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Buying or renting? The pros and cons

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With the cost of buying a house rising faster than salaries and rent, it can be confusing trying to decide which option is best for you. We weigh up the pros and cons of buying versus renting.

Counting up the costs

Whether you are renting or buying, you are still entering into a legal agreement with your mortgage lender or landlord. Some would say that buying offers stability and investment and renting means flexibility and freedom, yet ultimately it will depend on your personal circumstances.

When you tot it all up, the figures can be startling – in the first year of owning a home average costs (including a 25 per cent deposit) are £70,538, according to research by the Chartered Institute of Housing – a rise of 73 per cent in the past decade.

In contrast, the cost of renting a property (including a six-week deposit) came in at £9,622 – an increase of 29 per cent over the same time period. With average household incomes rising by just 12 per cent, it’s no wonder that home ownership levels have been falling, particularly among younger people.

The pros and cons of renting

With many home-owners pushed out of the housing market since the start of the credit crunch, the number of people renting has risen dramatically.

If you want to find out more about an area before to committing to buying, then renting is often a good idea. On the other hand, it will be harder to put your own stamp on a property, you will have the uncertainty of a landlord who can put rent up or not renew your contract, and you may not be able to keep pets.

On the plus side:

1. You can move faster without the legalities of buying a property.

2. Your upfront costs will be far lower than buying.

3. Rented properties often come furnished, saving you money.

4. If anything goes wrong then it’s up to the landlord to arrange to fix it; properties managed by agents can mean you get things sorted a lot faster.

5. There is less long-term risk involved – if you’re struggling to cover the rent you can make the decision to move somewhere cheaper or smaller.

Buying or renting property to let sign

The pros and cons of buying

There’s a lot of pride involved in owning your own property, especially as you can decorate it the way you want to without living by the rules of a landlord. However, upfront costs are much larger in comparison to renting and there’s a risk of falling into negative equity (where property prices fall below the amount you paid for it or borrowed).

As well as it being a big financial commitment in terms of mortgage repayments and maintenance costs, it may be hard to uproot your family if you decide you don’t like where you live.

The cost of a property depends on a number of factors, including size and location. As well as moving costs and furnishings, you can expect to shell out for the following:

• Deposit

• Survey

• Stamp duty

• Legal/conveyancing fees (including searches and other associated costs)

• Building and contents insurance/life insurance/mortgage protection

• Mortgage arrangement fee

• Monthly mortgage repayments

• Estate agent fees (if you are selling a property)

• Annual maintenance

On the plus side:

1. A property is an investment into your future, rather than just spending ‘dead money’. House prices generally rise faster than inflation and many people pay off their mortgage before they retire.

2. By making regular payments to your mortgage lender you will be improving your credit rating. You will also be able to take out a secured loan against your mortgage.

3. You can rent out a spare room to help cover bills.

4. You can’t be thrown out of you own home by a landlord who wants to sell up or move back in at short notice.

5. With no landlords to deal with, you can live by your own rules. However, if you are a leaseholder you will still have to liaise with freeholders on certain aspects of your property.

Different ways to buy

There are a number of ways you can get on the property ladder. Helen Pickard, founder of the Good Value For Money website, suggests the following: “Consider buying a property with a friends or a family member- a great investment for both of you! Just remember to get good legal advice on how to own the property should one of you decide to sell.”

• Government schemes (home ownership schemes)

There are four types of schemes available for anyone living in England who can’t afford to buy a home yet may be eligible for financial help. These include: Help To Buy equity loans, Shared Ownership, NewBuy and Help To Buy mortgage guarantees (available from January 2014).

 • Buy to let

If you’re looking for an investment property then this will mean a steady income and potentially making a profit when you do sell up. The majority of the best mortgage rates will require a 25 per cent deposit. You’ll also need cash readily available to maintain the property of for times when the property is empty.

• Buying at auction

If you like the idea of taking on a project and avoiding gazumping then buying property at auction could be a worthwhile option. On the other hand, if you’re indecisive or of a nervous disposition, then this won’t be for you.

 

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About Julia Faulks

About Julia Faulks

Julia Faulks is a content editor and journalist with 11 years' experience writing and subbing editorial for a number of publications. Now a mother herself, she has turned her hand to writing content for parents as well as young people and likes nothing more than turning long and complicated copy into something that everyone can understand.

Website: Julia Faulks

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