The big question of whether to rent or buy is an important one to consider. Being a homeowner is a dream most people have. A place they can make their own. However, renting has its advantages, too.
Looking at the advantages and disadvantages of renting and being a homeowner can be beneficial before you take the plunge to buy your first home.
What are the pros and cons of being a homeowner?
Owning your home is a great feeling – but useful to factor in the downsides and costs of being a homeowner to make sure it’s affordable for you.
Con: Increasing mortgage repayments
Mortgage repayments can go up or down as interest rates change. This can avoided by finding a fixed-term deal, and remortgaging when the deal ends.
You need to ensure you can afford an uplift in your regular monthly mortgage repayments, otherwise, you could fall into debt. There is also a risk that your home could be repossessed if you don’t meet your repayments.
Con: Repairs and maintenance
There is a responsibility to keep up with property maintenance and unexpected repairs, such as broken boilers or cracked and frozen pipes can turn into costly ventures. It’s ideal to have extra savings for these just in case.
Con: Lack of flexibility
If anything changes such as a new addition to the family, or you need to relocate for a new job, moving is less simple and more expensive when you own your home.
Pro: Invest your capital
The money you pay goes towards owning your property instead of a landlord’s mortgage. The payments you make every month give you something tangible in return, compared to the ‘empty’ money you spend on rent.
Pro: Improved financial standing
If you keep up on your mortgage repayments, as a homeowner you can improve your credit score and provide added security.
You will also own the asset that you’ve invested in. When you have paid off your mortgage and own 100% of your house, you can live free of regular monthly payments. This will free up your income for you to invest in other ways.
Pro: Own your space
You don’t have to worry about whether you’re going to get your rental deposit back or home inspections from your landlord. You can decorate your home in a way that suits you.
The freedom of owning your own house is what draws most people to get on the property ladder.
What are the benefits and disadvantages of renting?
There are a number of reasons to continue renting, from saving on bills to flexibility of moving when you want to, here are some of them to consider.
If your lifestyle changes, you get a new job or you want a fresh start, moving rented accommodation is simple.
Owning your property ties you to the location and the expenses involved in buying a new home can quickly run into the thousands. When you rent, the only cost you need is for a deposit and first month’s rent.
Advantage: No extra costs
If the roof starts leaking or the boiler breaks down, it’s your landlord’s responsibility to fix it. It can give you peace of mind knowing you don’t have to worry about covering the costs of a leasehold property. As well as having to pay capital gains tax when you leave the property.
Your landlord may decide not to renew your annual tenancy or they decide to sell the property. This will leave you with a short space of time to find a new place to live and the costs involved.
Most tenancies have a clause that after six months that your landlord can give you two months’ notice to leave the property. For some people the lack of security can be stressful.
Disadvantage: Tenancy agreements
There are often restrictions about what you can and can’t do in Tenancy agreements while you live in the property. For example, you may not be allowed to keep any pets or you might be required to have the carpets professionally cleaned every six months. You might also be restricted by what you can do with decorating the house. If you own a home, you can do what you like, without any restrictions.