From a financial point of view, there are pros and cons to both renting and buying a property. While buying might seem like the obvious choice, there are some other things to consider. Here are the pros and cons of each.
Renting from a landlord
Renting isn’t often considered the ideal scenario, with most people preferring to own their property. However, it’s certainly not all bad and there are some great advantages to renting.
The first is freedom, most tenancy agreements are six months to one year- and so if you’re not getting on well at your home you always have the option to move. It’s far easier to do so compared to when you’ve bought a property, since you have to wait for it to sell, and go through all of the legal stuff first.
Another way renting can be good from a financial point of view is that you don’t have to pay for repairs. Providing you didn’t cause the damage, the landlord is responsible for fixing things that go wrong. As a homeowner, structural issues, pests, failed double glazing and boiler issues among other things can all be really expensive.
On the downside, rent is called ‘dead money’ for a reason. Once you’ve paid your rent for the month, that’s it. You’re paying for a month of living there and nothing more, at the end of your tenancy you’ve gained nothing from it. Lots of renters like to decorate and improve their home, and do so with permission from the landlord. And while it makes it nice and homely while you’re living there, again when you move you’re gaining nothing from it. Whereas decorating a house that you live in will bump up the value, which you’ll get back when you sell it.
It can make sense to rent homes for a while before buying, that way you get a feel for different properties and can work out what it is you want and don’t want. Some issues might not be obvious until you’ve lived in a home that’s just not right for you. You don’t want to realise that after you’ve signed on the dotted line to buy it.
Owning your own home
Getting a foot on the property ladder is almost always a smart move. In many cases, your mortgage payment won’t be much more than you’d pay on rent for a similar property (often it will be less). But every payment you make contributes towards you later owning outright. Whether you choose to keep the home and pass it down to your children, free up equity in it using a scheme like Retirewise or sell it and have a big chunk of money to enjoy in retirement, it can make things a lot easier later in life. You’ll also have many years of no rent or mortgage to enjoy once it’s paid off which can free up money for you to do other things with.
It’s worth getting onto the property ladder if and when you can, but there are benefits to renting too. Especially if you’re renting for a few years before purchasing to work out exactly what you want.