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Buying or renting. Which route is best for you?

POSTED ON 21 FEBRUARY 2017

It’s true that personal finances play a big role in determining whether you decide to buy or rent,  but there are many other different aspects to consider too, to help you make the right move

Simple common sense tells us that the process of deciding on whether to rent or to buy a property will typically be centred on your financial circumstances. But moving into a home is one of the biggest decisions you will ever make, so there are bound to be all sorts of specifics you will need to consider when opting to either buy or to rent.

For a moment let’s look at the financial definition of the two options. A property for sale will have its own value. Buying that property will either mean paying that entire cost outright, immediately and without any professional help, or arranging to have a portion of that value lent to you in the form of a ‘mortgage loan’. The amount of the loan offered to you depends on how much money you will pay initially as a deposit, and the deposit is commonly around 10% of the whole value of the property. With the property now paid for by the lender, you will proceed to pay back the mortgage loan in instalments, all the details and conditions of which are discussed between you and the mortgage lender.

On the other hand, renting simply means paying a monthly or weekly fee to the owner of the property – the landlord – for the duration of the time that you live in that property. The ‘rent’ that you will pay while living there depends on a variety of different conditions. Sometimes the rent figure includes the bill costs: otherwise you’ll be required to pay for the bills separately.

However, that’s only what buying and renting mean in financial terms. One major reason why moving homes is such an important decision in your life, is because it’s also an extremely personal one. Everyone has their own unique selection of preferences, such as the location, the amount of bedrooms, having an en-suite, and/or having open plan living space. Any one of those factors could be strong enough to sway someone into renting rather than buying.

Furthermore to the financial advantages of buying, once you’ve paid off the mortgage, the property’s yours no matter what, meaning you’ll never have to worry about finding somewhere to live. Officially owning the property also means you will never need to be permitted to have children and/or pets in the property. And this goes for improvements on the property as well, although for some extension work you will still need planning permission granted.

Another advantage of buying is that if the value of the home increases, you can use this equity to purchase a bigger home or simply put the funds towards retirement. A significant flip side to buying, however, is the fact that if the base interest rate rises, your mortgage repayments could also go up, and this is something for which you would need to be prepared for. Talking of costs, there are a whole array of them you will need to consider if aiming to become a homeowner – the mortgage deposit, survey costs, stamp duty, maintenance costs, removal costs, legal/solicitor fees, monthly repayments, and even the process of selling your home. It is perhaps little wonder why so many people first decide to rent before considering buying a home. Even though rent money is often referred to as ‘dead money’ (because you don’t appear to be getting anything back for your investment), renting, in the long run, allows you to save your own money ready for a deposit further down the line. And there is always the possibility of seeking out other properties with lower-costing rent too. This isn’t the only reason renting can be considered more flexible – shorter tenancy agreements can be found or even negotiated, and in the event of a break-up with your partner, for instance, it’s a much less difficult process if you’re renting than it would be with a mortgage – the latter of which can easily become very complicated and expensive.

There are many advantages and disadvantages for renting or buying a property and, alas, neither can be said to be a better option than the other. This decision will be personal to you, and your ultimate choice will depend on a whole array of different factors associated with your own personal circumstances and preferences. So wherever you decide to make your bed… just make sure you make it well.

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