Home > Buying a House > Should I Buy or Rent?

Should I Buy or Rent?

By: J.A.J Aaronson - Updated: 14 Jul 2010 | comments*Discuss
 
Should I Buy Or Rent?

In the Leaders' Debates prior to the 2010 General Election, Gordon Brown said that he wishes to create an "owner-occupier majority" in the UK. This aspiration seems to have been adopted by politicians across the board. But there is still much debate concerning the relative merits and drawbacks of home ownership. There has been considerable publicity given to the housing market in recent years, a concern which has directly affected a great number of Britons. Even after these debates, however, many people are still unclear as to whether they should rent or buy their house.

There are a number of major considerations to take into account when attempting to make this decision. Your final choice will almost certainly be governed by your own personal circumstances, but there are also certain factors which are out of your control. The most major of these is the ever-fluctuating property market. This has been on the rise for several years, and many people are simply financially incapable of buying property as a result of skyrocketing prices. The majority of people who rent do so for the simple reason that they cannot afford to buy; all other factors are, by and large, meaningless if you fit into this category. It is, of course, unlikely that you will have the capital available to buy a house outright. Instead, you will probably be forced to take out a mortgage in order to finance your purchase. A mortgage is essentially a secured loan - that is, a loan which is guaranteed against an asset, which is, in the case of a mortgage, your home. The amount that you can borrow is dependent upon your credit history and your income.

You should remember that there will be stamp duty and other fees to pay, such as surveying costs, which your loan may not pay for. Similarly, it is now very unlikely that your lender will give you a mortgage which covers the entire value of your property, meaning that you will have to plug the deficit out of your own capital.

A mortgage is, of course, a hefty financial commitment. If you do not keep making repayments then your home can be repossessed by your lender. If your financial circumstances are likely to change, therefore, a mortgage may be too high a risk.Mortgages can, however, have their benefits. If the market value of your home continues to rise, then in a few years time you will probably be able to remortgage. This essentially means either changing your mortgage lender or renegotiating with your existing lender, in order to secure better terms. These may be a longer or shorter repayment period, or a more favourable rate of interest. Of most interest to many people, however, is equity release. This means that, as a result of remortgaging, you can release a proportion of the value of your home which you have already paid off through repayments, as cash. If your house gains value, you could therefore acquire yourself a fairly considerable lump sum. Similarly, if the need ever arose for you to take out another large loan, the only way that this would be possible is by securing it against your house. If you do not own property, therefore, loans above a certain value are probably out of your reach.

Renting also has both positive and negative factors to consider, depending upon your financial situation. One of the major positives is that you avoid the financial responsibility of a mortgage. You will, of course, still have to pay rent, but you will not be tied down to repayments. It is normally possible to extricate yourself from your tenancy within a maximum of a year but, if you own your home, mortgage debts are likely to carry on into your retirement. Furthermore, the fluctuations of the property market are of little concern to those who rent.

However, the negative results of renting may be just as long-term as those associated with buying. If you are renting, the money you are paying your landlord every month is lost - it is 'dead money'. There is no way that this cash will rise in value, and it is not working for you after you have paid it out. If you are paying off a loan on a house, however, you are making a long-term investment. If the value of your property increases, you will see a return on your money if you choose to sell up. Those who rent, on the other hand, are spending rather than investing, and may therefore find that their long-term costs are considerably higher than those incurred through mortgage repayments.

In conclusion, therefore, there are both positive and negative factors associated with both buying property and renting. Your final decision, however, will probably be made for you as a result of your own individual financial situation.

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
Why not be the first to leave a comment for discussion, ask for advice or share your story...

If you'd like to ask a question one of our experts (workload permitting) or a helpful reader hopefully can help you... We also love comments and interesting stories

Title:
(never shown)
Firstname:
(never shown)
Surname:
(never shown)
Email:
(never shown)
Nickname:
(shown)
Comment:
Validate:
Enter word:
Latest Comments
  • Lolly
    Re: A Guide to Unemployment Benefits
    Hi i am currently working in the care sector my age is 61 i have been trying to get varicose viens removed for 7 years plus…
    16 May 2019
  • Dave
    Re: Taxation for the Self-Employed
    I am PAYE and Self Employed through CIS. I earned £41k in PAYE and a mere £3500 self employed, (before tax) I have a…
    24 April 2019
  • Stanharris
    Re: Renegotiating Your Loans
    Thanks for sharing a valuable information. It is really informative and helpful. the information that you have shared is really useful.…
    4 April 2019
  • Oggy
    Re: Taxation for the Self-Employed
    I’m a construction worker on cis can I claim back my 20% tax back on my first 12k tax is deducted before I’m paid although I’m…
    1 April 2019
  • Caz
    Re: How Much Tax do I Have to Pay?
    Iv just started working for an agency I will be played weekly they not taken out tax and national insurance I have to have my…
    23 March 2019
  • SylviaBlood
    Re: A Guide to Unemployment Benefits
    an you help me pls I had operation on my kidney followed by chest infection I then went profound deaf had cochlear implant…
    19 February 2019
  • sylv
    Re: A Guide to Unemployment Benefits
    i returnee red to work after 2operations I was on ESA support group con based. I went to work I had my hours cut but unable…
    19 February 2019
  • Jax
    Re: How Much Tax do I Have to Pay?
    I earned £924 for working 99 hours last month yet between tax and national insurance Im just bringing home £690 is this right?
    24 January 2019
  • Stuart55
    Re: What is a Stakeholder Pension?
    I was put into a pension scheme by my works, in 2002,I left after 1 year and i only paid £900, into the fund, since then I have…
    12 January 2019
  • Bpro
    Re: A Guide to Unemployment Benefits
    I have been a self-employed taxi driver for the last 8 years, but but unfortunately two weeks ago I received a driving ban…
    20 December 2018