Both buying and renting a property are valid options, and depending on who you speak to, you’ll be told that buying is a terrible idea because of the fluctuating housing market, or that renting a house is simply a waste of money. In reality, renting and buying both have their advantages and drawbacks. The real answer depends on your current situation, as well as your long-term goals.
There are a few questions you can ask yourself straight away to start to decide what the best option for you is:
- What’s your current monthly income, and how much do you save?
- Do you plan on staying in your next house for a long time?
- Is flexibility or being stable more vital to you?
- Where do you see yourself in 5 years? What about ten years?
Once you started to ask yourself these questions, the choice of renting or buying might begin to become apparent quite quickly.
The most obvious thing to consider is which of the two options is the best financial decision? When renting a house, there are several upfront costs you need to think about. Most rented properties will require a deposit at the value of 1-2 months’ rent, and then, there may be administration fees and your actual first months’ rent on top of this. This means that the first month of renting can be quite costly. Not all of this is money spent, and assuming that you keep the house in good condition, you’ll get your deposit back.
Something you generally won’t have to pay for is general upkeep and fixing anything that goes wrong. This is up to the landlord, taking the responsibility and cost away from you.
On the other hand, though, the upfront costs of buying a house are considerably higher than the cost of renting. You’ll need a deposit of at least 5% of the value of the house, and more likely 10% or more. This means having the savings available to buy in the first place. If you don’t have the money saved up, then renting is definitely your best option if you want a house. If it’s an option, though, consider living with your family while you save up for your deposit. If you don’t have rent to pay, you’ll have substantially more free income each month which you can move into a savings account.
Once the initial deposit has been paid, you also need to think about solicitor fees and additional administration fees when buying a house. This can be a significant sum of money on top of your deposit.
The final benefit of buying a house is that once the deposit has been settled, your monthly payments will be much lower than if you were to rent a house of the same size.
After cost, flexibility is the most crucial factor to consider. If you think that you may want to move to a new city or country after a year or two, the stress and cost of buying a house really aren’t worth it. If you rent, you can simply end your tenancy and move with very few issues. Also, if there’s a problem with the house, then moving out is simple. If there’s a serious problem and you have to sell a home with foundation issues, for example, this can be very difficult and stressful.