When is renting a good idea?
Owning a home is a goal for many but with rising house prices and the cost of living ever increasing, many fall into an endless cycle of renting.
But is owning a home really the be all and end all?
We’ll be looking at the benefits and drawbacks of renting versus owning a property, to get to the bottom of whether renting is ever a good idea.
Is renting a good idea?
A popular misconception is ‘renters’ are young people who cannot afford a deposit. However, according to the Family Resources Survey, the number of middle-aged renters has doubled since 2017.
But is this out of choice or has social inequality resulted in no other alternative?
Single mothers and divorcees aged 45 – 50, most commonly rent from private landlords as opposed to their local council. With the average rent for a one bedroom flat costing £650, this leaves many renters in a vulnerable position.
That being said, the burden of a mortgage can be too much for some. Owning a property can be a huge financial strain and so renting does provide an alternative for those who might find the cost of maintenance and repairs unaffordable.
What are the benefits of renting?
The landlord is responsible for repairs/ renovations
A benefit of renting is that as the tenant, you’re not responsible for the cost of maintaining the property. Landlords are legally required to ensure that the property you reside in is safe and habitable.
This includes ensuring that repairs are made to the exterior and structure of the property including problems with the roof, chimneys, walls, guttering and drains.
Gas safety and performance checks are also the responsibility of the landlord, saving tenants hundreds of pounds compared to homeowners who must pay for boiler repairs, maintenance and insurance themselves.
Quicker moving in process
Finding a rental property can be a fairly quick process in comparison to the sometimes tedious task of completing a sale and moving in. In fact, the average time it takes for a homeowner to buy a property and move in is 6 months.
For a lot of people, finding a property to live in is time sensitive whether that be because of a breakup, the death of a parent or loved one or because of a job.
Although the cost of renting has increased, resulting in renters spending half their wages on rent, it has provided greater choice and flexibility for many who just need to move in quickly.
What are the drawbacks for renting?
Restricted to changes you can make to the property
A huge drawback for renting is that many landlords can have strict rules regarding what you can and can’t do to the property.
This can make it difficult to ‘put your stamp’ on a property, especially if as a tenant, you are forbidden from painting the walls or decorating.
Situation dependant on landlord e.g. moving out, pets etc
Another restriction is that because of the risk of damage to a property, the majority of landlords do not allow pets.
With 26% of the UK adult population owning a dog, this can cause problems for tenants and landlords alike.
Of course, there are some landlords that ask for a larger rental deposit to cover any pet-related damage to the property, making it possible to find a home to accommodate animal lovers.
Renting can be expensive and many feel that the money paid out, is essentially wasted. For example, if a person were to pay £650 a month in rent, they would have paid £39,000 over 5 years and have no legal ownership of the property.
A homeowner could pay the same for their mortgage and at the end of the 5 years, would own £39,000 worth of their property (excluding interest payments).
Could I buy?
The consideration of whether to buy or rent is often a fleeting thought for those who believe homeownership is out of their reach.
However, with the right advice and guidance, that might not be the case.
Benefits of buying
Comfort of knowing you won’t be evicted
Renters often worry about what they’ll do when their landlord decides to sell the property. Homeowners have the comfort of knowing that as long as they pay their mortgage, they can stay.
Own the home at the end of term
Owning a property also provides freedom to adapt and improve the property, without having to ask permission and then after the property is finished to a standard of your liking, you have the choice to sell it or use the equity you’ve built up in the house for other things.
Profit from selling the property
For many people, the prospect of making money on their home provides a financial route for retirement, whilst for others, it’s just a good business decision.
Of course, there are also homeowners who buy property, to one day leave it to their children.
A study published by Royal London estimates that roughly £400bn worth of property will be handed down to children or grandchildren.
Drawbacks for buying
Financial consequences of missing payments
Missing your mortgage payments can have huge consequences, the most crucial being that you could face repossession and lose your home.
A study by a housing charity Shelter found that more than eight million people are one payday away from not being able to pay for their mortgage or rent.
Diving the property’s equity after divorce
A breakup can be traumatic enough without having to go through the lengthy process of calculating and legally divvying up who owns what proportion of the property.
A joint mortgage can complicate this process and with 42% of marriages ending in divorce in 2017 alone, the consideration of whether or not to take a joint mortgage should not be taken lightly.
Are you going through a divorce and are concerned about how it might impact your home and your mortgage, read the blog Divorce and Mortgages – What to Know.