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Renting vs buying: The pros and cons of both

Renting vs buying: The pros and cons of both

While buying a property simply isn't an option for many renters, it's fair to say renting has become something of a lifestyle choice rather than a necessity in recent years.

Labelled 'Generation Rent' by the popular press, many Millennial and Generation Z renters are doing so because they choose to rather than being forced to by affordability woes and high UK property prices.

Whether renting or buying works best for you, however, will largely depend on your personal circumstances.

But that said, there are some very clear pros and cons for both. Let's look at them...

  

 

Is renting better than buying?

Many Millennials would argue it is despite their ears ringing with the sounds of their Baby Boomer parents condemning them for simply 'paying off someone else's mortgage'.

It's true, of course, that renting does help build up something of a nest egg for savvy property investors.

But renters get lots of benefits, too, despite not being able to rely on bricks and mortar as an investment of their own.

  

 

Pros and cons of renting

The pros

·         Renting is flexible

·         Renting a property is quicker than buying

·         Renting is low risk financially

·         Tenants don't have to pay for repairs or maintenance

·         Tenants can often live in an area where they could never afford to buy

   

Renting is flexible

Alongside the 'You're just paying off someone else's mortgage' comments from parental Baby Boomers, Millennials are often told that they should secure a 'job for life'.

The fact is, very few people in 2020 are able to secure a job that will last them, and keep them happy, for their entire life.

Younger generations like to be able to move around and climb the ladder by gaining experience with different companies and in different roles.

And with that in mind, renting offers the kind of flexibility home ownership will never match.

 

Renting a property is quicker than buying

Even if you've never bought a property, you'll almost certainly have heard horror stories from friends and family about how long the process can take.

Delayed searches, long chains and solicitor enquiries can all draw out the process.

Renting, though, can be done in no time as long as your tenant referencing comes back clear and you have a deposit.

 

Renting is low risk financially

UK property prices have generally been moving in an upwards trajectory for the past decade and before the UK financial crisis of 2008.

But prices can go down as well as up and owning your own property is a huge weight on your shoulders if they do.

As long as you pay you rent each month, though, you don't have to worry about the value of the property you're living in - and that low level of responsibility financially is hugely appealing to many renters.

 

Tenants don't have to pay for repairs or maintenance

Property doesn't just cost you a lot of money to buy.

It also costs a lot to maintain, not to mention the upheaval and hassle that comes with regular maintenance work or repairs.

When you rent, this is your landlord's problem, not yours.

So, when the boiler packs up, it's a quick call to said landlord or letting agent rather than a hefty bill for a new heating system.

 

Tenants can often afford to live in an area where they could never afford to buy

You've got a dream postcode, right?

We probably all have, but buying a property in that area is often well out of reach.

Renting in your ideal location is often possible, though, and this is another massive plus point for tenants.

 

The cons

·         Your money isn't working harder for you

·         Renting means no roots

·         It's not your own space

·         Rent can increase

·         You don't benefit from added value

 

Your money isn't working harder for you

This takes us back to the Baby Boomer comment because, factually, you are topping up your landlord's pension pot rather than, potentially at least, you own.

 

Renting means no roots

Renting provides that level of flexibility that many Millennials crave, but on the other side of the coin, your landlord has flexibility too.

That means, within the law, they could decide to rent to new tenants or even sell their property, meaning you have to find somewhere else to live and face the costs that come with moving, too.


It's not your own space

One of the most exciting things about buying a property is being able to make it 'your own'. When you rent a property, you're left with your landlord's taste in decor in many cases, or those Magnolia walls that are so common in rented homes.

 

Rent can increase

Landlords in the UK have never felt more squeezed thanks to legislation surround income tax and the ban on tenant fees.

That means many are putting up rent to combat the impact on their bottom line and that could mean extra pressure on your own finances.

 

You don't benefit from added value

If your landlord decides to renovate your rental property, perhaps adding extra square footage along the way, you won't benefit from that work financially as you would if it were your own home.


Pros and cons of buying

The pros

·         Owning property is an investment for the future

·         You can make a healthy profit from property

·         You can make your home your own

·         Ownership means added security

·         A mortgage can be cheaper than rent

 

Owning a property is an investment for the future

While paying rent keeps a roof over your head and gives you the flexibility to move on your terms, it doesn't help you financially as an investment for the future.

Owning your own home starts working for you as an investment the moment you start paying off your mortgage.

 

You can make a healthy profit from property

As well as paying off your mortgage, there's a strong chance your property will grow in value as you own it.

Other than the 2008 financial crash and, in certain areas of the UK post Brexit referendum, property in this country has grown steadily in value over the past two decades.

So, if you stay in your home long enough, you should benefit from that growth in the future.

 

You can make your home your own

If you like purple paint and flowery wallpaper, go for it. There's nobody to answer to but yourself when you own your own home and definitely no magnolia walls to contend with.

Unless you like magnolia, of course.

You could also consider extending or undertaking work to add value to your home, as long as you do so within building regulations and planning permission rules.


Ownership means added security

While renting could see your landlord give you notice at the end of a fixed term tenancy, nobody can tell you to leave your own home unless you fail to pay the mortgage.

Owning your own home gives you a level of security you simply can't get with renting.

 

A mortgage can be cheaper than rent

It can also be more expensive, too.

But if you can save a healthy deposit and only borrow what you really need, you could find your mortgage payments are lower than what you were paying in rent. 

The cons

·         The cost of buying

·         Potential break-ups

·         Interest rate changes

·         Time it takes to sell

·         Pressure of ownership

 

The cost of buying

Even when you feel you've saved a substantial deposit to buy your own home, it's easy to forget just how much of that money is needed for other expenses.

The biggest is stamp duty, which can wipe out a hefty chunk of your deposit in one hit.

However, under current rules, first-time buyers are stamp duty exempt up to the value of £300,000, so unless the property you buy costs more than that, you won't pay any duty if you're a first-timer.

However, removals and solicitor fees can all mount up, so make sure you're prepared and have budgeted well.

 

Potential break-ups

If you're renting with a partner and you split up, either one or both of you can go your separate ways.

When you own a property together, this scenario can be more complicated as it can be difficult to agree on who is owed what from the value in your property and whether you'll sell or one person will buy out the other.

 

Interest rate changes

Interest rates have been low now for some time, but should they rise in the future, that can greatly affect your mortgage payments if you're not on a fixed rate deal.

In the 1990s, interest rates rose as high as 15% and many people lost their homes, so being on the right mortgage product is crucial.

 

Time it takes to sell

The flexibility of renting means, with two months' notice at the end of your fixed tenancy or during a periodic tenancy, you can move out.

When you own a property, if you can't sell it, you might not be able to move on.

And when you do attract a buyer, the sales process can sometimes take upwards of six months to reach a conclusion.

 

Pressure of ownership

Owning your own home brings with a degree of financial pressure. Property is the biggest financial commitment you're ever likely to make and the sums of money involved are huge.

That alone can mean added pressure to ensure your finances are up to scratch and you''re meeting your mortgage repayments.

 

So, should I rent or buy?

We've outlined the pros and cons of renting vs buying, but which option you choose really is a decision solely for you.

Owning your own home is an incredible feeling, but the time has to be right and your financial situation has to be in order.

If you need flexibility, renting is probably your best option.

And remember: If you are looking to buy, always get independent financial advice before doing so.