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Renting vs Buying - Essential Living

Renting vs Buying

Blog Guide to Renting
18.02.20

Deciding between renting and buying has a massive effect on your future goals, lifestyle, and financial stability. So, while deciding, you need to consider all of the below factors. Both options require a stable income to give you a place to call your home.

While renting offers flexibility, fixed monthly payments, and no repairs expenses, homeownership provides a sense of security. But each comes with a set of cons, as well as pros.

So, which is better, renting or buying? The answer isn’t that simple. Buying a home isn’t always great, and renting isn’t always stress-free.

Let’s dig deeper into the downsides and benefits of renting vs buying to choose the best option according to your financial health and personal preferences.

How Do Renting and Buying Differ?

Here are some of the significant differences between renting and buying:

Property Costs and Values

 

St John's Wood, London

People often prefer buying a home as they consider it a way of securing their future. Most people feel pride in owning a home instead of paying rent. Of course, homeownership is a good investment, but many factors may impact the value of your property.

These include:

  • Economic instability
  • Environmental issues, including nearby factories, toxic wastes, landfills, etc.
  • Antique interiors, which doesn’t meet modern construction standards survive the modern challenges
  • Outdoor conditions, including your gardens and the land surrounding your property
  • Repairs and maintenance
  • Home surpluses

As a homeowner, these factors can adversely affect your property value. However, as a renter, they would benefit you as your landlord might be pushed to lower the rental costs. No landlord wants to go without rent, even if it’s a little less than expected.

Tax Management

 

Rent vs Buy: The Benefits of Renting | Essential Living

On the bright side, homeowners can benefit from some tax advantages. As a homeowner, you can reduce your out-of-pocket expenses  due to the home mortgage interest deduction.

This benefit is available in the early period of the loan, as long as the deductions are itemised.

Sometimes, your due mortgage can be cheaper than rent. However, if interest rates go up, you may end up paying more on your home mortgage repayments.

Other expenses you may have to pay as a homeowner that don’t apply to renters are:

  • Property taxes
  • Pest control
  • Rubbish collection (some renters also pay it)
  • Water and sewer services (may also apply to some renters)
  • Homeowners insurance
  • Lender-required flood insurance

If you rent a home, you don’t have to pay most of the expenses listed above. Since you don’t own the property, these taxes/expenses won’t be subject to you if not mentioned in the contract.

In addition, you can’t take advantage of the mortgage deduction.

 

Repairs and Maintenance

 

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If you own the’ property, you’ll have to take care of it too, and that means keeping a check on its maintenance every now and then. Homeowners are responsible for making repairs and maintenance in their homes to keep them presentable, safe, and valuable.

These expenses can be very costly, and most of the time, these renovations don’t boost your home’s market value.

But despite that, it’s still your home, so you can decorate it as you want without worrying about anyone.

On the other hand, if you’re renting, you usually can’t make many changes in the home you’re living in.

Since the rented house isn’t actually yours, your landlord is obliged to make all the repairs. However, you’ll have to wait for your landlord to make changes which could be a considerable amount of time. Yet, the wait is worth the high costs you may have to pay as a homeowner.

Investment of Time

 

Rent vs Buy: The Benefits of Renting | Essential Living

If you’re a busy bee, life and work might be pretty tricky for you to balance. In such cases, you probably won’t have the time to take care of your damaged pipes, mow the lawn, repair the mailbox, or repaint the rooms.

Moreover, if you sell your own home, the entire process may take months. So, you can’t move out quickly. On top of that, owning a home can increase your stress levels since it often requires investing large amounts of money.

Meanwhile, renting comes with less financial stress and time constraints. If you face any damage, you can simply contact your landlord and see the repairs being made while relaxing on your couch.

In addition, you can move out of a rented house much more easily than selling or buying one. Renting has lower financial risk, and you can save your money into a retirement account for a secure future.

 

Is Renting Better?

 

Rent vs Buy: The Benefits of Renting | Essential Living

The decision of renting vs buying comes down to your own preference.

If you’re working with a lower budget and want to move to your desired location soon, renting is the way to go.Even if you’ve saved a reasonable amount for buying you can put that money aside for your post-retirement period or make investments elsewhere.

This way, you’re also transferring the repair responsibilities to your landlord.

So, if you’ve made your mind for renting, you can gain the following advantages:

  • Flexibility to change your location easily. Also, if you’re finally travelling to your dream place for six months or more, the house mortgage won’t hold you back. What’s better than having the autonomy of moving in and out?
  • Easy moving in process and house arrangements. No worries of waiting for months to finally move out or in; your agent is going to take care of it all, and that too, within weeks. Moreover, some property providers don’t even charge extra fees for maintenance or contract renewal.
  • High-quality houses. You can rent a better-quality home for the same money or less than what you were investing in buying. Plus, build-to-rent enhances the house standards even more. For example, consider Vantage Point. In such locations, everyone has access to own a high standard, well-furnished apartment and top penthouse floors.
  • Better location. You can easily get a good-quality house in your desired location with a low budget. For example, buying a house in Westminster averaged about £1,132,968 over the last year. This amount is usually more than what most people can afford. However, renting a 1-bed house costs only around £3,500 PCM.
  • Low financial risk. Renting comes with lower financial risks. You know the exact amount you’ll be paying in your rent each month. Plus, your landlord will take care of the repairs and maintenance, as well as other expenses.
  • No additional expenses. Some of the other costs that renters don’t have to worry about include damaged washing machines, water leaks, mold damages, clogged lines, broken windows, blown bulbs and lights, and much more. If you have a good landlord, you are free from such additional expenses.

 

Renting vs Buying: Which Is Cheaper?

 

Generally, renting a house is cheaper than buying one. That’s because the total costs incurred in buying are considerably higher than renting. However, you may have to pay less in mortgage payments than on rents.

It was found that the asking rents in the UK increased by 6.2% in June 2021 compared to June 2020. Around the same period in 2021, the average monthly rent in the UK, except central London, reached £1,000 for the first time.

Luckily, the interest rates are at record lows, which means homeowners may have to pay less in their monthly mortgage payments.

A major downside in buying a house in the UK these days is the increased first-time buyer deposit. Halifax reports that the average deposit needed to buy a house in the UK (excluding London) reached  £58,986 in April 2021, with London’s at a whopping  £111,321.

That means that even if you manage to save £1,000 per month, it would take you more than nine years to have enough money to buy a house in London.

 

Rent vs Buy: What Is Better?

 

While the final decision depends on your financial health, it also revolves around your comfort and future planning.

Both types of housing options have their own pros and cons. Where renting holds fewer financial risks, owning a home makes us feel secure.

So, evaluate the risks involved, especially if you plan to buy. If the housing prices increase, you can make more gains on your mortgage.  However, if the prices fall down, you’re at a greater risk.

This is why renting always makes sense, regardless of your financial situation.

By renting a home, you can get rid of additional expenses, chores, maintenance, and financial risks. Plus, you can in neighbourhoods that you would otherwise not be able to afford.

So, if you want to move out quickly, don’t waste more time; renting is the way to go!

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