Homeownership has long been seen as a badge of honour. Of the final step into adulthood, but does it actually benefit you? Many view renting as a waste of money because you don't ever own the home you're paying monthly for. However, soaring property prices make it harder for young people to get onto the ladder. Renting has become a standard amongst many who long for their own space.
When we ask the question 'is renting a waste of money?' there are a few things we have to take into consideration. Although buying your own home may seem like an exciting goal, it could get in the way of other life goals.
IS RENTING THE SOLUTION?
Renting is often seen as being a waste because you are spending a lot of money that will not lead to ownership. Although renting has a stigma of being ‘dead money’, the perks of renting a home are alive and well.
Renting a home and buying one are two different beasts. Both come with pros and cons and which is best depends on your long-term goals.
For some, renting will offer them the perfect home for what they need. For example, those looking for less liability concerning the maintenance of a property. Or, those who are career-focused and may need a more flexible living arrangement.
RENT VS. BUY: WHICH SHOULD YOU CHOOSE?
We have previously taken a deep dive into the biggest pros and cons of renting vs buying here so feel free to read that blog for more info.
The answer to which you should choose is not a straightforward one. You need to think about your lifestyle, what commitments you have and what you can handle.
Buying a home is a huge responsibility and can end up being a money pit if you're not careful. When you own your own home you are solely responsible for its upkeep.
When renting, your landlord takes the weight of that stress. If there's maintenance that needs doing, it's your landlord that handles it. Not only does this leave you free of the financial strain, but it takes the pressure off you to get things sorted.
LIVE ON YOUR OWN TERMS
One of the top benefits of renting is that it allows you to live on your own terms. Buying a home requires a long-term commitment. No matter how tough things get, there is no way to quickly jump ship.
However, when you are renting, you have much more control over the terms of your agreement. If you know you may need to relocate for work at some point, renting is your best option. You have greater control over how long you stay in one place. With rolling monthly contracts to bi-annual and so on, there's always a contract to suit you.
Additionally, you can also enjoy the freedom of travelling and relocating. So, for instance, if you sign an annual lease, you can relocate to a new home once your lease is up.
This gives you the chance to sample various locations to find somewhere that you love. If you've not clicked with your community in one place, you have the freedom to move on to find somewhere better.
Homeowners are not afforded the same luxury. Once they sign a mortgage, they have much fewer options for flexible living. If you realise your new neighbourhood is not quite for you, you have few options than to sell up.
While there are ways to get out of a mortgage, the process is typically highly stressful and costly. No matter how great you feel about buying, the flexibility of renting is an undeniable benefit.
SCALE YOUR LIFESTYLE WITH YOUR CAREER
Another benefit of renting is that you can scale your home along with your career. When it comes to buying a home, it is entirely possible to buy a house that eventually becomes too expensive. Also, you may purchase a home that your income outgrows within just a few years. Luckily, when renting, you can up or downsize your home as often as you’d like.
Arguably the biggest factor when it comes to the question ‘is renting a waste of money?’ is what you can afford.
Additionally, renting will provide you with access to homes that you cannot afford to buy. For instance, the average renter in London isn’t likely to have many issues finding a place within their budget in Zone 2 and 3.
The savviest among us may be able to get a decent flatshare in Zone 1. However, if you try to purchase a home in these areas, you will face significantly more obstacles.
Renters can benefit from the budding build-to-rent lifestyle that’s spreading across London. This trend involves:
- Offering high-quality apartments
- 24-hour on-site building management
- Community events and social functions
- Large shared spaces
And an array of other amenities, which will make the costs worth your while.
Did you know that the average house price increased by 9.8% over the year to March 2022?
Something that renting offers more than buying is the opportunity for autonomy. You are much more likely to be able to afford your own space by renting solo.
A single person would have to save up the whole deposit alone, which could take a significant amount of time. Renting allows those wanting to live alone more chances of enjoying their own home.
Living on your own allows you to create habits and routines that are yours alone. You can decorate your space in your own style, invite friends and family to stay and more. Renting your own place offers a sense of freedom. It can allow you to start creating a life independent from your parents.
You may still have to pay the rent and bills by yourself, but you won't have to worry about surprise bills. Any maintenance needed on the home will be your landlord's responsibility.
NO NEW TAXES
Another major benefit of renting your home is that you won’t have to worry about new taxes.
Owning a home comes with lots of hefty fees, including property taxes. These extra costs tend to get lost in all the excitement of buying a house. But, some of the biggest costs come in the form of fees through buying and selling.
For instance, when buying your home you will have to pay:
- Stamp Duty and Tax unless your home is less than £125,000
- Land Transaction Tax (Wales only)
- Capital Gains Tax (When you sell)
However, you don’t have to worry about such fees when you opt to rent instead.
Free maintenance is possibly one of the most underrated benefits of renting a home. This is because maintenance fees are solely the responsibility of the homeowner.
Although some landlords may have you pay for the cost of repairs, they should reimburse you. It is the landlord's responsibility to keep their property to a certain standard. When you own your own home, all of these costs will fall on you.
In fact, some may argue that maintenance bills are the epitome of “dead money.” As a homeowner, you funnel thousands into keeping your home in top condition. Even renovations can be a bank account drainer and one that you may not see a return on. How much your property is worth is dependent on the housing market. This means all those renovations you do may not turn a profit in the long run.
Renting allows you to spend this money elsewhere. It gives you more financial freedom to spend your hard-earned money outside of the home.
YOU WON’T GET STUCK IN A HOME RUT
In a perfect world, you could purchase a home and never have any issues or regrets. Unfortunately, this is not how things go. Although your home may be in great condition when you buy it, the same can't be said a few years down the line.
Wanting a bigger kitchen will require investment. Adding an extension to your home may drain your savings. Your tastes and needs are constantly changing and for your home to change with you will cost money.
When renting, if your needs change, you can simply search for a place to relocate once your lease is up. In need of an extra bedroom? Simply search for somewhere that offers you that extra space. No need for builders, architects or contractors.
Of course, you can do the same when you own your own home, but it can be much more of a hassle. Not only would you have to pay sales taxes, but there's also a risk of loss. If the housing market is struggling, you may not be able to afford a bigger property. You may have to get a new mortgage and things like surveys may need to be done. Renting offers ease and efficiency.
This is especially true in this day and age, where the costs of buying a home are astronomical. Just because you can afford to purchase property doesn’t always mean it will be worth the investment.
In fact, it’s possible that you will pay much more than the property is worth. You could then be locked into an expensive mortgage while the value of your home slowly plummets.
The only answer to such issues is ‘negative equity'. If you want to move on from the property, you could lose the down payment. Plus, all the money you have invested in the property.
IS RENTING A WASTE OF MONEY?
So now we've looked at all the facts, is renting a waste of money?
If you are ready to settle down in one particular area or maybe even try your hand at house renovating, then yes. But, if you need flexibility, affordability and don't want to commit to one property then no.
Renting is undoubtedly easier than buying a house. With shorter contracts, no taxes and minimal responsibility renting is a fantastic option.
If you want to be able to focus more time and money on your career, social life or even travel, then renting could be for you.
Looking to rent in London? Take a look at all of our Essential Living locations.