The answer to this question is not as simple as you may think which primarily comes down to your personal circumstances and current market conditions. It’s also one main topic of conversation with friends, family members or most of all over a dinner party. However, this is based on individual personal circumstances.
Interest rates have been a record low (currently 0.25%) for 91 months since March 2009, which has played a major role in keeping the cost of borrowing low, especially with interest-only mortgages, and driving down monthly mortgage payments. However, the criteria for lenders has not eased since the hay days back in 2007 and consequently obtaining a mortgage in today’s market has proven to be different with further relentless questions and information to be provided.
It goes without saying that buying wins hands down compared to renting today but the potential of interest rates increasing cannot be ignored and could change your thought process. If interest rates were to increase then renting a property could become more attractive and cost-effective.
In today’s current market, there is plenty of positive coverage and the general overall view is the majority of lenders are becoming more competitive, especially for first time buyer’s, but they don’t suit everyone’s financial situation.
Deciding to buy a home is one of the biggest steps you can make in your life and for most of us it’ll be the most expensive thing we will ever buy! When it comes to moving home, deciding whether to buy or rent might be obvious, however both options have advantages and disadvantages: –
Advantages of Renting:
• You only need a small deposit. Landlords generally ask for a 6 weeks deposit, plus a month’s rent in advance. If you buy, you will need considerably more than this.
• You can rent furnished accommodation so you don’t need to buy any furniture.
• Your landlord is responsible for any repairs, maintenance and decorating to the property.
• You don’t have to pay for buildings insurance, service charges and ground rent but you may want to take out contents insurance.
• It’s easy to move. Typically, once you have got past an initial period, you usually only have to give two months’ notice.
Disadvantages of Renting:
• Once you move on, you don’t have anything to show for all the rent money you’ve spent.
• If house prices rise you don’t benefit and it becomes more expensive to buy.
• If a lot of your money goes on rent you may not be able to save much.
• Your landlord decides how your home is decorated and may place restrictions on how you live, such as if you can have pets.
• Not all landlords are good at maintaining their properties and you may find you have to chase yours to carry out necessary repairs and maintenance.
• You could lose your home if your landlord doesn’t pay the mortgage or decides to sell the property.
• You can’t borrow against your home.
Advantages of Buying a Home:
• If you take out a mortgage your money goes towards buying a home which will one day could be yours.
• It can be a good investment if house prices rise.
• There’s no hassle with landlords.
• It’s your home so you decide how it’s decorated and the house rules.
• You choose if and when you want to sell or move on.
• You can borrow against your home.
Disadvantages of Buying a Home:
• You need a large lump sum to buy. Lenders often want you to put down a deposit of at least 10% of the property’s sale price.
• As well as a deposit you need to pay stamp duty, mortgage arrangement fees, local authority searches and solicitor fees.
• You’ll require building insurance. Your lender will want you to have buildings insurance and may also insist on life insurance to pay off your mortgage if you die. You may also want to take out payment protection insurance to help cover your mortgage repayments if you fall ill or lose your job.
• You’re responsible for any maintenance and repair costs to your home.
• If house prices fall you could fall into negative equity which means your mortgage is more than the value of your home.
• If interest rates rise your mortgage repayments could go up depending on the type of mortgage you have.
Renting is often a first step to independent living and gives renters a chance to find out more about the area, and maybe save a deposit to buy a home later on. But, remember, whether buying or renting, you are undertaking a legal agreement either with your mortgage lender or a landlord – you are responsible! So remember whether you rent or buy make sure you have looked at all the options and seek good advice before you choose which is best for you.
Mark Hillier, Director
If you are thinking of buying or renting in the local area and require some friendly advice, please do not hesitate to contact us or if you require us to recommend a mortgage broker (IFA) on your behalf, we would be more than happy to assist you to whom we have worked closely with for over a decade.
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