What are the benefits of renting a home rather than buying your own home? This is a question many of us will have to consider, especially during the uncertain financial times we are currently experiencing.
Both renting and buying a home involves a large financial commitment. Will you be able to keep up your mortgage repayments? Will you be better renting, as renting allows flexibility if your personal circumstances change? This article aims to weigh up the pros and cons of renting over buying a home.
Lower Monthly Cost
Normally renting your own property is cheaper than paying a mortgage. Especially if you’re Planning to only rent for a short time. Sometimes utility bills are included in your rent, which makes budgeting much easier. Mortgages are often accompanied by hefty taxes and insurance bills, which you won’t have when renting. Even the process of buying a home is expensive when you take into account estate agent fees, solicitors stamp duty. Different countries and areas incur different fees.
No Maintenance Costs And Repair Bills
A huge financial benefit of renting over owning your own home is having no maintenance and repair bills. Maintaining a home is very expensive and never ending. Renters on the other hand have the advantage of phoning their landlord when the roof starts to leak, the heating system breaks down etc etc. The landlord is wholly responsible for repairs and maintenance, unless of course the damage is deliberate or negligent by the tenant.
Access To Facilities
Renting your home allows you to live in areas and houses that you probably would not be able to afford to buy. Yes, the rent will be set to reflect the facilities available, but will still be nowhere near the cost of buying. Perhaps you have always dreamed of living in a stately home, a penthouse in Singapore or to have access to your own swimming pool. All of these options are a possibility – even if only for a short time. Do you like living in the countryside or in the hustle and bustle of a city? Renting will allow you the flexibility to try both!
A little like the point above, renting means that you can choose where you wish to live. If you decide to move somewhere else, it’s not a problem as you can just give notice to your landlord. Perhaps you have encountered a problem neighbour, no problem as you can move. The flexibility side of renting is a definite advantage if your career means that you need to travel. You can move anywhere in the world without leaving a property behind to pay for and maintain. Selling a property as a property owner when you wish to move is a slow, complicated business as well as being very expensive.
Another benefit to renting is that you can upsize or downsize when you need to. For example, as a couple starting out, you may want to save money for leisure activities by renting a small property like a flat or apartment. Families may wish to rent a house with lots of bedrooms and outdoor space for children to play. Once children have left home, renting is then flexible enough to allow downsizing to a smaller property, thereby reducing rent costs.
Fixed Monthly Rent
The rent on your property is likely to be fixed for a year or two and when the rent is increased the landlord is obliged to give their tenant plenty of notice, so that they can search for another property if they so wish. Mortgage payments however have the potential to fluctuate on a monthly basis, making budgeting very tricky.
To be able to rent a property you need a bond, which is normally around the cost of one month’s rent , you also need to pay a month upfront and pay for credit searches. Although these costs add up, they are nowhere near as much as the 20% deposit most banks require these days to secure a mortgage. Saving up for such a large deposit is almost impossible for some people and saving will certainly restrict the amount of money you have available to spend on leisure. Renting therefore gives you a better quality of life and you don’t become a “slave” to your house.
Lack Of Stability
Whilst renting brings the benefit of flexibility, owning your own home brings stability. You feel part of your community and proud of your ownership. When renting you don’t have total stability as your landlord could suddenly decide to sell up, meaning that you have to look for another house to rent. This may not happen when it’s convenient, but you don’t have a lot of choice. Tenants do have rights though and you should look carefully at what your rights are. For example you must be given reasonable notice to vacate the property.
Waste Of Money?
When you have a mortgage, if everything goes to plan you will eventually own the property. Essentially when renting a property your rent is actually paying someone else’s mortgage or providing your landlord with a stream of income. In other words it is dead money to you, as a tenant.
That being said renting can still be cheaper in the long run, as if you were to invest the money you haven’t had to pay on repairs, maintenance, taxes etc. you could probably buy a house outright if you wished. Also money saved could be put into a retirement plan to cover future rent when you retire, so depending on how you view it – renting is not always a waste of money.
Having To Ask Permission
Having to ask your landlord’s permission to do anything to your rental property can be frustrating. Some landlords will not let you decorate or put up pictures and shelves without their permission. Owning a pet can be contentious too, as a lot of landlords will not allow pet ownership in their property. If this is the case it’s worth asking if you can put down a larger bond, to cover any potential damage and offer to deep clean the property when you leave.
In the main renting your home works out cheaper, in some areas however, rent can be extortionate. This is often due to supply and demand. If you live in an area where quality rental properties are hard to find, landlords can take advantage of this and demand higher rents. As more and more people are unable to get on the housing ladder, due to the large deposits required to get a mortgage there is more demand for rental properties, this does have the potential to worsen in the future unless the housing market drastically changes.
To conclude the decision to rent or buy a property is not an easy one to make. Before making any decision look at the affordability of both options and try to envisage which direction your career path will take you. Will you need the flexibility to move to another part of the country or world? Or would you like to put down roots in your local community for stability? Who knows what the future will bring in terms of the housing market in financial stability.