If you're looking to move out, you need to make the ultimate decision. Which option is best for you, renting or buying?
To buy or not to buy, that is the question.
Some people can’t wait to get on the property ladder - you can’t call yourself a true adult until you've ticked it off the list, right?
But buying a property just isn’t for everyone.
Let’s weigh up the pros and cons of buying and renting.
Owning vs borrowing
Do you want a place that belongs to you, or are you happy living in a house owned by someone else?
Buying a house means that you can make any improvements you like, within reason.
When renting, you often need permission from the landlord for most things - even for putting up shelves and painting walls.
Also some landlords won’t allow pets or children, so starting a family when renting might be tricky.
However, renting gives you the flexibility to move once your minimum tenancy period expires.
Rent vs mortgage
This is a biggie.
On one hand, a big chunk of your monthly mortgage payments are to cover the interest on the loan itself. This is why it takes so long to pay off.
Whereas renting gives you extra flexibility if your circumstances change. If you find yourself with less money, you can move somewhere that offers a lower rent.
You also have a wider range of choices when choosing a place to live.
Buying a house in a desirable area might be unaffordable, but renting there might be within your price range.
On the other hand, paying rent every month doesn’t give you anything back for your investment. This is why renting is often referred to as “dead money”.
However, you shouldn't feel stigmatised by this if renting suits you better. You may feel that living in a nicer place outweighs the benefit of an increasing investment.
That said, depending on where you want to live, monthly mortgage payments could actually be cheaper than rent costs in the same area.
Even though house prices have risen significantly over the past few years, average rents have also soared while the cost of mortgages has fallen.
So it’s worth looking at the average costs for both options, to decide which is best for you.
Extra cash vs investment
If you want decent mortgage rates, chances are you’ll need to put down a deposit.
You’ll need at least five percent of the value of the house. That’s if you take advantage of the government’s Help to Buy scheme.
Saving for a larger deposit could mean lower monthly repayments, but this could take a while.
That initial deposit acts as an investment in the house, which could increase in value as time goes on.
Here's some tips that could help you save for a deposit.
Renting a house or flat doesn’t have any massive up-front costs, so it’s easier to jump in without needing to save beforehand.
Although it is typical to pay the equivalent of a month's rent upfront as a bond.
This potentially gives you more cash to play with in the short term. That £20,000 you were saving for a deposit could be spent on holidays or a new car, for example.
But that initial deposit acts as an investment in the house, which could increase in value as time goes on.
Freedom vs responsibility
With buying a house comes great responsibility.
This means that if anything goes wrong - a broken boiler or a leaking roof - it’s down to you to fix.
This can sometimes come with a hefty price tag.
When you’re renting, it’s your landlord’s legal responsibility to make sure these kind of problems are taken care of.
If you’re not DIY-inclined, or don’t have the money to cover the costs for these kinds of repairs, then being a tenant might be more appealing.
However, in a rented house, you’re also at the mercy of the landlords as legal owners. If they decide to sell the house, then you’ll probably have to move out.
Buying vs renting
When it comes down to it, choose the option that best fits your circumstances and budget.
There are pros and cons to each decision, and as your situation changes your needs will shift.
If you’ve decided that renting is a better option for you, then check out our guide to tenants’ insurance.
If you want to become homeowner, then the next step is working out how much you can afford to borrow and how much you need to save.
For more information, see our 10 steps to buying your first house.
Next: Step 2 - what can I afford?