It seems like a very backwards idea, the fact that buying a home is cheaper than renting. But there is some method behind the madness. The question it is worth asking yourself is if you are able to purchase a home. The nature of how we rent properties now means that we are, in many ways, living in a hand to mouth type basis. So, finding a down payment for a mortgage is much harder to come by now. But with all of the hidden costs of buying a home and the money troubles that we all get into nowadays, does this mean that it’s financially savvier to rent? Let’s try and answer the question.
When Renting Is Easier…
Renting a property means one thing, choice. When you are looking at houses for rent, the fact of the matter is that you will have a lot more choice of properties, in different areas, than you would if you were looking for a house to buy. Renting a property, especially through a letting agency, means that you are going to be lumbered with fewer transaction fees, admin fees, and no hidden fees. The other main thing to consider from the perspective of a tenant is that, while you are subject to background checks, these are going to be less stringent than if you were to buy this property. And, while there are some strict checks, and there may be some conditions of your tenancy agreement, a good example being that if you are self-employed, you might need to have a guarantor in case you are unable to make rent. If you have already had credit checks and you’ve been deemed reliable, this is no slight on you, nor should you take offence to it, but it is merely a formality. The other positive where it comes to renting a property is cost. If you were to look at a property you had your eye on to rent in comparison to how much that same property would be to buy, in conjunction with the hoops you would have to jump through, you would see that renting would be much less of a hassle first of all, but also you may not be able to afford to buy that property. This, of course, relates to certain criteria, such as catchment areas, proximity to schools, and everything you would look at when deciding to buy in a specific area. And while that four bedroomed house with a garage and a lavish garden is completely out of your budget to buy, if you are able to rent it, then why don’t you?
When Renting Is Harder …
For all of its positives, renting comes with a fair amount of downsides. But, the one debate in terms of finances is that lots of people view renting a property as throwing your money away. Now, this appears to be more the perspective of homeowners, because they have somewhere that is theirs. So when they see somebody paying a proportionately high amount of monthly payments on rent, in comparison to monthly mortgage payments to line somebody else’s pockets, it’s no surprise they feel that it is a waste. However, this is one issue that renting brings up. The other name downside relates to personal and professional hassles. Despite living in a property that is yours to inhabit, there is that nagging notion at the back of your mind that it really isn’t yours. Having said this, it all depends on the relationship you have with the letting agency or your landlord. Some people have nightmare landlords, and some landlords would say the same about their tenants. When looking for a rental property, sometimes the landlord may be the reason to swing it for the prospective tenant. Having a great relationship with your landlord can definitely reduce a lot of hassle. The one main issue in renting for most tenants is the dreaded one month notice period. If a landlord decides to sell up, they only need to give you one month’s notice. So if you are a family or a student with limited finances, this is a very short time period for you to save up a deposit for a new place of rent, let alone trying to find a property that suits you. With this in mind, financially it is an incredibly tense situation to be in. But in purchasing a property, although you do not have these issues, it is your responsibility to fix problems, such as common issues like your boiler breaking down. In renting a property, it is your landlord that has to fix the issue as well as pay the money. So, this still means that you are saving quite a bit of money on those issues. And especially if you were to compare it on a like-for-like basis, you would be paying infinitely more money on these problems, but it depends on the mortgage that you have settled for. Not to mention getting the down payment, which is usually on average 10% of the asking price!
The perspective of renting in the modern age is that it is essential, that we do not have the money for a down payment on a mortgage, and it’s very unlikely that we ever would. So, the options are limited, and renting is the most financially sensible option. Not least because we have enough to cover our rent, but it’s a far less costly effort in comparison to finding money for a down payment on a mortgage. Although there is government help to buy schemes, depending on the market you are in when it comes to finding the right property, you may end up purchasing a property that you didn’t want in the first place, but felt that you had to settle for in order to get onto the property ladder. This is an overriding factor for many people, especially for those that view owning their own home as a badge of honor. And not least there are people that offer their opinions on renting as being a waste of money, it is a handy comeback to remind them what the word mortgage actually means. In essence, it means “death pledge.” It doesn’t sound too appealing now, does it? Having said that, your unique circumstances always dictate your needs. For many people, renting is easier, because there is less hassle, but there are people who need to own their own property as it is an overriding sense of pride above all else. To rent or to buy? That is the question.
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