Deciding whether to buy or rent your next property is a big decision which should be well thought out after extensive research. Everyone’s needs and requirements are different and where it might be best for one person to rent, a mortgage could be ideal for someone else.
Advantages and disadvantages of a mortgage
Firstly, the big advantage of having a mortgage is that you will own the property and therefore have something of value for your monthly payments. This is usually the main reason someone would choose a mortgage as it can also be seen as an investment rather than just paying for a roof over your head.
Following on from the investment aspects of a mortgage, there is also the possibility that the value of your property will increase over the duration of your mortgage and as a result when it comes to selling, you could potentially be in profit and then be able to afford an upgrade.
Another benefit of owning the property is that you can make any changes you’d like without needing permission from someone else (except planning permission where applicable). So if you decided you wanted to give the property a new lick of paint, install a new kitchen or fit new carpets, the decision is completely yours to make.
A disadvantage of opting for a mortgage is that your monthly repayments could increase in line with national interest rates meaning you pay more back each month than initially budgeted (although rents rising could also impact tenants as well which is explained later). This could be an issue for some so you should be prepared for an increase and make sure you can afford it.
Additionally, it is much more difficult to break away from a mortgage if your circumstances were to change. For example, your employment status could change in which case, the mortgage may no longer be viable for you. In this instance you may need to sell the property which is a much more complex, drawn out process compared to leaving a rented property which will also entail legal and estate agent fees when selling.
Advantages and disadvantages of renting
A big positive for renting is that there is very little commitment required compared to a mortgage. If you change your mind or your circumstances change, it’s much easier to leave the property compared to having to sell it.
It’s generally also cheaper to maintain the property as any wear and tear issues for anything from the boiler, to pipework or requiring a mastic man to seal your bathroom is usually the landlord’s responsibility to fix and therefore the cost is not passed on to the tenant. Unforeseen circumstances like this can be costly for a homeowner.
Another benefit is that it can be common for the property to come fully furnished. This is ideal if you’re only looking to stay in the property for a shorter time and is especially perfect for students who will usually only spend 12 months in the property and may not have the funds required for sofas, beds and other furniture.
Although the tenant is usually responsible for the household bills such as water and electricity, they are not responsible the buildings insurance and therefore should only opt for contents insurance if it’s suitable to their requirements – potentially saving £100’s every year.
A potential issue with renting is that it is far less secure than a mortgage. A landlord can reclaim the property at almost any time, in which case (after sufficient notice has been served) the tenant would be required to leave the property and make alternative living arrangements.
Furthermore, the tenant is required to gain the landlord’s permission before doing any work to the property. So the painting and decorating outlined above may not be possible under a tenancy agreement and although the landlord is required to maintain the house to an appropriate level, it may not be to your taste.
Finally, as with potential mortgage rates increases, a landlord can decide to increase rent with little notice. Landlords will usually set the rate based on inflation and the market average for similar properties in the area however the price set is completely up to the landlord and any price they set may make the property suddenly unaffordable.
Deciding on whether a mortgage or renting is best for you is a decision which should be carefully thought-out and considered. Both contain a level of commitment and you should always weigh-up the pros and cons of both as well as your affordability.
Additional elements such as fees will vary depending on which option you go for.
If you’re in the process of moving home and require a small cash top-up then a payday loan could be your best option for finance. Just remember you’ll need to pay this back with interest.