Renting and buying are the two main options you have when you want to live somewhere. You can either pay someone else to live in their property, or you can purchase your own and pay the bank back over time.
Renting and buying are two sides of the same coin, really. When you break them down, you quickly discover that there aren’t all that many differences between them.
However, the psychology behind the choice can be strong. Many people want to own their own properties, especially in some markets, whereas others like to rent.
The purpose of this post is to guide you, whether you’re looking at residential lettings or want to buy somewhere long term.
The Financial Stability Aspect
The first consideration is the financial stability component. Many people find that buying a home requires significant upfront investment, including large down payments and closing costs. These are okay if you have the capital to pay for them, but what if you don’t?
In the latter case, it may be better to rent. What you don’t want is a situation where you’ve moved into a new home, but can’t afford the payments on it. Ideally, you’d like to be able to save and invest at the same time, but that might not be possible if you’re in an ownership situation. Could you afford emergency repairs if they suddenly came along?
Long Term Costs
You also want to consider the long-term costs. Rentals tend to cost about the same over time in line with inflation, whereas the price of mortgages goes down over the years as incomes rise.
If you plan on living somewhere long-term, you might want to rent for the first year and then buy after that, when you know you like the area. You might also want to put the mortgage on a fixed-rate loan to give you more financial stability and spending power.
Flexibility
Of course, flexibility is also a significant consideration when making a decision like this. You want to ensure that you’re able to move around with your job, just in case.
Buying makes more sense if you’re able to commit to at least 5 to 10 years. Renting is the better option if you don’t have that kind or runway or you’re unsure what’s next for you. In a year’s time, you might want to move on, and that’s okay.
Building Equity
Another reason people buy homes is because they want to build equity. It’s a form of forced saving, essentially, with release on retirement.
Freedom from maintenance, however, is the main upside of renting. In most locations, the landlord takes care of that and you don’t need to worry about it.
Which you decide is more important to you is a matter of personal choice. Some people prefer the idea of managing their own money and renting instead of putting it all into a property and settling down.
So there you have it; some thoughts on whether you should rent or buy your next home.
