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Should you rent or buy your first home in the UK?

Gauri Chandra
August 23, 2022
Should you rent or buy your first home in the UK?

Illustration by Muharrem Huner

Interest rates are increasing and mortgages are becoming more expensive. After the interest rate rise in early August, rightmove found that mortgages are to now take up 40% of first time homebuyers salaries. Property investments are risky and the UK is going into a recession. At the same time, rental properties in London are in a shortage, and rent prices have gone up since the pandemic.

It is safe to say that having a roof over your head is a stressful task and deciding whether to rent or buy is a huge question for many. 

Read on to learn more about what to consider while choosing whether to rent or buy a home.

1. Saving up

Renting would not require you to save up tens of thousands initially. There are benefits to paying rent and not having to worry about a mortgage deposit. However if you have saved up that money already and you’ve got a decent credit score, the security of owning a home could be an attractive option.

2. Timing and Security

Assuming you have spent time building your credit rating and you’ve worked in the same place for a while, buying is a good option. If you know you won’t be packing up and moving any time soon then this makes sense.

If you’re just starting out and you don’t have a good idea of your future just yet, renting gives you more flexibility. It also is beneficial if you’re testing the waters living with a partner as it won’t be so hard to move out.

3. Maintenance:

There are maintenance costs involved with buying. A broken boiler, damaged window or even lightbulbs fusing would come out of your own pocket. When you are renting this is all your landlord’s responsibility and so you don’t have to worry about them. 

However there are benefits to owning your own place, as you don’t have to wait for things to get done as you are doing them yourself. When renting you have to go through your landlord which could cause delays.

4. Fees:

Renting doesn’t have much fees, as a law passed in 2019 ensures that landlords are not allowed to charge you things such as admin fees or contract renewal fees. There are different fees involved with buying such as stamp duty, legal fees, insurance, surveyor fees, and mortgage interest.

5. Future benefit:

Most people like to emphasise the fact that you are essentially paying off your landlord’s mortgage while renting and not building any equity for yourself. While this holds true, there is also the risk that if you buy your property and the housing market falls below your mortgage value, you will be in negative equity. It also takes a long time to sell a property, so returns on your investment are not immediately guaranteed.

6. Inheritance

If you’re lucky enough to be inheriting a property in the future then you could put your money into other things such as investment portfolios, pensions or savings. Renting can allow you to save on a mortgage deposit, giving you more money to put into these.

So basically...

You’re ready to buy when:

  • You have a good credit score
  • You’re ready to settle in a location
  • You’ve got the savings to maintain the property and put down a deposit
  • You understand the risks associated with the property market
  • You aren't going to inherit a property and would like to secure something for stability

You’re better off renting when:

  • You require flexibility in your life
  • You haven’t built up your credit score
  • A deposit, maintenance costs, and other fees are not within your financial means
  • The property market is too much risk for your current financial status
  • You don’t want the majority of your wealth tied to your home 

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