Unlike many other countries in Europe and the United States of America, the UK has always had a strong culture of buying rather than renting residential property. In the UK, 65% of the population are homeowners compared to just 51.4% in Germany. However, the UK housing market is changing and an increasing number of people are shunning a life of mortgage repayments in favour of renting. According to the English Housing Survey, the number of UK renters has doubled in the 20 years between 1996/7 and 2006/2007.
Whether you already own a home and are considering selling or you’re looking for your first home, there are several reasons why renting might be a better option than buying.
- Renting does not require a long-term commitment. Most residential rental property is available for a minimum tenancy of six to 12 months. A mortgage is based on loan repayments spread over 25 to 30 years. Of course, it is possible to sell a property before the end of the loan term, but it can take months or even years to find a buyer and almost half of all sales in England and Wales fail before completion. Buying a home involves a much bigger commitment than renting.
If you’re undecided on where you want to live long-term or foresee your circumstances changing in the next few years, renting may be more sensible than buying. Renting will allow you to choose a home that suits your current lifestyle and budget for a year or two rather than buying a house and having to endure the hassle and expense of selling in a few years’ when the size and style of the property are no longer practical.
- There’s no need to spend years saving a substantial deposit. Many first time buyers struggle to get onto the property ladder because of the size of deposit they must save to qualify for a mortgage. There will be some upfront costs with renting, but these will be much more manageable than raising funds to buy a property.
If renting allows a person their independence and a first experience of living away from the family home, it is far from “wasted” money. Would you consider the money spent on holiday wasted because there is no investment to be called upon in the future? Renting can give young people valuable life experience that they would not get living at home and could not access if buying were the only option.
- Selling a home and moving into rented accommodation can free up capital. There may be many reasons why a person needs a large injection of cash at some point in their lives — be that to fund a trip around the world, to support a child through university or simply to enjoy a more comfortable retirement.
If a homeowner has built up a good amount of equity in a property, they can sell it to free up cash. Schemes such as “equity release” also allow a homeowner to access their property investment, but they often carry certain risks; there may be high fees and interest to pay and your right to claim benefits could be affected.
A house buying service is the only way to achieve a guaranteed sale and it is the fastest way to release the equity in a property. The company will make a cash offer and funds can be released as little as seven days later. A quick house sale will allow the homeowner to move into rented accommodation and access the cash tied up in their property fast.
- If the rent increases beyond what is affordable, it’s easy to move on. Many landlords raise the rent periodically. If this happens, a renter is free to give their notice and move to a more affordable place in a few months.
Homeowners do not have the same flexibility when it comes to moving on if the property becomes unaffordable. If the roof needs replacing or the boiler breaks and you can’t afford to repair it, you’re stuck with the cost. Likewise, if interest rates change or property prices plummet, leaving you in “negative equity”, there is little you can do besides selling up and that may be extremely difficult if the house is now worth less than you paid for it. If for any reason, a homeowner struggles to make their mortgage repayments — be that due to an unexpected increase in property expenses or a change in income — the only way out is to borrow more, sell or accept repossession of the property.
For this reason, buyers should be certain they can afford the property for the long-haul and have some leeway before committing.
The choice to rent or buy is a personal one and there are pros and cons to each option. However, buying is a much bigger commitment and one that is not possible for everyone — nor advisable. Once your name is on the mortgage deeds, the property is your responsibility until it sells. Renting allows much greater freedom and flexibility to adapt to changes in life. Renting may also absorb less disposable income or enable a homeowner to release the equity they have built up in a property. While rents may be higher than mortgage repayments, a renter does not have to put money away for a rainy day in case the electrics fail, or the boiler goes bang. Making a quick house sale, banking the cash and moving into rented accommodation can give a person the freedom to enjoy life without the ongoing responsibility of property ownership.