Should you rent or buy? Purchasing a home is one of the biggest financial decisions you can make, so it makes sense to ask yourself this important question. Owning property comes with many benefits, especially if you’re building your net worth – but there are also drawbacks.
We look at the pros and cons of buying vs renting to help you make the best financial choice for your situation.
Pros and cons of renting
For most people, renting is a temporary option, something you do until they’re ready to buy. But there’s more to it than that.
Pros of renting
- Renting gives you flexibility. It’s a lot easier to end a rental agreement than to sell a house when you’re ready to relocate.
- Somebody else is paying for repairs. A broken boiler? A leak in the shower? When you rent, these repairs are the responsibility of the property owner, not yours.
- Lower startup costs. Renting might require a security deposit, but there are no other costs when you move into a place. When you buy a home, there are deposits, legal and moving fees, and repair/replacement costs.
Cons of renting
- Your money isn’t helping you build equity. The biggest difference in the rent or buy issue is value. If you pay £1,000 a month in rent for 10 years, you’ll spend £120,000 and your net worth grow at all. But £1,000 a month paid towards a mortgage would give you significant equity on your property after ten years.
- No credit score benefits. Having a mortgage and paying it on time every month improves your credit score. Paying rent doesn’t do that.
- You can’t make the place truly yours. No replacing dated tiles, no building a fence, no major remodelling projects. What you see is what you get.
Pros and cons of buying
Pros of buying
- According to research by Good Move, home prices are set to rise by 17% over the next decade. So if you’re wondering whether you should rent or buy as a long-term investment, the answer is clear. Plus, every mortgage payment you make builds equity and increases your net worth.
- Since the house is yours, you can change it, renovate it and extend it.
- Peace of mind. Knowing the property is yours gives you stability. You don’t have to worry about a landlord cancelling your contract or your monthly rent payments unexpectedly rising.
Cons of buying
- When it comes to rent or buy options, buying will always come with higher costs. A deposit, mortgage fees, surveys and moving costs can all be significant. Owning your home also means you’ll be responsible for maintenance costs – from garden care to expensive plumbing problems.
- You lose flexibility. It’s harder to just pack up and go somewhere else when you own a place. If you do, you’ll have to plan to either sell it, rent it or leave it vacant. Selling might take some time, during which you would have to continue paying the mortgage even if you don’t live in the property.
Making a decision
The ultimate choice around whether to rent or buy comes down to life planning. You don’t have to live in the house you buy forever, but it makes more sense to buy if you plan on staying put for at least a few years.
It also makes sense to look into your finances before making a decision. If you can afford the higher upfront costs, then buying makes a lot more sense.
For some people, renting long term (or even forever) might be a better choice. This is especially true if your career requires you to move frequently. The logistics of buying and selling a home every 3-5 years can be exhausting and renting might be a more economical choice in this case.