Mortgages, Money and Me

Rent or Buy (Are you ready?)

Should I rent, or should I buy? There is no single answer for this, it really depends on your own psyche and lifestyle and it can certainly change over time. The main thing is to understand what is important to you and to be aware of the pros and cons of both decisions.

Ask yourself these questions:

Is it the right time?

Moving house can be stressful and time-consuming, so consider whether it’s suitable right now. Do you have children? Will they need to move school? Are there work obligations that could make a move challenging? If you’re planning major life changes like having a baby, you’ll need to factor these in.

Am I ready?

When considering your financial situation, do you have debts (like a personal loan) that you’ll need to manage? Perhaps you can consolidate these into your home loan, or pay off the credit card first. You’ll need to ensure your deposit is big enough to both purchase your new home and cover the costs of buying.

Pros and Cons

Buying Pros

  • It’s a form of enforced savings… your repayments generally consist of both interest and principle loan repayment, and so over the long term you will be paying off your property, and the property itself also grows in value over time
  • You can make repairs and alterations to the property without asking permission from a landlord
  • You have a reasonable certainly over your loan repayments, especially if you choose a fixed rate loan. Rents however can fluctuate depending on supply and demand
  • You have certainty of tenure, and won’t need to move if your landlord asks you to vacate. This can be very important if you are active in the local community and have children attending schools, or pets that need to be accommodated
  • There is a significant emotional benefit of feeling settled when you know the house is yours

Buying Cons

  • Your loan repayments and initial purchase costs are not the only expense… you will have ongoing maintenance and bills to pay such as council or water rates
  • You may not be able to afford the area you want to live in
  • Initial purchase costs can be significant
  • You will need a sizable deposit or a family member who is prepared to be your guarantor
  • You are making a substantial long term financial commitment. If you find you are struggling financially you may need to sell or you could consider renting the property and finding cheaper accommodation for yourself
  • If you have a bad neighbour you are likely to be stuck with them for a while.

Renting Pros

  • You have more scope to live in an area of your choice
  • You don’t need a large deposit to start renting
  • You can move when you wish (within the requirements of your lease)
  • You don’t have to pay for maintenance or repairs
  • You can choose the size of your house to fit your lifestyle as it changes
  • You can move to a cheaper property or move in with friends or family if you are struggling with your finances

Renting Cons

  • Your rent is not building an asset for yourself
  • If vacancy rates are low you may have difficulty finding a home where you want to live
  • Rents could be increased in a competitive market
  • You may be required to vacate even if it doesn’t suit you
  • You cant change anything in the house without your landlords permission
  • You will have regular rent inspections which you may feel is an invasion of your privacy
  • You may not be allowed to have pets

What about ‘Rentvesting’?

‘Rentvesting’ is where you rent where you want to live and buy a separate home to rent to others as an investment.

This can be a tax effective investment strategy that will still allow you to enter the property market but have the freedom to live where you want.

In summary

Consider what is important to you. As you follow these emails over the next few weeks they will give you lot more information about savings, financial assistance and the buying process. Don’t forget that you can contact me at any time to discuss your circumstances.