Should you buy or should you rent? The answer to this question depends on your own personal circumstances such as the size of your deposit, the property you wish to rent, the size of mortgage available to you etc.
Since house prices are currently so high however, it is true to say that in the significant majority of cases, it is currently better to rent a home than to buy.
Buying incurs substantial fees. The average £200k house costs £2,000 in stamp duty, around £2,000 for surveys and legal fees and around £4,000 of estate agents fees to sell the property when you want to move out. So that’s £8,000 just in fees. Then you have to add in the annual cost of maintaining the property (repairs, replacement boiler etc), which is commonly estimated at around 1% per annum or £2,000. In addition, the mortgage cost of buying a house is currently higher than the cost of renting that same house. With mortgage rates currently around 6% and gross rental yields currently around 4% it is easy to see why.
Conversely, renting allows you to keep your deposit in the bank, earning 5-6% interest per annum at prevailing rates. Plus, you are able to add to your deposit with the money you save from paying rent rather than a higher mortgage payment.
The only argument for buying a house over renting is the possibility of further house price increases. After reading “The Essentials” you will already know my thoughts on that subject.
Click here for the Which Way Home Buy or Rent Calculator, an invaluable tool which allows you to compare the benefits of renting and buying a particular property. Follow the guidance within the calculator to tailor the simulation to match your own personal circumstances.
