To Buy? Or To Rent?

Online, July 10, 2013 (Newswire.com) - The Money Advice Service, an independent service set up by the government to help people make the most of their money, sets out some of the considerations of whether to buy or rent.

Buying a property is probably the biggest financial decision you will ever have to make. How do you know whether it is the right decision for you right now - or whether you would be better off renting?

Things to weigh up if you're not sure whether to buy or rent

Owning your own home is a huge commitment, not just to the building you buy and the area you choose to live in, but also to your life (and to another person if you are buying with a loved one or friend).

There are many benefits to home ownership. Here are some of them:

Once you have paid off your mortgage, your home will be yours and it could be worth far more than you paid for it; If your home increases in value you can use that equity to help you afford a bigger home or to fund a more comfortable retirement if you downsize; When you retire you will not necessarily have the income you need to keep on paying rent, while if you have paid your mortgage off you will be living there 'rent free';

You can spend money improving your home and increase its value, whereas you can not alter a rented home without the landlord's permission; Sometimes it can be cheaper to buy than to rent. There are also potential downsides of owning a property:

It is a big financial commitment so you will need to be sure you can afford the responsibility you are taking on; You also need to be sure you can afford maintenance costs such as replacing a boiler if it packs up or fixing a leaky roof. If you stretch yourself too thinly when you buy, you may resent not having money for meals out, holidays and entertainment;

You have less flexibility than when renting. For example, if you want to move for work or personal reasons, selling up and moving on is far more expensive if you own as you will have all of the associated estate agency and legal fees. Also bear in mind that it may not always be easy to sell your home - you'll be dependent on what is happening in the market;

If you live with someone else and split up, the process of sorting out the property will be far more complicated and expensive. Are you better off buying or renting?

You are not necessarily going to be better off financially buying rather than renting your home.

If the value of your property falls, you may find yourself unable to sell because you owe more to your mortgage lender than your home is worth.

On the other hand, if house prices rise, you could make a nice profit that could help fund a move to a bigger home or give you a lump sum if you choose to downsize later on in life.

Can you afford to buy?

The first step towards buying a property is figuring out whether you can afford to do so. There are many costs associated with buying your own home, beyond your mortgage repayments, including:

deposit
legal costs such as solicitor's fees
survey cost
Stamp Duty
removal costs
your monthly bills, such as gas, electricity, home phone, etc.