We would advise that owning your own home and having a mortgage is better than renting a property. Buying a home usually offers more value than renting. Even though there are a number of upfront costs such as a deposit, legal fees and the mortgage repayments being similar to rent prices, you will be gaining equity.
When we talk about gaining equity, what we mean is the money you pay back to the mortgage isn’t just going to the mortgage provider, it also goes back into the house. Therefore when you go to sell your property, you will potentially make a profit if house prices have also risen. A mortgage is also better than renting because a it is made up of debt and interest. Each month you make a repayment, your interest will decrease, resulting in your monthly repayments getting smaller as you get closer to repaying your mortgage.
Benefits of owning your own property
- As you continue to pay off your mortgage, you will get equity allowing you to potentially sell your house for a profit,
- Your monthly outgoings will reduce as you gradually pay off your mortgage,
- You have the opportunity to rent out your house or spare room for additional income.
We believe that owning a home is better value and a more sensible option than renting. This however isn’t always possible due to financial circumstances but it does make sense to aim for having a mortgage rather than renting in the long term.
Mortgage vs. renting – the costs
We wouldn’t advise renting a property over owning your own home however, sometimes renting is the only option. In the very short-term renting can be cheaper, you usually have to pay the first month’s rent and a deposit.
A mortgage on the other hand, will require a lump sum for a deposit on your house along with other costs such as stamp duty, legal fees etc. Once these payments have been made, the mortgage repayments are likely to be similar to rental fees but your debt will be getting smaller over the years. This is affected by your interest rate and this can fluctuate. Once you have paid your mortgage you can continue to live in your house without paying.
If you rent, then rental payments will stay the same or increase over time and it will only end if you stop renting.
In order to purchase a property, you will need money for a deposit and stamp duty. If this is not possible then you may be interested in the help to buy equity loan scheme backed by the UK government which helps buyers purchase a new build property with a 5% deposit. Another option would be a shared ownership scheme.
If you are interested in discussing your mortgage options, then please get in touch and we can arrange a call or meeting.