If you’ve always dreamt of owning your own home, you could find that taking those first steps onto the property ladder are more affordable than you think.
New figures compiled by Strata show that buying a home is often cheaper than renting, especially with the government’s Help to Buy scheme.*
Using data from Zoopla, we’ve compared the price of renting a two bedroom home against buying a 2 bedroom new build home, both with and without a Help to Buy equity loan. This is where you only need a 5% deposit for your new home, which the government will boost by a further 20%. You’ll only need a mortgage on 75% of the property price, making it an affordable alternative to renting.
A closer look at the figures
The results might surprise you, as buying is more affordable than renting across many of the country’s major towns and cities – especially in the north of England.
Take buying a new home in Leeds as an example. Our research shows the average cost of renting a two bedroom home in the city is around £701, but you’d typically pay £586 a month towards paying off a mortgage (10% buyer deposit). With a Help to Buy equity loan, you could be paying as little as £453 per month.
It’s a similar situation in Doncaster, where you would pay around £474 a month in rent, compared to £467 making home loan repayments. With Help to Buy, this figure reduces even further to £361.
Meanwhile, it costs around £37 more to rent a home in Derby than it does to have a mortgage on a home of your own. If you use Help to Buy, the gap increases even further to £161.
The benefits of owning your home
Many people choose to buy their own home because it offers financial security. The value of your home should increase over time, building up equity you can use later in life. The only expenses once you’ve paid off your mortgage will be insurance, utilities and general maintenance. There’s also the added benefit of being able to personalise your home without having to ask permission from your landlord. This is particularly the case in new homes, which are a blank canvas that you can really make your own.
*Strata Homes does not offer mortgage advice and all figures are for illustrative purposes only. Monthly mortgage payments have been calculated based on a new build, 10% buyer deposit, 25 year term, 2 year fixed rate mortgage with an interest rate of 2.35% for guide purposes only.
Help to Buy mortgage figures are based on a 5% buyer deposit and 20% Help to Buy loan with a Help to Buy mortgage over 25 years and an interest rate of 1.69%. Costs have not been included for any fees which may be payable to your lender such as arrangement fees, valuation fees, early repayment charges, insurance and stamp duty etc. You should take advice from an IFA or preferred lender before agreeing to a mortgage. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP YOUR REPAYMENTS ON YOUR MORTGAGE.