What are the differences between buying and renting a property?

Buying vs renting: where does your money go?

When renting a property, the monthly payments go to your landlord, and it’s your landlord who owns the property. Regardless of how long you live in the property and pay rent, this amount will never go towards owning the property. If you always choose to rent a property rather than buy, you will have to pay rent even after you’ve retired. If you choose to buy a property, then your monthly payments will be paid to your lender (for example, the bank or building society you borrowed the money to buy from). However, when you get to the end of your mortgage term, you will own the property outright and will no longer need to pay anything in order to live there.

Will monthly repayments remain fixed, or can they change?

Whether you choose to rent or buy, changes can occur when it comes to your monthly repayments. Although fixed-rate mortgages do exist for homeowners, rising interest rates can increase your monthly repayments by a substantial amount if you do have a variable rate mortgage. And if you are unable to pay your mortgage and fall behind with payments, there are financial consequences. As mentioned already, renting is not without potential increases in monthly repayments either, and landlords can choose to amend the amount you owe them. The good news is there is legislation in place to prevent landlords from upping the rent owed at the drop of a hat. For example, they must give 2 months notice if they’re looking to increase your rent, and they can only increase the rent once a year.

Updates and repairs: who pays for what?

Another major difference between buying and renting links to the costs involved when things need updating or repairing in the property. If you’re a homeowner, then all repairs, renovations and updates are your responsibility to finance. If you instead rent a property, then it will be your landlord’s responsibility to cover the costs involved.

The flipside of the previous point however is that homeowners have the freedom to make changes and update the property as they see fit, and any improvements which add value to the property will benefit you as the homeowner if you decide to sell further down the line. Those who rent can often find that their landlords have set rules about what can and cannot be done within the property, and they are able to restrict your ability to make changes to the property, as it’s them who own it. And it’s worth noting that even if you do have a landlord that’s willing to allow you to make improvements to the property, it won’t be you who benefits from any increase in the property’s value as a result. 

So do higher mortgage rates mean it’s all bad news?

Definitely not! Although interest rates have increased, lenders are doing their bit to try and better support first time buyers. For example, they’re offering longer mortgage terms. There was a time when a 25 year mortgage term was all that was available, but now there’s 30, 35 and even 40 year mortgage terms to choose from in order to keep prices competitive.

Builders are also offering incentives, which weren’t available when interest rates were cheaper. For example, a 5% discount on a property was not available a year ago, but is today. And you can also get contributions from the homebuilder towards your deposit too. These incentives offered by home builders in the current market offset the rise in cost that comes with current mortgage rates. 

Green mortgages are also available. Under a green mortgage, a bank or mortgage lender offers a house buyer preferential terms, for example a discount of 0.1-0.2% and are willing to lend more on home with an energy rating of A or B EPC. A home with an energy rating of A or B EPC also means lower utility bills, which can again help to offset rising costs elsewhere. And the really good news is that all Strata homes have an A or B EPC rating, meaning that a Strata home is a real investment.

So whilst at surface level it can seem as though there’s no good news when it comes to trying to get on the property ladder, there’s actually a whole lot more available than there ever was when mortgage rates were lower. So whilst mortgage rates have risen recently, there’s options out there to give you a boost onto the property ladder. So, if becoming a homeowner sounds like it’s the right choice for you, now’s the time to take a look at our collection of spacious and contemporary homes and find the home you’ve been waiting for.