Deciding whether to rent or buy a property is no easy decision. We each come to the question with a different set of circumstances and finances, which means there’s no one size fits all approach here. What can help though is knowing the key differences between renting and buying a property, so that you’re able to make the choice that’s the right one for you. Because that’s all that really matters.
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.
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.
Even if you’ve made the decision that you want to buy a property and become a homeowner, there’s another question that springs to mind for many: is now the right time to buy? It can often seem that the path towards owning your own home is a long and winding one, and the media can paint a bleak picture. But if you’re serious about buying a property, then it’s time to look beyond the headlines and get a handle on what your options are because it really isn’t all doom and gloom!
The central bank began hiking the base rate in December 2021 in an attempt to lower inflation. The base rate refers to what the central bank will charge building societies and banks for loans. So when the base rate goes up, it’s often the case that banks and building societies will raise the interest rates on mortgages and other types of credit they offer because the cost of borrowing has increased. The central bank raises the base rate in order to try and meet the target of keeping inflation low and stable, which is a target set by the UK government.
