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I always encourage you to ask me questions, and when there is something really juicy, I like to write about it! This question is one of those…
“Should I Buy Or Rent A House?”
Let me start with this (based on harsh personal experience).
Sometimes it just makes no financial sense to buy for the stage of life you’re at.
I wish I had known this in my 20s when I was desperate to get onto the property ladder. I worked so hard to buy a 50% share of a flat in South East London.
1-2 years into being in the flat I wanted to go travelling, but I still had the mortgage/rent to pay while I was away. I got myself into a lot more debt because of it.
I sold the flat just 1 year later to move in with my boyfriend, now husband. It helped me to pay off some of the debt I’d got into, but it took 7 years before I was finally in a position to buy again.
If I had instead rented a room in a house-share to keep costs low and focused on saving and building a proper emergency fund first, this would have put me in a much more stable situation.
But try telling 28 year old me that.
Of course, my experience won’t be the same as everyone’s, but the conventional “wisdom” of home ownership was definitely not the smartest thing I listened to about my finances in my 20s.
So do you buy or rent? See what you think.
The Benefits of Buying
Home ownership provides you with more than just a home of your own; it’s also about finding greater security and making sure that you have an investment for the future. At some point you will then be able to sell the asset and hopefully use it to fund future home purchases.
The housing market has gone bananas in recent years, and the cost of buying has increased way beyond many people’s wages.
If you’re already on the housing ladder, it can seem that you are sitting on a potential goldmine!
This is not, and I repeat, this is NOT a great pension strategy!!
It’s not always a given that house prices will increase over time, so it’s worth bearing that in mind when you think about buying.
Another reason to buy is that you won’t suffer the consequences of being kicked out by a landlord because the home will be yours. That’s where the security factor comes in, and it’s something that shouldn’t be underestimated.
This is not just about when you’re young or when you have a family. Think about when you’re old. Could you image being kicked out by a landlord when you’re elderly and need stability in your life?
But then again, if you can’t make those mortgage payments, the bank will soon take your “security” from you.
Freedom To Make Changes
As a homeowner, you’ll be able to make changes to your home, whether they’re major or minor. Even simple things like redecorating can be prohibited for many people who are renting their home.
If something goes wrong, you can get it fixed quickly without having to ask. If you want to build an extension, you can!
Buying your own home could open up the possibilty of hosting guests on sites like air bnb. There are rules to stay within, and you might want to check this with your mortgage lender before you do anything too drastic. But it is highly unlikely that a landlord would be happy for you to sub-let your rental (not to mention risky and illegal if you don’t have permission!!).
The benefits of renting
There are many reasons why you might want to put off buying a home until a later date.
If you don’t really have the means yet to cover the costs of buying a home, don’t stretch yourself, because it could damage your financial situation later.
The costs of moving don’t just involve finding the deposit for the home. You’ve also got to think about stamp duty and the costs of hiring a solicitor. You’ve also got to pay for a mortgage to be arranged.
When you move in, you’ll also be responsible for everything. If it gets broken, you’ll be paying to get it fixed or replaced, so it can get costly very quickly.
Renting eliminates all that, but you will need to have upfront costs to put down a deposit and rent to the landlord.
Another reason to hold off buying a home is the flexibility that renting brings. When you’re young and you want to move around between jobs until you find the career that’s right for you, it helps not to be tied down to one location. What if you decide you’d like to go travelling, or you meet someone who lives in a different part of the country. Speaking from experience, rental flexibility is so helpful!
It’s less stressful
With all the pressure to be buying a house, it can feel like you’re being left behind. But if you’re not ready, or just don’t want to, then why put yourself through the stress of buying a home? Apparently, only divorce is more stressful than home buying, and I can understand why!
FIRE and Financial Freedom
Many in the FIRE movement are not fans of home ownership; renting would be the preferred option. The idea is to save to buy rental properties first, then use the income you gain from being a landlord to eventually help you to pay for your own home. I think this is a very clever strategy, and one that I wish I had been taught at a young age!
How Do You Decide to rent or buy?
I’ve written another post that goes into 6 signs that you’re ready to buy, but if you want something quick because you’re in a hurry, then here’s a few things to think about:
If you’re ready to put down roots
While no one has a crystal ball, you generally have an idea that you’re ready to settle down in a location for a while. Maybe you’ve done some travelling, you’re in a stable job and you’ve found your life-partner. This is not a great time to buy, not rent if you can and if you want to.
If you’re still dreaming of something else
If you haven’t travelled yet, or you’re still not quite sure you’re where you want to be living long term, or your job isn’t stable, this might not be the best time to buy a house. Renting would give you the flexibility you need.
You don’t have financial stability
This one is a common one for many people. If you don’t have the right financial foundation, adding in an expense like a mortgage could lead to trouble. Know your numbers first. What is your credit score? How much do you have in savings? Are you setting aside money for a pension/retirement? Are you in debt? Is the job you’re in likely to be long term? All of this matters, because a mortgage company will scrutinise everything. If you’re not in a good place, it’s highly likely they will say no. Renting in this scenario would allow you to stabilise first.
What about the economy?
The last thing you should consider is the economy. This freaks a lot of people out and ensures that you put off making decisions that are right FOR YOU. The aim is to build up our own personal economy that can weather any storm. There will always be some kind of crisis to content with. The most important thing is that you are doing what is right for your own circumstances.
So that’s it, my thoughts on the buy or rent debate. It can be hard to go against the grain, but as you’ve read, owning your own home is not necessarily the best thing to do and sometimes renting is better for where you’re at and what your future intensions are. You have time, there is no need to rush and stress yourself with this.
Now over to you- what are your thoughts? Should you buy or rent?
Until next time,
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