How does the cost of living compare for tenants and mortgaged homeowners?
For much of the UK population buying their own residential property will be the biggest financial commitment anyone undertakes and for many, owning their own home is essential. In the UK renting has traditionally been seen as an option for students and young professionals who need flexibility and also the ability to save up for a deposit for that all-important mortgage, but which is better value?
To Rent or Buy?
The ultimate aim of previous generations has always been to buy property. The potential uncertainties of renting property in the UK private rented sector (PRS) don’t always appeal to families.
Associated costs when buying property can add up to a ridiculous amount of money, but buying property using a repayment mortgage means owning the property outright at the end of the mortgage period, as long as all the relevant lending conditions are met and at the end of the mortgage term homeowners end up owning a sizeable asset that could bring future financial security.
In comparison, renting property long term means tenants have no assets at the end of a tenancy, despite paying thousands of pounds (GBP) in monthly rent.
In recent years renting property in the UK has become almost the norm, with people find it difficult to get on to the property ladder. Renting has many benefits that might have been previously overlooked and is the traditional way of living in the majority of European countries.
One obvious financial benefit of renting is that tenants don’t need a big deposit to secure a property.
Currently the best mortgage rates available require large value deposits. Many lenders require borrowers to find 25% or more of the house price as a deposit, this can be a terrific financial headache for many requiring them to save tens of thousands of pounds, which can take time.
Buying a residential property also means paying legal bills, surveyor fees and possibly stamp duty if your new home is above the threshold, all upfront expenses that tenants avoid when renting.
Tenants, that are required to do so, have to provide a deposit to the landlord or their appointed property management agent, but this figure is usually just a months rent, instead of the huge lump sum required when buying property.
Property owners have sole responsibility for the upkeep and maintenance of the property. Ongoing maintenance and repairs may seem initially expensive but swift early action can save a great deal of money in the long term.
For example – Annual checks on roofs and gutters might spot a potential problem that is cheap to repair before it develops into a damaging leak that can cost ten times that of a small repair.
In comparison, tenants have little responsibility if anything goes wrong with the property as repairs are paid for by the landlord. The same goes for maintenance issues, though tenants do have a responsibility to keep the rental property in good condition and have a duty to report any issues to the landlord or their appointed property management agent as soon as is practically possible.
The general comparison between the cost of renting and buying property can largely depend on the geographical location within the UK, as prices vary in different regions and tend to increase in and around major towns and cities.
Renting property gives tenants a degree of flexibility in terms of location, length of stay and depending on the size of the rental property, the number of people residing in the property.
Due to the costs of buying and selling property on the open market, renting property becomes highly attractive for people who want to explore living in different cities and those who need to move for employment purposes because the flexibility of renting property is ideal.
The appeal of buying property remains strong for most people and will ultimately be more cost effective in the long run, especially if the property goes up in value.
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