I keep having conversations with clients and friends about the pros and cons of renting or buying property. I have summarised my thoughts below and provided a link to a brilliant tool, so read on.

The case for buying

Owning your home can provide greater clarity over your monthly outgoings when compared to renting, for example if you fix your mortgage interest rate for five years. Additionally, you may have a sense of security when buying, feel more connected to the area, put more energy into knowing your neighbours, improve the condition of your home, and generally feel more settled. These soft factors should be considered along with the hard financials, such as monthly repayments, and building equity in your home.

If you are keen to buy a home it is worth exploring what’s possible, despite the negative noise  surrounding the property market at the moment. There are always external factors that can dissuade you from buying, but if you feel settled in an area and want to be there long term, it is worth exploring what’s possible. If you find you don’t have the deposit, or the monthly payments will be too great, then at least you are clear on the challenges and can think about how to overcome them.

The case for renting

Renting in Greater London is challenging right now, rental viewings usually end in bidding wars with properties getting snapped up. Despite this, renting is now cheaper than buying due to increased interest rates. The difference is about £500, with average monthly London rents are about £2,053, while the average mortgage repayment is £2,546. This comes from research completed by Zoopla that has been widely reported in UK media.

While you lose security when renting, for example your landlord could decide to sell the property, you do gain flexibility. Renting can make moving easier and faster than if you own your home, so if you need a change of scenery or want to try something different it is as simple as giving notice and handing the keys back. If you own your property and are trying to move you must prepare the property for sale, appoint an agent and work around viewings to name a few. You also need to be mindful of the costs involved, for example Stamp Duty, and the risk of being in a chain. According to the Home Owners Alliance the selling process can take up to 6 months from start to finish and can be emotionally draining. As you move up the housing ladder you will incur ever more punitive Stamp Duty rates, so if you aren’t sure about an area, it is likely better to dip your toe in with a rental rather than buying and moving again soon after.

The final word

There are a huge number of factors, financial and emotional that go into this decision. If you are not sure about something, don’t ever feel obligated to buy just to get on the property ladder. Especially if you are comparing yourselves to others or see the move as a short-term purchase. This calculator from Smart Money Tools covers most of the financial factors. As a rule of thumb, the best decisions are made by leaning on internal motivation rather than external pressures, and the same applies here.

Wealth Spring does not offer mortgage advice, but we can always provide an introduction.

* Your home maybe repossessed if you do not keep up repayments on your mortgage