Back to: Homeownership
Owning and renting are fundamentally different, both give you a place to live but whichever one you chose you will have to pay for where you live. Whether you rent or buy depends on your lifestyle, financial position and personal goals. 86% of people in Britain say they would like to own their own home so let’s look at some of the reasons why you may want to buy your own home.
The Pros.
What are the advantages of buying your own home?
You have more choice over the type of home you want and its location. It can be less expensive than renting. Homeownership brings both tangible and intangible benefits. Not only do you have your own home, but you make the decisions about how it looks and the design/use of the space, and you also get a sense of stability and pride of ownership.
- Homeownership gives you creative license
- Paint and paper the walls however you want too
- Hang up whatever pictures you want, wherever you want
- Add landscaping or put in a vegetable garden
- Build your dream man cave, she shed, craft room, kitchen or kids play area
- Having your own space where you can make lasting memories with family and friends in your forever home
2. Buying rather than renting can save you money
- When interest rates are low, and if you have a reasonable deposit, owning your home can be cheaper than renting
- With fixed rate mortgages, you can control your costs more easily than being pressurised by the rental market and the financial needs/desires of a landlord
3. Owning your home can make you money, Your Home working for you
- In a rising property market, you get the increase in property values. For many people, the single largest sum of money they have made in their lives is from the rising value of their home
- You are investing rather than spending – instead of paying rent that pays off your landlord’s mortgage, your monthly payments will be contributing towards something that is yours
- If you live elsewhere for a while, you can make money renting it out
- Your home can be your life savings and pension plan all in one. At the end of your working life, you can downsize, release equity and live off the capital invested in your home
- You can use the equity in your home as the deposit on a bigger and better house moving you up the property ladder
4. Legacy, generational wealth and other benefits
- You can leave a legacy/inheritance for your children and help them on to the housing ladder
- Pay off your mortgage. If you take a mortgage over 25 years and do not extend your payments or remortgage, then after 25 years your payments are finished. What you did spend on mortgage payments is now yours. You could use this to travel, save for retirement, the choice is up to you
- Homeownership will improve your credit score and increase your borrowing power.
- It’s more secure; no one can decide to sell it and kick you out. As long as you keep paying your mortgage it’s your home
- Studies suggest homeowners report less visible benefits such as a sense of pride in their home, greater sense of community involvement and better physical and mental health
The Cons.
What could make you feel it’s not for me!
Buying your own home may not feel like it is right for you now but in the future you may feel it is the best option for you as your life and circumstances change. Not only is it a financial commitment, it is also an emotional one which requires certainty. To offer balance and the knowledge to make your best decision, you should consider the potential downsides to homeownership.
1. Upfront costs.
- A deposit, you will need a minimum of 5% of the value of the property you are wanting to buy
- Solicitor’s fees (sometimes referred to as conveyancing fees)
- Surveys
- Valuation fee
- Mortgage application fee
There may be other costs to factor in like the cost of removal firms or van hire required to move your belongings. Ground rent and service charges if the home is a leasehold property.
2. Responsibility and Flexibility
- Less flexibility, owning a home ties you to a particular location, making it difficult to move if you need to relocate quickly for work or personal reasons
- Maintenance and repair costs. Homeownership comes with ongoing maintenance and repair costs. You will be responsible for repairing and paying for any damages or issues that arise
- Interest rates can rise. You’ll be paying interest on the money you borrow to buy your home. You need to be aware of the effect an increase in interest rates can have. Even a small uplift can dramatically alter a family’s budget
There is a way to mitigate against unexpected interest rate rises. Consider a fixed-rate mortgage for a period of time so you can manage your monthly budget and regularly renegotiate your mortgage deal.
Ultimately the decision to buy is yours and yours alone, you just need to do what is right for you at the right time.