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Renting or buying – is there a right choice?

Updated: Feb 17

It’s a common question Squigglers are often faced with, but is there a right choice between the two? Here are the pros and cons of renting vs buying.




Is buying a home really the right step for you as a Squiggler?


Traditionally, we’ve always been taught (by parents or society or relatives) that buying a home is the natural next step in life, especially once you’re in your 20s. And that might have worked for them, but times have changed, and so have the needs of our generation (and I’m not just talking about that TikTok obsession).


According to data from Nationwide, house prices in the UK have increased by a whopping 33% in the last 10 years, with the average house deposit for a first-time buyer being roughly £57,000, according to research by Halifax (I’m still anxious over the £20 I spent on Maccies last night!).


Of course, it’s not all doom and gloom. If you’re keen on getting onto the property ladder, there are loads of schemes and options available to help you raise the deposit you need. But if you’ve got other plans for your money, and love the freedom of renting, that’s ok too – ABC Finance says less than 30% are buying a home before the big 3-0 now, compared to over 50% of Boomers back in the day (you know when house prices were like £3,000?).


If you’re still on the tipping scale between renting and buying, don’t worry you’re not alone. Here’s a handy pros and cons list on renting vs buying to help you make the decision.


What’s the word out there on buying a home?

We can tell you all the good stuff about buying, but you might have heard enough of that from literally everyone else. It definitely feels great to own your own house – you can do it up however you like (maybe install a slide instead of stairs?!) and it’s an asset in your name giving you financial stability. And, let’s not forget, it’s great to know you’ll always have a stable roof over your head (no pesky landlords kicking you out with no notice!).


But although it’s a goal for many (if the exorbitant prices haven’t put you off), we’ve also heard the horror stories about buying – people struggling to sell when they want to, the huge costs of repairs, the burden of maintenance, high interest rates and massive mortgage repayments making houses a huge financial tie – and the rest!


What are the pros of renting instead of buying?

Firstly, there is a big misconception that renting is more expensive than buying. As of May 2020, Hamptons estate agency said in most regions of the UK, it’s actually cheaper by £71 a month to rent than to buy with a 10% deposit.

 

When you buy a home, you have to pay a deposit upfront, which usually costs a percentage of the price of a house (it can be anything, but often has to be at least 5% of the value of the property). The rest of the money you can borrow – but you need to pay that back with interest (it’s called a mortgage). And usually, the lower the deposit you put down, the higher the interest rate on your mortgage – think of it as the fee you pay the bank to lend you that money.


For a long time, that mortgage interest ‘fee’ per month was cheaper than the rent you pay per month, which made buying more appealing. But like I mentioned, that’s not the case anymore (oh how the tables have turned)

 

Aside from being the cheaper option today, renting also has other perks like:

  • The flexibility to move: You never have to worry about being in one place too long – you’re not tied down by a home! And for many Squigglers, that’s very important.

  • Low financial risk: You’re not making a huge financial investment that could potentially go down in value.

  • Less worry around maintenance: All the repair work and costs sit with the landlord, so it’s not your responsibility.

  • Expanding your social circle: If you like meeting new people, you can always rent a flat share, and it’s a great way to meet new people! And on the other hand, if you prefer living on your own, that’s an option too.


Sounds dandy – now spill, what are the cons of renting?

I’m not going to lie to you, renting has its downsides too.

  • Your home may not feel truly like home, simply because of the restrictions your landlord might have for tenants (that slide ain’t happening if you’re renting, mate).

  • Your money could be working harder for you if you bought a house or made another type of investment with the cash you spend on rent – you know when people say renting is ’dead money’? Renting is basically buying you a lifestyle and convenience.

  • There’s always the risk that your landlord could increase your rent or ask you to move out – there’s less security around renting.


So, what’s the verdict? Renting or buying?

That, my friend, is totally up to you. I’m just here to give you the full picture (I know I sound like a therapist).


Whichever one you go for, it’s important to remember that you’ll need a steady income – whether that’s to pay your rent or your mortgage every month. If you’ve worked hard to buy a home, and you lose your income, you might not be able to keep up with your mortgage payments – which means you could lose your home. And if you’re a renter and you lose your income, you could risk getting kicked out because you can’t afford rent (I mean, you could move back in with your parents, but do you really want that?).


Either way, income protection insurance could help you remove that worry (we’ve already got enough stuff to overthink about). It’s basically a financial product that replaces your income if you can’t work because of an injury or illness. You can find out more about income protection insurance here.




Conclusion:

Renting and buying have both got their perks and downsides, and the decision really depends on your personal situation and what you want at this stage in life.


So, coming back to the first question – ‘is there a right choice?’ In my opinion, not really – choose what’s right for you based on your priorities, we all want different things from life and how we spend or save our money is up to us (just don’t spend it all on an unlimited texting plan, we have the Internet now).