Given the economic state the UK is currently in, the housing market is showing no signs of improvement. First-time buyers are finding it harder and harder to save up their much needed deposit in order to attain a mortgage, and so are turning to long-term renting instead.
Many people are under the impression that renting can be far cheaper than buying, but is this really the case? Before taking the plunge, you may want to consider your options carefully before signing any contracts.
Buying is Cheaper
Rental rates have been growing steadily around the country in recent years, while mortgage rates have actually dropped, meaning that it is much cheaper in the long run to own a house rather than rent. In fact, studies have suggested the average person could save up to 16% through buying rather than renting, which is a significant amount.
According to a report by the BBC, it’s even a better option for those living in the notoriously expensive regions of London: one case study found that those living in a house share could be paying around the same amount a month in order to own a house as they were currently paying for rent.
Make it Personal
Of course, these figures can vary wildly from person to person. While 16% is the average saving, some could save even more, whilst others may be in a much better position by renting.
There are ways to figure out what would be best for you in just a few easy steps.
The first, and perhaps most obvious, thing to figure out is how much you could be saving with both methods. Using online resources you will be able to judge how much it would cost to rent the kind of house you’re looking for in a specific area, as well as how much it would cost to buy.
Once you’ve figured out how much it would cost to buy, you must study your savings carefully.
For most mortgages you’ll need at least a 10% deposit, if not more, in order to purchase the house, so look at how much you currently have saved, and figure out how long it’ll take you to save up the rest if needed.
With the introduction of new help to buy schemes from the UK government, first time buyers can get their foot onto the property ladder. This scheme works by the government loaning you 20% towards the deposit of a new build property in addition to your own 5%. This means that you only need to have a mortgage for 75% of the property value. This is currently being extended but is only available on new build properties. As such, you might not be able to buy in your desired location.
Talking to a mortgage adviser is also a good idea as they may be able to find schemes or savings that the untrained person may not be able to see.
Mortgages and property are often one of the main expenses in a person’s life so making sure that you have the right one and for the right price is essential.
The following article was provided by Totally Money in order to help readers understand the differences between renting and buying a home.
Image: Terry Robinson