Mortgages

Is it better to Rent or get a Mortgage?

Since the 1980’s there has been pressure on people to buy their own homes. It was something which was promoted by the government back then and even those people renting council houses were allowed to buy those homes, should they wish to. This desire to own a home has continued but is it a sensible idea?

There are many positives of owning a home, but there are negatives as well and it is worth being aware of as many as possible before deciding whether buying a home is the right thing for you. We are all different too, in our priorities and this will have an influence on whether buying a home is the right thing for us to do.

One of the big advantages for many people buying a home is the fact that the mortgage payments tend to be cheaper than they would pay for privately renting a similar property. This means that they feel they would be financially better off. Of course, if you use a mortgage to buy, the amount you pay will change if interest rates increase, but you will get to the point where the mortgage is cleared and you will no longer have to pay those monthly payments anymore. However, when you are renting there is no need to pay buildings insurance and this is usually paid my home owners even when their mortgage term has ended (it is a requirement to have this with a mortgage) and they will also have to pay life insurance for the mortgage term. The house also has to be maintained. This means that if there is structural damage, decorating needs doing, a leak or any internal refurbishments, these need to be paid for by the homeowner. When you are renting you do not need to have to worry about any of this, although the landlord will probably let you decorate if you want to. These costs can add up, but it does depend on how much modernisation you want to as well as how structurally sound the property itself is. It is still likely that owning a home will be cheaper than renting privately although there are a few exceptions. If your home is not kept in good repair and falls down no insurance will pay out for it to be rebuilt or if the house goes down in value and is worth less than when you paid for it then it could be not worth owning one.

There are other considerations as well. If we buy a home we will then have a fixed address and if we want to move, we would normally have to sell that home and then find another one to buy. This takes time and can be very expensive with the cost of estate agents, solicitors, removals and possibly stamp duty as well. So you will only really want to buy a home if you know that you will be staying there for the long term. So if you move around the country, or even the world with your work on a regular basis or do not feel ready to settle down, then it is probably wise not to buy a home. However, if you want to invest in a home and rent it out this could be an option, but it is very different to owning a home and living in it and so would need a different sort of investigation.

When we buy a home then a mortgage is something that most of us will get. We have to consider the commitment that we are making when we take this on. We will, of course, have to always pay rent or mortgage if we want to live in our own home. However, a mortgage is a loan like those offered by Emu Loans, so it is different to paying rent. Both will give you a poor credit record if you cannot keep up with the payments and if you cannot manage the payments you could lose your home in both cases. However, having the loan means that you may struggle to get credit in other areas, as you already have a big commitment and so lenders may see you as a risk. However, there is also a flipside where you can show that you are capable of making repayments on a loan regularly and this can make other lenders have faith in you, that you will do that for other loans as well.

A mortgage can often be the biggest outgoing in a household and so you need to think about how you will afford that. It may be cheaper than rent, but you will have other costs as well, as discussed before such as insurance, house maintenance and things like that. Make sure that you are confident that you will be able to afford it as now as well as in the future.

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