I have recently passed the four year anniversary of owning my own home. I purchased my very first property just over four years ago at the age of 28. Before this I was a seasoned renter who had rented eight properties over a seven year period after moving out of home at age 17. I estimate I spent anywhere from £25000 to £30000 in rent during this period. This is pretty cheap too as the properties I rented include a dinky bedsit and rooms in shared houses, so my rent was much lower than if I’d rented a property all by myself. Before buying our first home together I lived with Ben for three years where I contributed to the mortgage so I’ve not included this in my estimations. In this blog post I am going to take a look at the advantages and disadvantages of owning your own home.
The amount I spent on rent shocks me and I’m sure others spend a whole lot more than my figure. I get that renting is flexible and allows you to be young and carefree whilst you work out what you want to do with your life, but I still think it’s such a huge waste of money. I did live in the same county and I never enjoyed moving around so much. Packing and moving house was really a royal pain! Living in houses with people you don’t really know is also quite challenging.
I’ve basically paid a nice chunk off someone else’s mortgage when I could have been paying my own. Except I couldn’t as I never had a deposit at the time and obviously needed to live somewhere, so renting was the only option. It’s a shame there wasn’t a 100% mortgage option, especially for those of us who could afford to rent a property so could clearly afford the mortgage repayments. If that option had existed I’d have owned a property for almost 15 years now and have a nice pot of equity sitting there. If only.
Now I own a home and have been settling in for four years, so I have had long enough to experience both sides – renting and owning. Below I will share the advantages and disadvantages of owning your own home.
Advantages of owning your home
You will make money
Usually property prices will increase over time. In recent years house prices have really boomed. By using the ‘How much has my house made me?’ tool on the Sunlife website I can see that Zoopla estimate my property has gone up in value by £52,050 since we moved in four years ago. See here exactly how much your house has made you too. It’s an estimate, but it’s not far off based on what other nearby properties have been selling for. That’s over fifty grand we’ve made for basically living in our property. That’s £13,000 per year which is pretty staggering if you ask me. If we were renting we obviously wouldn’t have made any money from the property at all.
As you continue to pay off the mortgage and the house value continues to rise you will generate more and more equity. This is the difference between how much you still owe on the mortgage and how much the property is valued at. This equity can be used to climb the housing ladder or it can be released in retirement to fund a more enjoyable lifestyle.
One day you’ll be mortgage free
So long as you don’t have an interest only mortgage then you’ll be paying off the amount borrowed. Eventually you’ll be mortgage free! When this exciting day comes you’ll no longer have to worry about paying mortgage or rent and will have more money in your pocket.
Owning a home gives you the safety and security of somewhere permanent to live. When renting you never know if the landlord will renew the contract or if they may decide to sell up. You can decide how long you live in your home. You’ll also be mortgage free one day and will have a home in retirement. I always wonder what renters do when they reach retirement age as rents must be extortionate to those on a basic pension. Paying off a home now means you have somewhere comfortable to live when you can no longer work and earn.
It’s your own home so you can do what you like to it, within reason and sometimes with planning permission! But you can decorate it exactly how you like, put things on the walls and basically make it your own. Renting either doesn’t allow you to make changes or if you did then it could be money wasted if you need to move out.
It can sometimes be more cost effective
Sometimes mortgage repayments are cheaper than rental payments, particularly if you have a sizeable deposit. My husband’s previous home was in a very cheap area and his mortgage repayments were much cheaper than my rent in a shared house in the next town!
Monthly costs will decrease
Your monthly costs will decrease over time if you stay in the same property as inflation rises, but your mortgage repayments stay approximately the same. You’ll get pay rises and the cost of living will go up, but providing you don’t move those mortgage payments that seemed a lot in the beginning will start to seem much smaller in a few years. Rent will always go up, usually every year, so you’ll save in the long run against renting.
You can make money off the property
You can rent out a room to a lodger or even convert an outbuilding to a guest room to make extra income. The property is yours and you are free to make money from it by renting a room out. There’s even a certain level of tax relief when doing so. You would not be allowed to sublet when renting.
Disadvantages of owning your own home
The housing market could crash
There is the possibility the housing market will crash and you could go into negative equity or have less equity. This is usually only momentary and you can always choose to stay living in your home until the market recovers.
You need a big deposit
This is usually the biggest drawback to owning a home as you need a large deposit. High rents can make it impossible to save for this. There are lots of help to buy schemes available where you now only need a 5% deposit, so it’s worth saving as much as you can and seeing if you qualify for government help to get on the property ladder.
You are responsible for repairs
One of the main benefits of renting is not being responsible for the white goods, plumbing and electrics and so on. If something goes wrong you simply call your landlord or letting agent and they will fix the problem at no cost to you. In your own home you own everything so if something breaks you will need to pay to repair it. It’s a great idea to save an emergency fund for these situations.
When renting you may move onto a rolling contract after a six month period or whatever is agreed, which means you can give one month’s notice to move house. Owning will not give you that same flexibility. It could take months to sell your home and even then there’s a chance a buyer will pull out last minute.
High moving costs
If you want to move home there are high costs involved. I estimate the cost of us moving home is around £10,000 with estate agents fees, solicitors and stamp duty to consider. When you move from rented accommodation you will get your initial deposit back provided you maintained the property and there may only be some minor admin and referencing costs.
Interest rates can rise
If bank interest rates rise then mortgage repayments will also rise. There are fixed mortgage deals which will give security for two or five years, but once these run out then there’s a risk that interest rates are no longer as favourable. It’s best not to max out your budget for this very reason and take a lower mortgage than you can afford.
For me, at this stage of my life, owning a home is a no-brainer. We are a young family with children in nursery, playschool and school so owning a home gives us the security to stay put in one place and raise our children close to their schools. It gives us a sense of security. Once the mortgage is paid off it will also be our inheritance to our children. The value of the property will increase over time so we will also make money either for ourselves to enjoy in retirement or again to leave to our children. We also love being able to modify our property and make it our own, knowing it is really our own home. So for security, investment and ownership reasons I believe owning a home is definitely better than renting.
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