Rent or buy – what makes more sense?

Ask your parents or grandparents the above question and they will almost certainly say it makes the most sense to buy a house. They will tell you that rent money is “thrown away” while the repayments you make on a mortgage are going towards a tangible asset, and will probably come up with a number of other reasons.

All this is true, and they could be right, but there are senior economists and property experts who will tell you that in the current economy, it actually makes better financial sense to rent. So who is right? Let’s try to find out by taking a look at some pros and cons.

Renting or buying – what makes more sense?

Buying

Let’s start with the pros. Your parents are right, when you are paying off a mortgage, you are buying something tangible rather than simply lining your landlord’s pocket. There is also the fact that the property is all yours to do with as you will. If you want to paint the internal doors, or completely remove them, it’s entirely up to you. You can also live by your own rules in terms of what pets you want to keep, whether you want to smoke indoors and so on.

So what’s the downside? Well, buying a house can be a gamble. When the property market crashed in the 1990s, owners found themselves owing mortgage companies vastly more on a property than it was actually worth. A house is also a tie. If you want to up and move, you need to find a suitable website to research the estate agents, put it on the market, find a buyer…  All of which involves time, money and effort. Finally, it is also something of a responsibility – if the boiler breaks down or the front door needs replacing, nobody’s going to deal with it for you.

Renting

As a renter, you have far more flexibility, and the whole process of drawing up the contract, signing on the dotted line and moving in is much, much quicker. You are not subject to the vagaries of the property market – if the value goes through the floor or interest rates go up, it shouldn’t make a blind bit of difference to what you pay out each month. You also have the comfort of knowing that if something expensive breaks, all you have to do is tell the landlord and he will get it repaired or replaced.

On the other hand, there is always the unsettling feeling that the house is not really your own, and you know that the landlord could decide to sell or do something different with the property and give you notice to leave at any time. It can also be frustrating to be unable to make certain improvements to the house to really put your own personality on it.

Which is best?

As we suspected, there are pros and cons to both buying and renting. It is certainly not a clear-cut case of one being better than the other – in many ways it would be far easier if it was! Ultimately, it comes down to your own financial and personal circumstances.

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Photo Credit: Michael Browning Alvin Engler Dawid Liberadzki

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