When moving home, you may need to initially decide whether you should rent or own a property. This may feel overwhelming as there are many factors to consider, but don’t worry – you’ll soon be able to make the right choice for you.
To help you out, we’ve created this handy guide detailing what you may need to consider when deciding… rent or mortgage?
Renting could be an ideal choice for moving depending on your current situation. Examples of scenarios where renting could be a suitable option include:
- You are moving on a temporary basis - Perhaps you need to work or study in a different place for the next few years. Whatever the reason, if you know you’ll only be living there on a short-term basis, renting may be a suitable option.
- You need to move quickly or as soon as possible – Unlike the admin requirements of a mortgage, rental agreements can often be drawn out quickly as the paperwork is less time consuming for your estate agent or landlord. Once you express interest in a rental property, there is usually a quick turnaround time between signing the documents and getting the keys to move in.
- You want to avoid long-term financial commitments – Rental contracts can usually be withdrawn or renewed every 12 months, although this time frame can vary depending on the landlord or estate agent. Therefore, you are not financially committed to the property for many years like you could be with a mortgage.
- You don’t have room in your budget for household repairs – If you rent a property, your landlord or estate agent is usually responsible for soliciting any urgent repairs that are needed. This shouldn’t implicate you financially, provided you don’t deliberately damage the property.
Sometimes, however, renting can present some frustrations.
A quick turnover time between different sets of tenants could mean that you initially arrive to a property that needs a thorough clean or still contains belongings of previous tenants who have left them there. So, make sure you are prepared to spend time making the place truly feel like home.
Your landlord or estate agent will usually ask for a deposit before you move into a rental property. Your contract should explain how you can get this back at the end of your tenancy, provided you leave the property in a suitable condition.
Be mindful of this; not only is it a larger cost which you will need to budget for initially, some landlords or housing agents can keep some or all of your deposit by arguing that you have not left the property in a liveable condition. To resolve this kind of dispute, always take as many photos of the property as possible when you leave, to help prove that you have given it a thorough end of tenancy clear out.
You do not need to worry about challenges like this. There are resources available to help you with landlord or housing agent disputes, and any other obstacles that could arise from renting. The UK government have recently updated their How To Rent guide, which details everything you need to know and look out for when renting a property.
Buying a property can be a worthwhile investment if your situation allows it. Some examples of when taking out a mortgage could be a suitable option include:
- You are moving on a permanent basis – If you want to move into a property where you will settle for many years or live on a long-term basis, you could consider home ownership.
- You are not in a rush to move but would like to do so in the future – If you do not want to move straightaway, you could put aside time to save for a deposit to place on a mortgage, whilst you stay at your current address.
- Your income can cover a long-term financial commitment – A mortgage can last for many years, so it’s important that you feel secure in your income to be able to maintain the monthly payments for a long period of time.
- You are not solely responsible for your current household bills – Maybe you are living with family or friends, whereby you do not take complete ownership of household bills. This could present the ideal savings opportunity for a deposit to place on a mortgage.
Taking out a mortgage can present some challenges. For example, processing a mortgage can be quite time consuming, as there is usually a lot of paperwork involved. This means that you may have to be patient during the time between placing an offer on a property and getting the keys to move in.
You will also have to save and budget for large costs to obtain a mortgage. Firstly, there is the initial deposit, which is usually the biggest cost to account for. It can take several months or years to save for this. Currently, some mortgage lenders will accept a deposit that is at least 5% of the purchase price for the property in question.
Secondly, you will have to budget for solicitor’s fees. A solicitor will usually have to process conveyancing paperwork to cover legal aspects of the property purchase.
Another cost to consider is that of household repairs. As a homeowner, you will be financially responsible for these.
However, there’s no need to worry about this. There are plenty of resources available to help you get on the property ladder, including shared ownership schemes and the Help to Buy ISA.
Sometimes unexpected expenses can arise that need to be covered quickly, such as urgent household repairs, or important repairs to your car which need fixing to help you get to work. Whatever the reason, this type of situation may lead you to consider taking out a loan to cover any unexpected costs.
It is a common myth that you cannot apply for a loan unless you have a mortgage. Regardless of whether you rent or own a property, there are lenders who could help.
Where your mortgage would be considered is during an affordability assessment. Responsible lenders usually carry out this assessment to reassure both them and you that you will be able to manage your loan repayments. Your regular mortgage payments would be taken into consideration as part of your monthly outgoings.
The same applies for if you are renting; monthly rent payments are usually considered by lenders as part of your application.
At Morses Club, we want to help you feel a little more in control of your finances, but we understand that unexpected costs can sometimes throw you off course. We are one of the UK’s leading doorstep lenders, providing small cash loans.
We provide loans for new customers from £300-£1000 that can be paid back over 35 weeks. Our interest rates are fixed, and there are no extra fees or charges, so you know from the start how much you have to repay.
Please note that our loans may not be right for everyone, so if you are considering applying, it’s important you understand how it works.