Renting or Buying: Which is the Most Frugal Option?

Discussions about whether it is best to rent or buy a house are all over, with each person arguing that their side is the only correct one. However, there are pros and cons to each of them- here are some sent in by a reader below for some food for thought.

Photo Credit: Dhruva Mehra

Are you looking to choose between buying a home and renting one out? There’s plenty to consider, so here are some pros and cons for both to help you decide…

One of the biggest life goals out there is to buy a home, but the real question is whether this option is the best for you and your situation? After all, it can be extremely expensive, and you have to wonder whether it’s all worth it.

For those looking to buy a home, there are government incentives. For example, help to buy scheme solicitors can help you to make the most of your money through buying a new build with a low deposit.

That said, buying a house today is extremely expensive, and not right for everyone. Especially if you’re not looking to settle down just yet, and want to travel the world, think again. In this article, we’ll provide some pros and cons for both options to help you with making your decision.

The Pros and Cons of Renting a House

Let’s start with renting a house – the situation that 4.5 million families in the UK are currently in…

The Pros of Renting a House

Small Costs from the Start

For starters, the up-front costs of renting are far cheaper than buying. Most of the time, the most you’ll have to fork out is an initial deposit, which will usually be no more than 1 month’s rent. Then, it’s just a case of paying your landlord monthly for rent, as well as any bills and utilities.

Generally Cheaper

What’s more, the ongoing costs of renting tend to be cheaper than a mortgage too. In fact, a recent article in The Evening Standard has revealed that renting in London is now cheaper than a mortgage.

This isn’t always the case, and can be subject to economic change; the pandemic has caused this current situation, after all. But, in general, it’s usually cheaper to pay rent on a monthly basis than a mortgage.

More Freedom

Most rental contracts will tie you down for no more than a year, and many are rolling contracts that can be terminated by the landlord or tenant at any point. This means that, for anyone not looking to settle down, renting is an ideal option.

Not being tied down to any one property means you can move house whenever you please. Whether you get fed up of your current location, or decide to travel the world, you can do so at a moment’s notice.

The Cons of Renting a House

Money Down the Drain

One of the biggest problems with renting is that it’s money going into someone else’s pocket. Your monthly rent is funding your landlord’s family holiday, rather than being an investment into your own life.

Can’t Make Permanent Changes to the House

Another sticking point for many people is that rented properties can’t be altered without your landlord’s permission. In some cases, extreme deductions may be taken out of your deposit if you leave even the smallest mark on the walls when you leave.

Unlikely You Can Have Pets

Rented properties almost always restrict pet owners from living there. Despite the new standard tenancy agreement changes, which encourage landlords to accept tenants with pets, things aren’t all they seem.

In fact, the agreement has some pretty arbitrary and subjective rules which allow landlords to reject tenants with pets on a certain basis. What’s more, the agreement seems to only be a recommendation, and not subject to any specific laws or rules.

Photo Credit: Roselyn Tirado

The Pros and Cons of Buying a House

Now that we’ve taken a fair look at renting, what are the pros and cons of buying? Take a look…

The Pros of Buying a House

Somewhere Permanent You Can Call Home

One of the great things about buying a house is that you have a place you can call home. If settling down in a certain location, and creating a base and a family somewhere, is your thing, then this is certainly the choice for you.

Money is Going into Your Pocket

Unlike renting, the money you put towards your house will ultimately end up in your pocket in the end. For example, any renovations you make will hopefully add value to the house for when you sell it on later. What’s more, the mortgage you’re paying off monthly will end up back in your hands when you come to sell.

A Great Investment as You’re Building Equity

Because of the above, buying a house means you’re building your personal equity in something other than a bank. These days, money in the bank just sits there, but if you have your money invested in a property, it’s very likely that this money will grow as the property market grows.

The Cons of Buying a House

Large Upfront Costs

One of the biggest sticking points for most first-time buyers is the huge upfront costs that buying a house entail. All homes require a deposit of around 20 percent of the overall house price. What’s more, if you’re a low earner, your mortgage may not cover this 20 percent, meaning you may have to pay an even greater deposit.

Because of this, it’s almost impossible for the majority of young people to get on the property ladder without the help of a family member. For those who can, however, it may put them out of pocket for many years, whilst saving up and once the deposit is paid.

You’re in Debt

Most people who buy a house will take out a mortgage to fund it. That said, many people worry that being in this kind of debt is a negative thing.

It’s important to note that this debt isn’t necessarily a bad thing. Of course, it’s not good to owe money if you can’t pay it back. That said, if you can pay monthly rent, then you’ll be able to pay a monthly mortgage.

Lack of Flexibility

Buying a house is perfect if you’re looking to build roots somewhere but, if this isn’t for you, then it might not be the best option. After all, you’re tied to a mortgage and a location, which makes it tricky if you suddenly want to drop everything to go travelling.

Photo Credit: Travel-Cents

 

Will You Rent or Buy?

As you can see, there’s a lot to think about before getting straight on the property ladder. For those who can afford a deposit, and are looking to settle down, buying a house is the money-savvy option.

However, for those who are looking for a more nomadic lifestyle, perhaps renting is the better choice?

Ultimately, it’s down to your own lifestyle, so these pros and cons should hopefully help you to see the bigger picture. Be sure to leave your thoughts and any more pros and cons in the comments down below. What choice did you make for yourself and/or your family?