Rental and housing prices are both increasing, making it harder to decide which is the best option when it comes to living. Although buying a home is a big commitment, renting leaves you with nothing at the end and it can be frustrating paying out to a landlord instead of putting money towards a home.
Renting can make it more difficult to save but it also has its place if you need somewhere to live but you are not ready to buy a home or get a mortgage yet. Below we look at why buying a home is a better investment than renting in 2022.
How To Buy A Home
Before we get into the benefits of buying a home over renting, it is good to know the process of getting a home. Most people cannot afford a home outright, meaning mortgaging a home is the best option. Getting a mortgage takes time and you will need to have some savings aside so you can put a down payment. This is usually around 5% of the value of the house, but it will depend on the mortgage lender.
Even if you have a mortgage and are not happy with the interest rates, you can remortgage in the future. Remortgaging with bad credit is also possible, as Money Nest work with lenders who understand that refinancing with a bad credit history is difficult. They make the process easier and can connect you with lenders who could save you money on your mortgage payments.
To start the mortgage process, you should have a full-time job and proof of income. You should start lowering your monthly expenses where possible, as the less you payout, the more likely you are to be accepted for a mortgage. First-time homeowners can usually get mortgages that have small down payments, making it easier to get on the property market. Getting a mortgage is a big decision, but one that can seem less daunting if you speak to a mortgage advisor.
You Own the Property
The first and biggest advantage of buying over renting is that you own the property. Although getting a mortgage still means the property is not fully yours until you pay it off, you are still working towards owning the property. When you rent, all the money you spend is going straight into the landlord’s pocket. This can feel worthwhile whilst you are living on the property, but once you see how much money you have spent to gain nothing at the end of your agreement, it can be incredibly frustrating.
Buying Can Be Cheaper
Renting in 2022 is reaching an all-time high, with the average rental prices costing more than ever before. Buying does come with added costs at the beginning, but overall, the monthly payments can be a lot cheaper than renting. This depends on how many people live in the property and what kind of property you get, but if you want to get a mortgage with your partner, you could be paying substantially less than rental payments.
When choosing between buying and renting, it is also good to consider the deposit and payments you must pay when buying. If you have saved enough money and can pay for the upfront costs of buying, this is a much better long-term investment.
Buying Gives You More Freedom
Buying a home gives you a lot more freedom. Firstly, rental agreements usually only last around a year and a landlord could decide not to keep on your tenancy after this. If you are tired of moving, buying a home is a better option as it gives you the chance to stay in one place. Not everybody is happy to move once a year and moving comes with its own added costs, especially if you need to find furniture.
When you buy a home, you can decorate and renovate it however you want. When you rent, you may still be able to do this, but you would need to seek the landlord’s permission. Making a rental property more homely is a great idea at the time, but the money you put into that property is only going to benefit the property owner, rather than you. Unless you can come to an arrangement with the landlord where they decrease the rent if you improve the property, the costs are not usually worth it.
Buying allows you to keep pets, whereas many rental properties do not. If you are a dog or cat owner, it can be very hard to find a rental property that suits you and also allows for animals. Renting an apartment also comes with its own challenges when owning a dog, as you have to go downstairs several times a day to let the dog out.
Buying Is Better For Your Future
As rental prices are higher than ever, those on low incomes could find it extremely difficult to ever get on the property ladder. When your outgoings match your incomings, there is no room to save for a down payment for a home, meaning you could be stuck in this loop for a long time. Many people in Wales are moving back in with their parents to save money. When you can invest your money into a home and pay monthly payments towards it, you know you have something to look forward to in your future.
Once you have paid off your mortgage, the home is yours and you are left with an asset that you can sell or pass on to your children in your will. When you do make changes to the property, you will further increase its value which benefits you and your family, rather than a landlord. Once you retire, your mortgage will already be paid off, so you don’t need to worry about monthly rental payments. This is one less thing to worry about for the future.
You Can Make Money From Buying
Buying a home is a great investment even if you do not want to live in it long-term. As we’ve previously mentioned, rental prices are high, meaning you could choose to live elsewhere and buy a property to rent out. You could even rent out the spare room if you are living alone. When you have a mortgage, you will need to get permission from your lender before renting, but this is definitely possible.
Investing in real estate can give you passive income that you can use to pay off your mortgage. Eventually, you will be earning more than you need, so you can make money too. Becoming a landlord is a big commitment though, so this is something you need to do your research on. You should understand the laws around being a landlord and how to make the property safe for renting.
Buying is a better investment than renting as it allows you to own a property, renovate it as you please, and it gives you much more freedom. It is better for your future but is still a big commitment. You should make sure that you are ready to buy a home by cutting down on spending and saving for a down payment. You can speak to a mortgage advisor if you are ready to buy your first home.