Buying A Home

Is renting or buying a house better?

Dec 6, 2023

Renting or buying a property is a big decision, and it's one that many people struggle with. There are pros and cons to both options, and it can be difficult to know which one is right for you.

If you're feeling overwhelmed, don't worry — you're not alone. 

Before you make your decision, take a breath, grab a cuppa, and take a look at the advantages and disadvantages of both renting versus buying a house. Discover the costs for each, whether it’s a good time to get on the property ladder, and which option is cheaper. 

So, is it better to rent or buy a house or flat? Let’s get into it.

Advantages of renting

Short-term affordability

Renting is often cheaper in the short term. While you’ll probably need to pay a deposit to secure your rental property, it’s likely to be significantly cheaper than a mortgage deposit plus additional fees. 

No maintenance costs

You’re not responsible for the repair and upkeep of the property. That cost must be covered by the landlord. 

Flexibility

Renting also offers you more flexibility. Moving from rental property to rental property is generally a lot easier than buying and selling a property with a chain involved. 

This gives you the freedom to move around more and live in different places, even potentially living in different countries. If you want the ability to move around more frequently, renting could be the best option for you.

Disadvantages of renting

No equity

The main negative with renting is that you're not building equity, and the money that you pay every month goes into someone else's pocket. In all likelihood, your rental payments will be paying off the mortgage on your landlord’s property. Ultimately the value of that property will then belong to them, rather than you. 

According to Spareroom.com the average rent price across the UK has been £704 per calendar month, which works out as £8,448 towards your landlord’s mortgage in one year. £16,896 in two years. And  £42,240 in five years. (Wow. Right?)

No security

Landlords can also impose rules on your rental agreement, such as who can live or stay at the property, whether you are allowed pets, and how your rent amounts change over time. Breaking these rules can impact how much of your deposit you get back at the end of your tenancy and gives you less agency over your living circumstances.

Long-term cost

While cheaper in the short term, renting is more expensive than buying a house in the long term. Rent payments never come to an end, whereas mortgage payments will eventually pay off what you borrowed to buy your property. So consider whether you are looking for a long or a short-term living situation.

Advantages of buying a house

Investment

While buying has big upfront costs, it’s usually cheaper in the long run. Paying a mortgage means you’ll eventually own your home. Not only do your monthly payments go towards your investment, rather than your landlord’s, but you’ll also benefit from any profits when you sell your house. Buying is often the better long-term investment.

Stability

Another benefit of buying your own home is that you get to make the decisions about how it is decorated, whether you’re allowed pets, and what modifications you want to make. Not only does that mean that you get to express your own taste but it may even increase the value of the house, potentially giving you a bigger profit if you sell.

Disadvantages of buying a house

High initial costs

Trying to pay off a mortgage can be a really long path. A mortgage is a loan after all, so you’re committed to paying it back, plus a great deal of interest (unless you can find an amazing deal). 

Financial risk

There’s an element of risk too — if the property market takes a dip, so does your investment. Property is a fairly solid investment, but that risk is on your shoulders.

And who could forget the initial costs — a deposit for a mortgage can be 10% of the value of your property, sometimes more. That’s often tens of thousands of pounds that you need upfront just to get started. Add to that solicitor fees, stamp duty, surveyor costs and more, and it becomes clear that buying a house can be a lot more expensive in the short term.

Maintenance responsibility

Before buying your home, you need to consider your financial stability, long-term goals and your knack for DIY (or budget to pay someone else to do the latter, if it’s not your natural talent). While it’s great to own a house, you also own the repairs and maintenance that come with it. There can be great rewards but they come with greater risks.

High-interest rates

It’s also worth noting that when you take out a mortgage, you may not start chipping away at the mortgage itself for a few years — your initial payments could be going towards the mortgage interest rate at first. Many people choose to ‘overpay’ their mortgage to combat this. Use this handy overpayment calculator from MoneySavingExpert to work out how much you could save yourself by paying a little extra each month. But do check the terms of your mortgage agreement to see if you can overpay without facing any fees or penalties.

Renting vs buying a house or apartment: which is cheaper?

Whether it is cheaper to buy or rent a house or flat really depends on your circumstances and your short and long-term goals. It will often be more expensive in the short term to buy a house. You need to pay a deposit upfront and fees. But that initial outlay provides you with a strong financial investment in a property which could benefit you hugely in the future.

Renting is the cheaper option in the short term. The initial costs are less than when you buy a house or flat. But rental payments never end and you’re not using that money to pay into an investment. Renting is cheaper to begin with, whereas buying will often work out cheaper in the end.

When is a good time to buy a house?

Consider things like interest rates, the economy, and your personal circumstances. You can save lots of money if you manage to get a lower interest rate, but even if you do, that rate can change in the future. 

If you’re in a position to take on the commitment, and if you have the upfront capital (which, we won’t lie, is a huge challenge in itself for many people), a mortgage can be a fantastic investment.

So, should I buy or rent a house or flat?

The most important questions you should be asking yourself are what are your short and long-term life goals? What money do you have available, and how much are you able to pay every month? Is it the right time to commit to a mortgage or will renting be best for you for now?

Consider your personal circumstances and what you hope to achieve. Renting can solve your immediate living situation and can give you great flexibility in your life. Buying a house is a bigger personal and financial commitment but it could be a brilliant investment in your future.

If you don’t yet have the money to pay a deposit on a mortgage but are making sacrifices to get there, don’t forget that you can use your rent payments to boost your credit history as you go. A better credit history can offer you better interest rates and deals for your mortgage, and lead to you saving £1,000s in the long term.

So why not get started with Loqbox Rent? Just tell us how much rent you pay every month, connect your bank account, and we’ll do the rest. It doesn’t matter if you’re living with your friends, have a landlord or a letting agent — if you have a regular monthly lump sum leaving your bank account each month, we can report your regular payments to Experian. 

As time goes by, this will help you to improve your credit history and show future mortgage lenders a list of evidence demonstrating that you can responsibly manage to pay large lump sums each month. That way you’ll still be making an investment in your future even while you pay rent!

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