To Rent or Buy: Knowing the Right Housing Choice for Your Wallet

The following is a guest post by Melissa Marshall. Enjoy!

For people in the UK who are trying to make sense of the property market and their options, it can feel rather like a game of pontoon, and you don’t whether to stick or twist, in terms of renting or trying to buy your own home.

There are some attractive properties to discover at Entwistle Green in Liverpool for example and in certain areas around the country, it could work out cheaper to buy than to rent.

The buying or renting conundrum

If you were looking at a map of the UK where rents and property prices are at their highest level, the very epicentre of the most expensive area would be central London, where property prices and some rents, look more like mobile numbers rather than an asking price.

Interestingly, as you work your way out of that price hotspot in the city of London and spread out to other cities across the country, the numbers become not just infinitely more manageable in terms of affordability, but overall, in just about 35% of the rest of the UK, the mathematics come down in favour of buying rather than renting.

As you would expect, buying in some cities such as Glasgow and Dundee in Scotland, can offer some clear blue water in terms of a definite monthly saving achieved through buying rather than renting a property in these areas.

However, there are also a number of cities like Manchester and parts of Liverpool for example, where your mortgage payments will still be cheaper than many rental payments for an equivalent property.

It is still probably cheaper to rent than to buy in locations like London and Cambridge as prime examples, but as general view, the further north you head in the UK, the greater the chance than buying will trump renting in terms of monthly cost savings.

Savings to be made despite rising house prices

The property website Zoopla came up with some figures recently which seem to convincingly support the argument that buying a home is cheaper than renting in many major cities throughout the UK.

The study concluded that nearly half of the major cities offer you the chance to make savings through buying rather than renting. Interestingly, buying instead of renting was cheaper in 36% less than a year ago, but that figure has since risen to 48%, suggesting that there a growing number of opportunities to save money each month if you can get yourself on the housing ladder.

Barriers to overcome

It is fair to say that actually buying your own home is not always that easy in comparison to renting, as there are barriers to overcome, such as raising a big enough deposit and being able to afford the additional expenses associated with moving such as stamp duty and legal fees.

The average house price in the south of the country is now well over £300,000, which means that raising a deposit and having enough income to pass the affordability check, could be an issue.

If you widen your property search to the midlands and the north, the UK housing market offers far more opportunities in terms of affordability, as the average house price is closer to £150,000, giving a clear example of what is meant when people talk about the perceived north-south divide.

How the numbers work

Working on the basis that you are able to raise a 10% deposit in order to buy your own home, which is the typical percentage required, you will put yourself in a position to make savings over the term of your mortgage, in comparison to what you would spend on rental payments.

A typical mortgage where you put down a 10% deposit and pay the mortgage back over a period of 25 years at a fixed interest rate of around 4.5%, should see you end up paying less to own your home than renting.

The other major factor to consider is that once you have paid off your mortgage, you will own your home outright and be able to profit from any subsequent rise in values over the time that you have owned it.

There are pros and cons to both options, as you might have more flexibility to move around more easily when you are renting for example, but if you do want to make the most of the money that you have available each month, it could turn out to be cheaper to buy than to rent, especially if you are casting your net well away from the London area.

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