I’ve started my first job and want to get my own place. My parents are telling me that if I rent somewhere then it’s money down the drain but I am afraid to buy. The newspapers say that the housing market has crashed. My parents say that maybe now is a good time to buy. I don’t have much savings but my parents will help me with the deposit. I’m so confused by the whole thing. What should I do? Please help.
It’s quite usual for us to aspire to home-ownership. It’s part of the British culture, but I won’t go into the political reasons for that right now. But buying isn’t necessarily right for everyone. As a home owner, you would have sole responsibility for maintenance and repairs – and you can never predict what might happen or what might go wrong and how much it might cost to put things right. You will have far fewer responsibilities if you rent somewhere. However, as your parents have said, “it’s money down the drain” – in other words you are paying to contribute to someone else’s investment, not your own. There are pros and cons of both renting and buying a place to stay, so let’s have a look at them.
Advantages of renting
- The landlord, not you, has responsibility for repairs and maintenance.
- You don’t need such a large deposit – usually one month’s rent.
- Renting isn’t such a long-term financial commitment as buying.
- You can move more quickly if you change jobs or decide to move away for whatever reason.
Disadvantages of renting
- You have no financial investment in the property – the rent you pay is just a monthly expense like any other.
- The landlord may ask you to leave when your lease ends or other statutory period of notice*.
- You can’t usually make any major improvements. Even if you do, with permission, it’s the landlord not you who benefits from any increase in value to the property.
Similarly there are pros and cons of buying your own place.
Advantages of buying
- Money you put into your own home is an investment – but in the current economic climate you may well find that the value of your property could decrease. In the 1980s and 90s it was almost guaranteed that it would increase – not so now.
- Buying may give you more choice of types of property – old, new, perhaps even something that needs doing up.
- Security of tenure. You own it so there’s no landlord who can come along and tell you to move out.
- As a general tendency, you will have more choice of properties to buy rather than rent.
- Subject to planning permission, you can do what you like to your own home. Paint the place red!
Disadvantages of buying
- Buying a home is an expensive process. You will need to pay all sorts of fees to lawyers, and other professionals.
- You can’t predict how the mortgage rates may change and if mortgage rates rise, so will your monthly payments (unless you have a fixed rate mortgage for a number of years).
- If you got a job in another area, it would be much quicker to move if you were renting somewhere. If you own the house you would have to go through the lengthy and expensive process of selling it.
- You are responsible for repairs and maintenance of your property.
As you can see, home-ownership is an expensive business and not one to be entered into lightly without weighing up all the pros and cons. It’s difficult for me to advise on any specific situation, given that I don’t know all your circumstances. In your shoes, I would try renting for a few months, perhaps sharing with friends or colleagues. Get a better feel for living away from the parental home. Then a few months down the track you may have a better idea of what’s right for you. Good luck!
* Things aren’t always that simple, as our Trashed House story explains. We were legally entitled to get our home back but we had to go to court and get the bailiffs in to enforce that right. The law often seems to take the tenant’s side, unfairly in many cases.