Comparing the benefits of renting and buying a home

With the housing market in a seemingly constant state of flux in recent years, many people have been left unsure about whether it’s even worth saving up for a house deposit anymore. Prices are so high that it can feel impossible to get the money together – but at the same time, the rental market is also rising in cost. 

So what are the benefits of owning a home over renting, and vice versa? Let’s explore the issue from a financial perspective.

Buying a home

An investment

There’s no denying that buying a home costs a lot of money, but the hope is that you will get at least a large percentage of that money back when you sell the property – it’s an investment, rather than a sunk cost. In fact, depending on how long you stay in the house, you may find that you gain money, as inflation makes your house worth more in the future. Remember, you not only need to recoup the house cost, but also the solicitor’s fees and stamp duty if you’re out to make a profit.

To maximise this, make sure you consider the resale attraction when you choose a property. Is it close to local amenities, or a school? Is there a garden, and is it south-facing? Is there parking? All of these desirable features will help a home keep its value.

You can make it your own and reap the benefits

When you make home improvements in your own property, you’re the one who reaps the benefits. Not only do you have (almost) total freedom over what to do with your home, but you can then potentially sell it for a higher value than you bought it for. Whereas in a rented property, you get the benefit of your home improvements for the time that you’re living there, but you don’t get that cost back once you move on.

Renting a home

Smaller down payment

The upfront cost of buying a home is high, even if you can afford the monthly mortgage payments. In order to get the best loan to value rate, you’ll want to get the biggest deposit possible – usually around 10% of the property price. When you consider that the average house price in the UK is £286,000, that means you’d need a £28,600 deposit, which is often unaffordable in relation to salary, especially if you pay rent at the same time as saving.

Instead, renting means that you only usually need a month’s rent payment as a security deposit. This smaller sum is more accessible than a house deposit. 

Lower maintenance costs

One of the benefits of renting is that you often aren’t responsible for maintenance costs, as any work falls under the jurisdiction of the landlord. Whilst it can be frustrating to have to chase someone to do the work for you, rather than doing it yourself, it does mean that you don’t have to worry about the associated cost. 

Especially if money is tight, you may struggle to save anything in an emergency fund, which means incidents like a burst pipe can be financially difficult. Instead, as a renter, you simply need to report it to your landlord.

Which is better?

There are benefits and downsides to owning a home, but also to renting. Ultimately, if you’re able to afford it, and are looking to stay in the same location long-term, a buying may be the better option. However, if you don’t want to be tied down, or have the responsibility of managing your property, renting can offer you a more flexible option.

Published: 10 November 2023