Rent or buy: What’s the difference?
If you rent a home, you live in a house or flat owned by someone else.
If you buy a home, you live somewhere that belongs to you. You’ll have more rights over the property, but more responsibilities too.
Paying rent or paying a mortgage
Whether you rent or buy, you’ll need to pay for the roof over your head.
If you rent, you’ll pay your landlord rent for each month you live in the property.
If you buy, you’ll need to pay your mortgage each month until you've paid off the whole loan. You’ll then own the property outright.
Or if you have enough money, you can pay for a property in cash. This way you’ll own it from day 1.
Is it better to rent or buy?
Whether it’s best to rent or buy will depend on your personal circumstances.
Buying a home can be more cost effective over the long term. While renting offers some flexibility and can be cheaper in the short term.
We’ve taken a look at the pros and cons of buying or renting a home.
The pros of renting
By renting you:
could find it quicker and cheaper to find a home than the buying process
may be able to rent a home in an area where you cannot afford to buy
have more flexibility. You can often move in with just 1 month's notice after the fixed term of your tenancy. This could be 6 or 12 months
will not lose money if property prices fall
do not have to pay repairs and maintenance as it's your landlords responsibility
The cons of renting
The downside to renting is that:
you will not own the property you live in
it can be hard to afford after you retire
your landlord could ask you to leave with just 2 months’ notice
your landlord can restrict what you can do in, or to, the property. For example, you’ll likely need to get permission to redecorate or own a pet
once your initial tenancy contract ends, your landlord can put the rent up
you could find it hard to get your deposit back from your landlord when you move out
The pros of buying
The benefits of buying are that:
your monthly mortgage repayments go towards owning your whole home
once you’ve paid off your mortgage you’ll no longer need to pay each month for somewhere to live
you can make bigger changes to your home, like building an extension or renovating the garden
you’ll feel more secure as a landlord cannot serve notice for you to leave
if your home’s value goes up, you could use the equity to buy a bigger home or spend it on other things. Equity is your property’s value minus your mortgage debt
The cons of buying
The downside to buying is that:
you’ll need to save a large amount of money. This is for upfront costs such as a deposit, mortgage fees, surveys, solicitors and stamp duty
it's a big commitment. You need to be sure you’re happy with what you’re buying and be planning to live there long term
selling can take a long time
if the value of your home drops, you might fall into negative equity. This is when you owe more on your mortgage than your home is worth. Negative equity can make it difficult to sell or remortgage your home
you’ll have to pay for repairs and maintenance.
your home could be repossessed if you fall behind on your mortgage repayments
Is it cheaper to rent or buy a house?
It’s usually cheaper to rent a house in the short term. This is due to lower upfront costs, and the costs of maintaining a property.
But if your long term goal is to own a home, buying is a better investment.
The deposit
If you’re renting you usually only need a deposit of 1 month’s rent.
The average rent deposit in the UK is £1,300, according to Hamilton Fraser.¹
If you’ve paid all rent due, and not damaged the property, you should get this money back when you move out.
If you buy a property you’ll often need a deposit of at least 5% of the property’s value.
In April 2021, the average property price in the UK was around £251,000. This means a 5% deposit would be about £12,550.²
Stamp duty
You’ll also need to pay stamp duty and other costs when you buy a home.
A first time buyer paying between £425,001 and £625,000 for a home will pay a 5% stamp duty on the amount over £425,000.
In England and Northern Ireland, you do not pay stamp duty if you’re a first time buyer and your new home is under £425,000.
The Money Advice Service found buyers usually pay:
a mortgage valuation fee of between £150 and £1,500
surveyor’s fees of £250 to £600
legal fees of between £800 and £1,500
bank transfer fees of £40 to £50³
If you’re renting, you do not have to pay to repair or maintain your property. If the boiler breaks down or the roof leaks, it’s down to the landlord to fix it and pay for it.
According to LV=, UK landlords spend over £3,000 each year to maintain each rental property they own.⁴
Costs can include:
renovations and refurbishments
replacing or repairing the boiler
fixing structural damage
decorating and garden maintenance
replacing or repairing flooring
replacing white goods
If you buy a property, you would have to fund all this work yourself.
Can I afford to buy a house?
Our mortgage calculator will give you an idea of how much you might be able to borrow to buy a house.
A mortgage broker or lender can give you a more accurate figure based on your situation. When working out if you can afford to buy a house, you need to consider:
the upfront costs of buying a house
the cost of maintenance and repairs
monthly mortgage repayments
how much utility bills such as gas, electricity, water and broadband will cost
The government has several schemes in place to help you buy your first home. These include Help to Buy and shared ownership.
Read more about government schemes.
When should I buy a house?
You should only consider buying a house when you’re sure you can afford it. And that you'll be happy to stay in the property long term.
If you only live in the house for a short time or expect your circumstances to change, renting might be cheaper and more flexible.
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Sources
¹ Hamilton Fraser: Introducing our new brand, Ome, and its Deposit Replacement Membership
² Office of National Statistics: UK House Price Index, April 2021
³ Money Advice Service: The cost of buying a house and moving
⁴ LV: UK landlords spend £4.7 billion a year on their rental properties