The UK treasury recently announced a stamp duty holiday to get the property market going post the Covid 19 lockdown.
This has inspired many would be home owners to rethink the rent they are paying.
So is now the time to buy ?
We still operate under the mindset that every person needs their own castle and that owning a house is right for everyone, but like everything personal finance, it’s a personal choice and really boils down to what your goals and vision is for your life.
When is renting a good decision ?
When you want to save money
A rental payment may be lower than a mortgage repayment, insurance and maintenance costs.
This can give you the opportunity to create an emergency fund, build your investments or start saving for a house deposit.
When you need the flexibility
You may want a lifestyle that is totally counter to owning your own property and the ties that may come along with that.
Or your career and future plans may require relocation at the drop of a hat and you want to be in a position to jump into these opportunities.
Renting offers this flexibility.
When you want to do your research
The best way to get to know an area is to live in it.
When I moved to London I hadn’t spent a minute in this city and had no idea where I wanted to live.
Initially I stayed in a rental apartment. It was new and swish and seemed to be in a very modern area.
It ticked all my boxes.
But after living in the area for a few months I unexpectedly realised it wasn’t for me.
I was so thankful that I had the flexibility to move. Renting is a great way to get to know the lay of the land and the true personality of an area without commitment.
When is buying the better decision?
You can afford it
Buying your own home can be a dream come true if you are doing it with your eyes wide open to the costs.
Contact mortgage brokers and get a sense of what size mortgage you can secure and how much it will cost you per month. The mortgage you are offered may be bigger than your affordability factor. Be very sure that even if interest rates were to raise by a significant amount you would be comfortable paying the monthly repayment amount.
Compile a list of all the costs involved in the purchase, such as the mortgage costs, valuation and survey fees paid to the mortgage provider, the broker fee, the conveyancing fee, stamp duty and land registry fees.
Research the potential maintenance and insurance costs that you may have to pay.
Create a detailed spending plan that gives you comfort that your house purchase is going to be an exciting experience and not a stressful drain on your resources.
I can attest to what an unhappy place this is, having gone into my first apartment purchase with total blinkers on and having them painfully ripped off when the reality of the expense of owning my own property became evident
You are ready to put roots down
Your life goals include owning your own home, having the freedom to change it, paint it, alter it and spend many happy years in your own slice of real estate.
You have established a well funded emergency fund, done all your homework, saved up your deposit and all the costs involved in the purchase and in providing for any maintenance that may be required and are ready to take the next step to a life goal, then this is your time!
The maths works
Where renting has become suboptimal and expensive, home ownership is on your to do list and interest rates are at all time lows resulting in a mortgage payment and maintenance costs lower than a potential rental payment It is time to evaluate whether you are ready to act on your dreams and make them a reality.
Buying a property is a big decision and isn’t always for everyone. Be very sure when you decide to make this big move that it is truly your dream and not simply you following some perceived societal “rule” and that you are totally clear on the costs and understand the commitment you are making.
While it is not a commitment you are stuck in for a life time, realising you made a bad decision for yourself can set you back financially in a big way, believe me, again I speak from experience on this one.