Is it cheaper to rent or buy your home?

For many people, this is a question that they’d like to be able to ask. However, with property prices well out of the reach of some, especially in more popular areas, the question is academic for them.

But, assuming that you are in the fortunate position of having the choice, it’s a valid question and one whose answer depends on a number of variables.

The most obvious of these is the size of the mortgage on the property compared with the rent that is charged for a comparable home, followed by the running and upkeep expenses that you’ll have to pay. You also have to take into consideration the term of the mortgage along with any service charges that might be payable particularly in leasehold flats where they can be the homeowner’s responsibility.

What is for certain is that the nationwide housing shortage of recent times has pushed up both property prices and rental rates. In the light of this fact, in 2018 Santander Mortgages conducted research across the country to see which would be the cheaper option.

To make their calculations they worked on the assumption that the homeowners would have a £160,000 mortgage and make mortgage payments over the standard 25-year term at an interest rate of 2.48%. The monthly mortgage payment would be £723 while the equivalent average monthly rent would be £913. Naturally, there are large national variations with London being the most extreme example where the average monthly rent would be £1012 - but even in less expensive areas like the East of England, the monthly rent would be more, although only by £43 at £766.

But what these figures don’t take into account is the £50,000 deposit that would be needed to secure a mortgage while the bond paid by renters would be much less than this – typically around three months’ rent. Then there are all the costs associated with buying a property that has to be taken into account including conveyancing and mortgage fees and possibly also stamp duty.

The other advantage that renters have is that they are not directly responsible for the upkeep and repairs on their home. So if the cooker or boiler breaks down or the common areas need to be redecorated the cost falls on the landlord.

On the other hand, homeowners will hopefully enjoy the benefit of seeing their property increase in value over the years so when the time comes to sell this could well offset some of the money they have invested it. And, at the end of the mortgage term, they will own the home outright while for tenants the rent they pay each month goes directly to the landlord so it’s money they will never see again.

So, in its most basic terms, the answer to the question is that over the short term it’s cheaper to buy your home than to rent it but there are also many other aspects to take into consideration. There are also schemes like part ownership in which a share of the home is bought with a mortgage with the other part being rented from a housing association. In this case, it’s even more complex to work out whether it’s cheaper to rent or buy. Having said this, it’s often the only practical option for those who want to get on the property ladder but can’t quite meet the full asking prices for properties in the area in which they want to live.

So we hope that this short article has answered at least some of your questions about whether it would be cheaper to buy or rent, and also shown that there are more things to consider than just the cost. If you do decide to go ahead and buy, then rest assured that our conveyancing experts will be happy to advise and help you.

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