When it comes to financial decisions, buying a property is definitely one of the biggest monetary commitments that you most of us will make in our lives. Great care and deliberation regarding all aspects of the idea of home ownership is taken before taking the plunge, but when it comes to renting a property, you do need to be as equally vigilant and make sure that the deal is right for you.
There are tenant responsibilities that need to be considered with just as much importance as being the home owner, so the first question to ask is should you buy or rent your home?
Pros and cons of ownership
The most obvious benefit associated with owning your own home is the fact that once you have paid off your mortgage, the property will be yours, and it could well have increased in value beyond the amount you paid for it.
There is also the advantage that when you come to retire, you may not need the income required to continue paying rent, as you can live in your home “rent free”, although there are all the running costs to consider.
One of the negative aspects of home ownership, is that if you have a mortgage to pay, interest rates could rise, which means you would have to find extra money each month to make the repayments.
There is also the lack of flexibility that you should consider with home ownership. Moving home for work or personal reasons is much easier and quicker when you are renting, as you may have to wait until your house is sold before you move when you own your own property.
The argument for renting
It is important to remember that you are not necessarily guaranteed to be financially better off if you buy your own home.
You can experience negative equity if the value of your house falls below the amount you owe on your mortgage and there are some significant costs involved with buying a selling house. You will have to find money for a deposit, stamp duty and legal fees when you buy a property, as well as a number of other costs.
There is also the maintenance and repairs that you will have to pay yourself if you own the house rather than being the tenant and asking the landlord to carry out repairs.
If you are on a fixed income and need the stability of knowing that your monthly payments and outgoings are unlikely to change that much, then renting may be the best option until you have built up your financial strength to be able to deal with the costs associated with home ownership.
Tips for tenants
If you are going to be renting, there are a few things that you should look at in order to ensure that you get the best deal and don’t leave your finances exposed.
You will be required to pay a deposit when you move in to your rented property and you should check that your money is being held in a recognised deposit scheme.
If you have signed an Assured Shorthold Tenancy Agreement, your landlord needs to comply with a legal requirement introduced in 2007, which states that your money should be deposited in recognized scheme within 30 days, which gives you protection in the event of a dispute and provides a safe home for your money during your tenancy. Ask for details of where your money is being held if the landlord or letting agent do not inform you shortly after you move in.
Don’t just settle for the current supplier at the property when you move in, as it could be a costly mistake.
As you will be the bill payer at the property, shop around and check the various switching and comparison sites to make sure you pay the least amount of money for your gas and electricity.
Keep up your rental payments
In just the same way that your mortgage payments are recorded on your credit file, it was announced that 2014 could be the year that see the credit reference agencies record your financial conduct with rent payments.
Late payment can affect your ability to obtain credit, so consider punctuality with your rent payments as an opportunity to boost your credit rating, which could be important if you plan to buy a house at some point.
There can be a tendency to not be as thorough with your property inspection when viewing a rental property.
It is understandable that you would want a full survey carrying out when buying a property but do also take the time to check for damp and other obvious faults, that need to be fixed by the landlord before you move in.
Over 35% of households in England and Wales are occupied by tenants, so you are not alone in renting, just make sure you get the most for your money and know your rights and obligations.