Often, the greatest frustration for would be First-Time Buyers is the struggle to save a deposit whilst paying high rent, which may even be more expensive than the mortgage payment. But is renting a waste of money?
As a Financial Planner who concentrates on mortgage advice, you might expect that I would always say renting is a waste of money, that the best and only option people should look into is buying a property as soon as possible. However, this is far from the case and there are many reasons as to why renting isn’t wasting money:
- Living costs money, so paying for a place to live is anything but wasteful.
- Arguably, the biggest positive to renting is the flexibility it affords the renter. Life changes such as a new job, starting a family or relationship breakdowns may be trickier to navigate if you have bought somewhere. This flexibility has been highlighted by Covid-19 with many moving due to the newfound importance of having an outdoor space and room in which to work.
- Upkeep costs are kept to a minimum; the need to replace the boiler if it breaks down, fixing a leaky bath or needing new carpet, are all things covered by the landlord.
- Cities especially, can be unbelievably expensive when buying and although renting in those same locations is far from cheap, it does make it much more affordable whilst you save towards that opportunity in the future.
- The UK has an obsession with getting onto the property ladder as it is often seen as a natural step in the life cycle, but most of these life stages are happening later in life. It is important not to judge yourself against others and buy a property just because that is what is expected. Many across the continent are more than happy to rent for their lifetime; in Berlin for example, a city of three million people, only 18% of residents own their homes.
- Saving for a deposit can be done but you don’t want to sacrifice enjoying life in the now in order to save every penny. You must avoid having regrets further down the line where you tried to save too hard at the expense of all enjoyment – that time can’t be bought back and is arguably of greater significance than purchasing a property a few years earlier.
- When you are buying a property to live in, you should not see it as an investment but as your home for the future, a home to have friends over (when allowed post lockdown) and make memories in. Yes, the value may go up over time and historically house prices have increased significantly but, if you buy a property for the right reasons, that does not matter. It is a home not an investment.