Home economics
The experts at Belvoir say that it could actually pay to rent!
With a myriad of escalating costs associated with buying and owning a property, many people are turning to the rental market in search of low-cost living solutions…
Ownership expenses “Owning your own property can soon add up,” says proprietor of Belvoir Liverpool West Derby Adam Rastall. “There are many costs involved in buying a property, including mortgage application fees (which can sometimes be up to £2,000), valuation fees (many mortgage companies will charge to value a property), survey fees, a cash deposit (usually around 20% of the purchase price), Stamp Duty and solicitor’s fees.
“Once you have purchased the property there are on-going costs too, such as buildings insurance and essential maintenance – boilers, roofs, windows and fences can all be expensive to repair or replace.
“If you have a mortgage you will be paying a monthly amount to your lender and, if you’re not on a fixed term, this can rise when interest rates increase. Of course, if the property’s value decreases before you sell it on then you will lose equity too.”
Proprietor of Belvoir Paisley Denise Rhodes agrees and says, “The true cost of purchasing property is a bit of an unknown. When you sign the contract there can be hidden costs such as repairs and maintenance and potential loss of capital if the market drops – just what we have seen over the last few years.
“Other costs associated with buying which the renter doesn’t have to worry about are Stamp Duty and buildings insurance. Also, estate agent fees when selling the property are typically 1 to 2% and you’ll need the services of a
Rental savings “Buying a property can be a long and stressful process and the vendor can pull out of the sale before completion meaning you can potentially lose money already paid out,” continues Adam. “Renting is a quick process and tenants can often be in the property within 5 days.
“Costs associated with renting are considerably less than those when buying a property. Typical costs for renters are an application fee, a guarantor fee (if the tenant doesn’t earn enough or has a bad credit score), a deposit, the monthly rent, tenant’s insurance, council tax and utilities. Although the rent can increase on a yearly basis there are only a small number of tenancies that are increased after the first 12 months.”
Proprietor of Belvoir Cheadle Darragh Lee explains further. “Renting a property is quick and easy,” he says. “A tenant will fill in the application form, give it to the agent and pay the application fee. At that point the agent should suspend any viewings and process their application and check references. The tenant will then pay the first month’s rent and a deposit – usually one or two month’s rent. These costs are significantly lower than those involved in purchasing a property.
“Another financial benefit for tenants is that they don’t have to insure the building, just their contents,” he continues. “Obviously the contents could be worth 10k, 20k or 50k, but this is relatively small compared to what the building is actually worth, which could be 100k, 200k or 500k.
“An additional cost advantage for the tenant is that they don’t have to pay for repairs during the tenancy. If the damage is not caused by the tenant then nearly all repairs are the landlord’s responsibility. For example, if the boiler stopped working or needed repairs then the landlord would receive the bill. Likewise, any electrical faults, blockages or leaks that aren’t caused by the tenant would be the landlord’s financial responsibility. All these things can add up to hundreds or even thousands – but a tenant wouldn’t have to pay for any of them.
“Another area of saving that people often don’t think about is that it is sometimes cheaper to rent a property on a month-by-month basis than buying one.
“Certainly in the area that I operate in within Cheshire it often costs less to rent a property than pay monthly repayment mortgage payments. “Some people will argue that renting is dead money, however when you own a house the interest that makes up a large part of your monthly payment to the mortgage company is effectively dead money as well.”
Flexible freedom
The flexibility associated with renting is often very attractive to many – and it can create savings of its own too… “Many home owners are currently stuck in properties they don’t want to be in because they are in negative equity which makes it impossible for them to move on,” says Denise Rhodes. “However, if you are in rented accommodation then you can move as soon as your contract ends or you have given the appropriate length of notice.” Adam Rastall agrees. “Renting is great as it’s so flexible,” he says. “If you aren’t happy with the house, the area, the neighbours, your job or even the local schools, then it’s easy to move with little cost. “Selling a property can be a difficult, long and expensive process – but being a tenant can offer you increased levels of mobility and flexible freedom.”
Typical costs associated with renting:
- Application fee
- Guarantor fee (if the tenant doesn’t earn enough or has a bad credit score)
- Deposit
- Monthly rent
- Contents insurance
- Council tax (if not included in the rent)
- Utility bills (if not included in the rent)
Typical costs associated with buying:
- Mortgage application fees
- Valuation fees
- Survey fees
- Cash deposit
- Stamp duty
- Solicitor’s fees
- Building insurance
- Contents insurance
- Council tax
- Utility bills
- On-going property maintenance and repairs
- Monthly mortgage repayments
