Starting with and understanding the big "WHY" Buy a Home in the first instance is a massive step in shifting your focus.
We at FTBA (sometimes begrudgingly) strive to be impartial so before we destroy the age-old concept of renting a home let’s first look at the benefits.
Footloose & Fancy Free. The standard and minimum tenancy agreement (AST, for the acronym lovers) term is 6 months, and for some that flexibility and freedom suits them just fine. Maybe you spend little time in the country, or little time at home, maybe you have to move a lot for work – or maybe you just like to swap houses often; it must be said that whilst you can sell your home sometimes with relative ease, it’s generally excepted that renting offers a certain liquidity when it comes to moving from location to location.
The *Short Term* cash is king. Although there are still start-up fees involved in renting a house including your deposit, rent-up-front and agency fees (£50 in photocopying fees, but how?) these are a darn sight less than the investment needed for first time home ownership, which mounts to a UK average of £18,624*.
There is also the consistency of cost to consider. You know that at the end of the month your rent is going to be X, no unknowns, no repairs. Talking of rent, even that has the potential to be lower than a monthly mortgage payment, with some people opting to rent more affordable (less desirable, shall we say) properties, which they wouldn’t necessarily want to buy, or even live in for that long – all for the purpose of saving monthly cash. And, as we will come to learn, that can be a great home ownership tactic in itself.
Sounds good, where do I sign?
Steady on, the above comes at a big cost. Many of the benefits of home ownership outline the pitfalls of renting, some long term and some in the here and now.
In the same way renting offers the tenant flexibility of moving on it also offers the landlord the flexibility of moving you on. That’s right, your landlord can serve a notice that grants them possession of the property within as little as 2 months. Home ownership quashes that threat, so if you’re fond of the idea of knowing that month to month the roof over your head won’t be swept from under your feet (2 sayings which are quite illogical when combined) then maybe home ownership is for you. Still want the flexibility of moving travel and being footloose? Subject to your mortgage terms why not join the 1000’s of others that place their homes up on websites such as Airbnb or for longer term rent, who then get paid to both be on the housing ladder and location independent!
Creative Expression. Rented houses have to please everyone in décor, which often leaves them pleasing nobody – unless of course beige carpets and mocha walls are your style? We’re keen advocates of your home being an extension, and reflection, of your tastes and personality, a place that inspires you, a place where you can thrive. Home ownership gives you this absolute freedom to express yourself, not only in your choice of home but your choice of interior design.
Snakes & Ladders. Once you’re on the elusive ‘housing ladder’ that’s the hardest part over and done with. The process of up-sizing, down-sizing, re-mortgaging and the like are going to be a much smoother journey, as you already own an asset. You will also have a history of mortgage payments which will contribute favourably towards future housing moves you make.
So we’ve established that in the short term renting has its financial benefits but let’s take a look at the big picture now.
Money Money Money. So we’ve established that in the short term renting has it’s financial benefits but lets take a look at the big picture now.
House price trends for generations have shown us that in the long term house prices are rising and, in fact, over the last 30 years we’ve seen the average UK house price rise from under £50,000 to over £250,000*. ‘But what about inflation I hear you cry?’ Yes £50,000 isn’t the same £50,000 it was 30 years back when a Mars Bar was a penny and bigger than a house, but, when we take on a debt in the form of a mortgage the debt doesn’t rise with inflation, no, far from it, in fact inflation erodes the value of that debt over time – combine that with rising house prices and it would seem win win.
OK so your monthly mortgage payment for your dream first home is more than you currently pay in rent; that’s going to take more money out of your pocket at the end of each month. Right, but with rent every penny goes into your landlord’s pocket (they’re not non-profit after all). With a mortgage, even if the amount may appear to be higher, a proportion is paid as interest to the lender and a proportion pays off the capital value of your home – then as you pay down the mortgage that ratio of interest/capital paid turns more and more favourable. Think of it as a compulsory savings account where the interest rate is linked to your houses value, not as a penny or two in your landlord’s pocket.
So in summary. We’ve touched upon the big ticket reasons why we think that home ownership is the way to go, and we’re for not one minute saying it’s the path of least resistance which is why we at FTBA are stoked to help you along your journey of becoming a home owner. So don’t delay – before you’re on that ladder house prices and inflation are your enemy, the more time that passes the worst it gets with the house price/earning ratio rising as we speak.
2017 is enjoying historically low-interest rates and a plethora of government schemes to help you along your way – so let’s get stuck in!