Is it better to rent or buy in London?

If you rent, deciding whether to take the plunge and buy a property is probably the biggest decision you’ll ever make.

For many people, the decision will be swayed by what’s affordable to them. In most areas of London, average monthly rents are actually higher than mortgage repayments, making buying a better option (as long as you can afford the deposit).

Everyone’s circumstances are different, but if you’re struggling to decide whether it’s better to rent or buy in London, we hope this article will help inform your decision.

Should you buy a home?

Owning a property is a long-term ambition for many people. Given that rental prices always seem to be on the rise, it is easy to see why.

If you are considering whether to buy your first property, consider the following benefits and drawbacks.

The benefits of buying

  • Your monthly payments go towards buying your home and not into a landlord’s pocket. At the end of your mortgage period, you will fully own your home and can live ‘rent’ free.
  • If house prices rise, you will benefit from the increase in value, especially if you decide to downsize at a later stage.
  • Homeowners have much more freedom to put their stamp on a place and renovate to suit their lifestyle.
  • Money spent on home improvements is likely to be an investment, increasing the value of the property when you come to sell.
  • You don’t have a landlord who could make you move because they want to sell.

The drawbacks of buying

  • Buying involves a large initial financial outlay. You will need enough money for a deposit, stamp duty, legal costs, buildings insurance and mortgage fees. You’ll also need to furnish the place.
  • If you fail to keep up your monthly payments, you are at risk of losing your home.
  • Mortgage rates have been at historically low levels for several years, but this won’t last forever. While you can protect yourself for a period with a fixed rate, you’ll need to be able to meet the higher monthly payments when rates change.
  • You are responsible for keeping on top of repairs and maintenance and acting swiftly if anything goes wrong. Unexpected emergencies, such as broken boilers or dry rot, can cost a great deal of money.

How to decide

If you are still struggling to decide whether to rent or buy in London, ask yourself the following questions.

Do I have enough for a deposit?

To get a mortgage, you will need to have a deposit. You should aim to save 10% of the cost of the property, although some lenders will offer mortgages with just a 5% deposit. For the best mortgage rates, you will need at least a 25% deposit. Learn more about saving for a deposit here.

If you do not have a sufficient deposit, then renting may be the best option for you.

Do I have enough for the other costs of buying a house?

As well as saving for a deposit, you will also need to put aside money for other costs you will incur when buying a home. These include:

  • Survey costs
  • Solicitors fees
  • Mortgage arrangement fees
  • Stamp duty
  • Removal costs
  • Buildings insurance
  • Initial furnishing and decorating costs

Learn more about the costs of buying a home here.

Do I earn enough to afford a mortgage?

You should only buy a house if your income is sufficient to cover your mortgage repayments as well as your other outgoings, including credit card debt, other loans, household bills and general living costs.

Your mortgage lender will look at your salary and other income as well as your outgoings to ensure that you can afford the mortgage payments.

If you are struggling to get a mortgage, you could consider a guarantor mortgage. This means that a parent or close family member promises to cover any missed mortgage repayments if you are unable to. Learn more about mortgages here.

How long will I stay in my next home?

If you plan to only live in an area for a short period of time or you expect your circumstances might change, renting is usually cheaper and more flexible when you need to move house. However, if you intend to live in an area or property for a long time, buying a house can work out cheaper.

If you think that buying a home could be the right option for you, make sure you check out our First Time Buyer Guide and register for a Pocket home. As Pocket homes are solely for first time buyers, our friendly sales team are experts in guiding new buyers through the sales process, so feel free to ask them anything by emailing (no question is a silly one!). And don’t forget we have homes in Croydon and Barking on sale at the moment, with new developments coming soon.

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