Is there a right choice?

It’s a common question Absolute Military clients are often faced with, but is there a right choice between the two?

Is buying a home really the right step for you ?

Traditionally, we’ve always been taught (by parents, society or relatives) that buying a home is the natural next step in life, especially once you’re in your 20s. That might have worked for them, but times have changed, and so have the needs of our generation.

According to data from Nationwide, house prices in the UK have increased by a whopping 33% in the last 10 years, with the average house deposit for a first-time buyer being roughly £57,000, according to research by Halifax.

Of course, it’s not all doom and gloom. If you’re keen on getting onto the property ladder, there are loads of schemes and options available to help you raise the deposit you need. However, you may have other plans for your money, and love the freedom of renting, that’s ok too – ABC Finance says less than 30% are buying a home before 30 now.

If you’re still on the tipping scale between renting and buying, don’t worry you’re not alone. Here’s a handy pros and cons list on renting vs buying to help you make the decision.

What’s the word out there on buying a home?

We can tell you all the good stuff about buying, but you might have heard enough of that from literally everyone else. It definitely feels great to own your own house – you can do it up however you like and it’s an asset in your name giving you financial stability. Let’s not forget, it’s great to know you’ll always have a stable roof over your head with no landlords! Although it’s a goal for many we’ve also heard the horror stories about buying – people struggling to sell when they want to, the huge costs of repairs, the burden of maintenance, high interest rates and massive mortgage repayments making houses a huge financial tie.

What are the pros of renting instead of buying?

Firstly, there is a big misconception that renting is more expensive than buying. As of May 2020, Hamptons estate agency said in most regions of the UK, it’s actually cheaper by £71 a month to rent than to buy with a 10% deposit.

When you buy a home, you have to pay a deposit upfront, which usually costs a percentage of the price of a house. The rest of the money you can borrow – but you need to pay that back with interest (it’s called a mortgage).

Usually the lower the deposit you put down, the higher the interest rate on your mortgage – think of it as the fee you pay the bank to lend you that money.

Aside from being the cheaper option today, renting also has other perks like:

. The flexibility to move: You never have to worry about being in one place too long – you’re not tied down by a home! And for many Military
personnel, that’s very important.
. Low financial risk: You’re not making a huge financial investment that could potentially go down in value.
. Less worry around maintenance: All the repair work and costs sit with the landlord, so it’s not your responsibility.
. Expanding your social circle: If you like meeting new people, you can always rent a flat share, and it’s a great way to meet new people! On the other hand, if you prefer living on your own, that’s an option too.

Cons of renting…
At Absolute Military we tell you as it is and like anything renting has its downsides too.
. Your home may not feel truly like home, simply because of the restrictions your landlord might have for tenants.
. Your money could be working harder for you if you bought a house or made another type of investment with the cash you spend on renting is basically buying you a lifestyle and convenience.
. There’s always the risk that your landlord could increase your rent or ask you to move out – there’s less security around renting.

The verdict- renting or buying?
That, is totally up to you. At Absolute Military we are just here to give you the full picture. Whichever one you go for, it’s important to remember that you’ll need a steady income – whether that’s to pay your rent or your mortgage every month. If you’ve worked hard to buy a home, and you lose your income, you might not be able to keep up with your mortgage payments – which means you could lose your home. The same as if you’re a renter and you lose your income, you could risk getting kicked out because you can’t afford rent.

Either way, financial resilience to income reduction/ loss shocks via savings and appropriate protection insurance could help you remove that worry. Find out about the Absolute Military support available to you and your family at www.absolutemilitary.co.uk

Renting and buying have both got their perks and downsides, and the decision really depends on your personal situation and what you want at this stage in life.

So, coming back to the first question – ‘is there a right choice?’ In Absolute Military’s opinion, not really – choose what’s right for you based on your priorities, we all want different things from life and how we spend or save money is up to you.