Deciding whether to buy or rent a home is a big decision. It may be that you are moving out from your family home and are unsure which to do or that you are currently renting and wondering whether to buy. There are risks associated with both options and it is worth thinking about them and how you personally feel about them when you are trying to decide.
The main risk with renting is that you will be at risk of being moved on if the owner of the property decides to sell the house. This means that you can never be fully secure in your own home. Some rental properties will be more secure than others though. If you are renting a council house or from a housing association then you will be likely to only be moved on if you cannot keep up with the rent payments, which would be a risk that would occur in all homes, whether you were skipping rent or mortgage payments. However, with a private rental you are much more likely to be moved on as the owner may want to sell and they may not want to sell with tenants in situ. All rentals are also at risk of rent increases, but again private landlords may be more likely to increase rent at a less reasonable level. However, as all private landlords are different, then the risk that you are taking may be very much dependent on your particular landlord and something that is almost impossible to measure when you first loo at which houses to rent.
When you buy your own home then you have no risk of being evicted by a landlord and the same risk of being evicted if you cannot keep up with your payments. In fact, it is taking on a mortgage that is the biggest risk in this situation. If you cannot keep up with your mortgage payments then your home may be repossessed by the lender and you will be left without a home. There will also be further consequences as you will also have a poor credit record as a result of this situation. This could mean that not only will it be very difficult for you to get a loan in the future but it could also be difficult for you to even rent a property. This risk is the same though as a renter would face if they could not keep up with their repayments.
A further risk of a mortgage is that when interest rates rise it is likely that the mortgage repayments will rise as well. This would be very likely to happen if you have a variable rate mortgage, although could not happen if you have a fixed rate mortgage. This would mean that repayments would go up and may then become much more difficult to manage. There is also a risk of private rents going up if interest rates rise as many private landlords are paying a mortgage on the house that they are renting out, but the risk is lower as this is not always the case.
As you can see the risks are similar in terms of ability to pay the rent of mortgage and the consequences of not being able to do so. However, it is commonly found that a mortgage can be cheaper than rent and therefore you may be more likely to be able to keep up with these payments as you will be paying relatively less. Obviously, interest rate increases could potentially effect owners more than renters but there is still a risk to renters if their landlord has a mortgage and no risk to owners if they have a fixed rate mortgage.
It can be a tricky decision to make and risk is only one part of it. You will also have to think about whether it is practical for you to own a home based on whether you tend to stay in the same place for a long time or move around, whether you have allowed enough money to cover the cost of keeping the house in good order if you are buying and if you are happy about not being able to do renovations if you are renting.
It is a really big decision and should be thought about really carefully. The dream of being a homeowner can be one that many of us have, but we have to make sure that it remains a positive thing by ensuring that we are doing it for the right reasons and that it is a decision that is affordable for us. It is worth remembering that it is something that will effect you for a very long time, however the prospect of being able to not have to pay anything towards living in your home once the mortgage is repaid, is certainly a very positive one for many people.