Buying vs. renting a flat is a big decision that needs to be made on several occasions over the course of your life. It doesn't invalidate your right to reach a different decision in a few months or years' time. Whether flat rental is the right decision depends on your future plans and whether you have enough money set aside to buy a house.
Not all of us can afford to buy a property because we're unable to raise a sufficient house deposit. If you also have a bad credit rating, this can form a considerable obstacle to getting a foot on the property ladder. Apartment rental is seen by many as an affordable and flexible alternative to home ownership.
Advantages of Renting a Flat
- Flexibility. The terms of your lease may impose certain restrictions on you, but flat rental is regarded as a vastly more flexible option than home ownership. This is a particularly important consideration if not intending to reside in an area for the long-term due to career or family.
- Reduced insurance costs. Apartment rental means that you only have to insure your personal belongings, not the structure of the building.
- Repairs. If something goes wrong, such as the boiler breaks, you aren't responsible for fixing it.
- Affordable deposit. You may be required to provide up to 3 months' rent as a deposit, but this is easier than saving a 10% to 20% deposit to buy a property.
- Falling house prices. Although there's no capital appreciation, you don't have to worry about falling property prices. Homeowners are finding it harder to move house or get a remortgage.
- Interest rate changes. Interest rates can be extremely volatile when the economy starts to over-heat. Rising interest makes it more difficult to maintain your mortgage repayments. Your rent can change as well, but you are free to move to somewhere cheaper if you are not happy with the arrangement.
Disadvantages of Flat Rental
- No capital appreciation. Renting a flat is widely regarded as dead money as there is no long-term capital growth. Any investment returns are enjoyed by the landlord, not the tenant.
- Terms of the lease. Certain things, such as having pets, may be strictly prohibited by your lease. If you owned your own home this isn't an issue.
- Credit checks. If you have a bad credit score, it's more difficult to find houses and apartments for rent. Landlords or letting agencies insist on checking credit for potential tenants.
- Decorating. Most of us like to impose our own personality on an apartment, but this isn't easy when you rent a flat. You're also less likely to take as much pride in your home.
- Eviction. If you fail to pay the rent, you can be evicted by your landlord. This is also the case if you fail to comply with the terms specified in the lease.
- State benefits. It can prove quite difficult to rent a private apartment if you're on state benefits. Social housing can also be difficult to get, especially in the current financial climate.
Flat to Rent vs Buying a House
Buying a home provides you with greater autonomy and the potential for capital appreciation over the long-term, but it takes time to find the right place, save a home deposit and get a mortgage. Renting a flat enables you to quickly and easily find a place to live.
If you need additional flexibility or time to save a sufficient down payment, flat rental is likely to be the preferred option. Personal circumstances often change so there is nothing to stop you from getting a foot on the property ladder in the future.
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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