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Your Complete Guide to Switching From Renting to Buying Your Home

Posted 26 March 2018

Research says owning a home is cheaper than renting. Here’s what you should know about switching from renting to owning...

A recent study by the Halifax found that the average cost of buying a three-bedroom home in the UK, including mortgage payments, was £75 a month less than renting. The gap between the cost of renting and buying is at a four-year high, with the average cost of buying a three-bedroom home now £679 per month, compared to a renting at £754.

Buying a home is almost £1,000 a year cheaper than renting. But what do you need to know if you’re thinking of switching from renting to buying? Keep reading for your complete guide.

The main differences between renting and owning

In some ways, buying and renting your home are similar. In each case you make a monthly ‘housing’ repayment and you’re generally responsible for all the bills that come with living in a property.

However, when you’re renting, 100% of your monthly payment goes to your landlord. When you buy, your repayment goes towards building up equity in your home, with some going to your lender as mortgage interest.

If you’re thinking of switching from renting to buying the main differences are:

  • You will need a larger deposit: When you’re renting you normally need a deposit of around three months’ rent. When you buy a home, you’ll normally need at least 5% of the purchase price.
  • There are generally more associated costs: When you buy you may have to pay Stamp Duty, legal fees, a valuation fee and various fees to your mortgage lender.
  • You’ll have to pay for repairs and maintenance: If you’re renting and something in your home breaks, your landlord is generally responsible for putting it right. When you own your home, you will have to pay to get it fixed. This can be expensive if, for example, your roof leaks or your boiler breaks down.

Make sure you’re ready for the commitment

Buying a home is a big commitment. Most people will need to take out a mortgage in order to buy, and this is likely to be the biggest financial commitment that you ever make.

You need to be sure that you can afford to pay your mortgage, not just now but also in the future. Our mortgage calculator can help you work out what your mortgage payments would be, and whether you can afford them.

You also need to be sure that you can afford to maintain the property and buy the essential items that you need.

In addition, selling a property is more difficult than ending a tenancy. If you do end up moving to a different part of the country, it’s not a case of simply giving someone a couple of months’ notice. You will have to sell your property, and this can be a costly and time-consuming process.

Saving your deposit

The biggest challenge for people looking to switch from renting to buying is saving up the necessary deposit.

You generally have to put down a minimum of 5% of the property purchase price. Based on the average price paid by a first-time buyer, this equates to about £10,400.

There are schemes available designed to help buyers fund the deposit. The Help to Buy ISA allows you to save for your deposit tax-free, and for every £200 you save the government gives you £50. If you save the maximum amount of £12,000, the government will add £3,000, giving you a total of £15,000.

The credit scoring process

If you want to buy a house and you need a mortgage, then your credit rating will be a key factor.

Lenders use your credit score to decide whether you are a good ‘risk’ and whether they will lend to you. Your credit file is made up of information such as your address history, your previous account data and court records. It shows how you have managed your financial accounts in the past (loans, credit cards, hire purchase) and whether you are registered on the electoral roll.

If you have missed payments on loans or cards in the past, or if you’re not on the electoral register, your credit score may suffer. This may make it difficult to get the mortgage you need.

Find out everything you need to know about credit scoring.

Getting a mortgage

With dozens of lenders and thousands of mortgage products, you’re certainly not short of choice when it comes to choosing a mortgage.

Our comprehensive guide tells you everything you need to know about mortgages, including how they work, the types of mortgage available, what the costs are, and where you’ll get the right mortgage for you.

If you’re a first-time buyer, then it is worth checking out the range of government-backed schemes that are available to you. There are a range of incentives available designed to help people to get onto the property ladder, and you may qualify for one or more of these initiatives. Find out more about the first-time buyer schemes available.

You will also need to budget for the various fees and charges that mortgage lenders will levy when you take out a new mortgage. Our guide to mortgage fees and costs explains further.

Speak to an expert

Switching from renting to buying can save you money. Russell Galley, managing director at Halifax, says: “The gap between buying and renting has widened significantly, primarily driven by a reduction in mortgage rates and a more competitive market pushing down monthly payments. Meanwhile, the cost of rent, household maintenance and average deposits have remained broadly flat.

 “Despite having to put down a sizeable deposit up front, homeowners are overall better off than renters in all parts of the UK. But those who are unable to get onto the property ladder because they can’t raise enough cash are paying more by renting. The good news is that record numbers of first-time buyers are still taking their first step on to the ladder and helping to bridge this gap thanks to a continued low-rate environment and government schemes including Help to Buy.”

If you’re thinking of switching from renting to owning, then it can pay to speak to an expert. An independent mortgage broker will be able to help you work out what deposit you need, what you can borrow, and which is the right mortgage for you. See what a mortgage broker can do for you.


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