04 March 2015

Are you better off renting or getting a mortgage?

Getting a mortgage can be one of life’s big financial milestones. If you’re considering the leap from renting to owning, it may feel overwhelming. But in financial terms, a mortgage could leave you in a better position overall.

Once you've saved for a deposit and have been approved for a mortgage, you may find yourself with a similar amount of disposable income each month to when you were a tenant, depending on your circumstances. 

Rent vs. mortgage repayments

Are you wondering if a mortgage will cost you more than renting? If you’re considering getting a mortgage and you’ve previously been renting, it’s tempting to base your outgoings on how much rent you pay at the moment. But, don't forget there are different financial factors involved when it comes to getting a mortgage or getting a rental property, but being on the housing ladder could give you an added sense of security and the potential of future returns.

If you want to find out what your mortgage repayments might be, the Nationwide mortgage payment calculator could help give you a rough idea of your monthly payments.

Where should I buy?

For many people, where they work, local schools and their budget will be the most important factors when deciding where they buy their first home. You may also be looking at how house prices have changed across the UK. The below infographic shows how much the average house price increased by in 2014, based on the Nationwide House Price Index.

Image:what could your home gain in value

To rent or to buy?

Monthly repayments are just part of the decision making process if you’re switching from renting to owning. There are a few other things you may want to take into consideration:

Renting 'pros' Renting 'cons'
  • Everyday maintenance and repairs are covered by the landlord (although your deposit could be taken if you damage the property)
  • Rental amount is fixed throughout your contract, which tends to be 6 or 12 months
  • Most rental deposits are only one or two month’s rent paid upfront
  • Less choice about how the property is decorated or equipped compared with owning a home
  • Your rent payments are not paying into something which could offer a financial return
  • You’re dependent on the landlord to uphold their part of the contract and do repairs and maintenance

Mortgage 'pros' Mortgage 'cons'
  • Your monthly payments can build towards outright ownership
  • You have more freedom to make the property your own with decoration, garden and DIY work
  • You may be able to make energy-saving improvements like double glazing and insulation
  • You may be able to rent all or part of the property out. You'd need to check with your mortgage provider if you can do this.
  • You can apply for help with support schemes such as Help to Buy 
  • You need to build up a bigger deposit than for a rented property
  • You’re fully responsible for maintenance and repairs
  • Repayments could go up as interest rates change (depending on your mortgage type)
  • Houses prices could fall when you come to sell the house
  • You’re responsible for insuring the building, and may have additional costs like ground rent, plus costs like life assurance and critical illness cover

Before you buy

You’re making a long-term commitment when you take out a mortgage, so you'll need to have your chosen property surveyed beforehand. It's also a good idea to find out about any forthcoming changes to the area, such as planned rail links, construction work and urbanisation. These factors could affect what it’s like to live there long-term, and how much you might get for the property if you end up selling. If you're a first time buyer you may like our first time buyer guide.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

Legal information

The Nationwide House Price Indices are prepared from information that we believe is collated with care, but no representation is made as to their accuracy or completeness. We reserve the right to vary our methodology and to edit or discontinue the indices at any time, for regulatory or other reasons.

Persons seeking to place reliance on the Indices for any purpose whatsoever do so at their own risk and should be aware that various factors, including external factors beyond Nationwide Building Society’s control might necessitate material changes to the Indices.

The Nationwide House Price Indices may not be used for commercial purposes including as a reference for: 1) determining the interest payable, or other sums due, under loan agreements or other contracts relating to investments 2) determining the price at which investments may be bought or sold or the value of investments or 3) measuring the performance of investments.

Nationwide Building Society is the owner of the trade mark “Nationwide” and all copyright and other rights in the Nationwide House Price Indices.

The application of the IOSCO Principles on financial benchmarks to the NHPI is more fully set out in our statement regarding IOSCO Principles. Nationwide considers that its arrangements for administration of the NHPI comply with the IOSCO Principles in a proportionate manner having regard to the nature of the index.

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