Leaving home for the first time brings some hard choices about where to live, says Andy Stuart, Editor-in-chief of Your Mortgage magazine. And unless it’s the halls of residence or council property, it’s a question of whether to rent or buy
Apart from the lucky few who come from backgrounds where daddy finds it no financial burden to shell out half a million pounds for a pied-à-terre in Chelsea, we have to look carefully at our budgets. Is it wise to get a mortgage immediately or does it make better sense to rent a place for a while and save more of a deposit? Do you even have to buy at all?
Of course, the answers depend entirely on individual needs. Steve James, 43, who bought a flat a year after he left college in 1980 and became a marketing executive, does not have doubts about the matter. ‘I now live in a £750,000 house with a £250,000 mortgage on it and I put this down partly to the fact that I bought so early,’ he says. ‘I had no special privileges when I was younger and every penny of equity in my home I’ve earned myself. To be honest, I’d feel pretty insecure without my own property, so buying was as much about the way I feel as a financial decision. And with the money in the house I know that I’ll be able to help my children when the time comes, which is an important consideration for me these days.’
A fair point, but not one shared by 25-year-old Sian Murphy, who works as a nurse at a hospital in London. ‘I’ll never buy a property in my life,’ she asserts. ‘If anything goes wrong with my flat I just call the landlord and he comes round to fix it. Buying somewhere would mean being lumbered with a mortgage for most of my life and I’d have to pay all the repair bills. This way I am free to move on after each six-month rental period. Buying is just not worth it in my book – it ties you down and your choice is restricted.’
So is there a pressing reason for buying a property as soon as you possibly can? ‘The case of Steve James is a convincing financial one and I would say the sooner you buy the better it is for your pocket,’ says independent financial adviser Martin Cunningham. ‘You can look at buying as a case of nesting and investing, because despite short-term blips the price of property will increase over the years, as will your wealth.’
So what are the problems with renting in Cunningham’s opinion? ‘Younger people like Sian tend to forget that a mortgage is only finite rent and will one day be paid off altogether,’ he replies. ‘Rent is just pouring your money down a bottomless pit after a while.
‘Young people also tend to rent houses on a shared basis and, of course, that brings the monthly cost down. But although it sounds great talking about freedom and all that when you’re in your early to mid-twenties, people’s priorities usually change within five to 10 years after that,’ he continues. ‘This is especially true when you finally get sick of other people “borrowing” your milk from the refrigerator late at night or leaving the kitchen like a rubbish tip. That’s when most renters decide that they do want to own their own place, and that a mortgage isn’t such a bad thing after all. It’s a common pattern.’