With the housing and financial markets in turmoil, many would-be home-owners are looking to rent for another few months before deciding whether to take the plunge and buy a house in the current climate or not.

With headlines showing that housing prices are falling, and with mortgages becoming increasingly difficult to get, it is no wonder that many people are choosing to delay their house-purchasing decision to see if they can snap up a bargain in a few months time.

But, is renting really such a good option or should you still be looking to buy? Here at MoneyTowers, we have put together the factors you should consider when deciding whether to rent or buy.

Renting: The cheaper short-term option
Rental payments tend to be cheaper than mortgages, even if the mortgage is an interest-only basis. Mortgages also mean that you have to pay for the maintenance and repairs on your house, whereas a landlord would look after these issues should they occur.

Renting is also cheaper in that there are fewer up-front costs – buying a property will involve having to pay stamp duty and a deposit up front. You may also need to decorate and furnish your house to suit your needs and tastes. By comparison, you may be able to get a fully or part-furnished property, negating the need to buy any furniture. Although you will need to place a small deposit up-front, it is nowhere near what many mortgage lenders would ask for.

Lack of Security
The big downside of renting is the lack of security – when buying a property, unless you are unable to keep up with your mortgage, you will not be kicked out. With a rental property, your landlord may ask you to leave.

House Prices
Long term, house prices will rise, although short-term they may fall. If you are planning to own your house for at least a few years, you will probably see your property appreciating in value. If you are renting, the landlord will see all the capital growth; with your own property, you will benefit from the house price increase.

Retirement Considerations
Friends Provident have done some research that shows that those who have to rent in retirement will need around £133,117 to pay for their rent, utilities, ground rent and service charges. In comparison, it costs just over £3,000 a year for a property owner to run their property.

Pensions
The average retirement period is currently said to be 16 years. Research from Friends Provident has said that someone who rents during their retirement will have to pay around 275% more into their pension pot than someone who owns their own home.

Overall, it appears that making the rent or buy decision will depend on how long you plan to rent or buy for, the age you buy/rent the property and the sort of savings you are looking at. With renting, you save money up-front by not having to pay for a large deposit and not having to cover things such as repairs and maintenance, however you won’t have an asset to trade up or down and you may well end up needing more savings to help maintain your lifestyle when you retire.

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