Blog Post
Renting Vs Buying – How you could be £68,000 better off in 5 years!
We’ve all rented a property at some point in our lives and in the current housing market, more and more people are renting. The cost of rent differs from area to area but according to Statista.com, the average UK rent is £967pm or £11,604pa. Therefore, if you rented for 5 years you would have paid £58,020 - not a small amount of money.
Median household income in the UK was £28,400 in 2018 (see here). That means rent is taking 40% of household income on average!
So, would buying a property be a better idea?
With a £28400 household income, most lenders would be able to lend £127,800 on a mortgage. If we assume a 10% deposit, that would mean purchasing at £142,000.
A mortgage on this basis would cost around £561pm (based on 25 year term and an interest rate of 2.30%, currently available with Barclays on a 5 year fixed)
This would save £406pm or £4872pa. Again if we consider this over a 5 year period, this would save you nearly £25k!
It’s also worth noting that house prices generally go up. If the property you bought went up in value, you would gain money through equity. House prices increased by 1.3% in the UK in 2019 (see here)
Based on a property being worth £142,000, over a 5 year period this would increase the property value to £151,473 in 5 years. Your mortgage will have reduced to £107723, therefore the equity in your property would be £43750, plus the £25k you will have saved on renting means a total gross additional worth of £68000.
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