There are many people that cannot decide whether it is better to rent rather than have a mortgage and there are a lot of factors to consider. The cost does tend to be the main consideration for most people and so it is worth looking at it in some detail.
If you compare how much someone pays for a mortgage on a property and how much the same property would cost for rent, you will normally find that the mortgage is cheaper. If you are renting social or community housing or living in a council house, then the rent could be cheaper than a mortgage. However, this cost is not the only cost that a home owner has and so you need to consider the extra costs that a mortgage holder has, compared to a person who is renting.
Although a renter may pay contents insurance if they wish to, a mortgage holder will not only have this choice but they will also need to have buildings insurance. The mortgage company will have part of their contract where they agree to take out an insurance which will cover the amount of money borrowed on the mortgage. This means if the home is somehow destroyed, the mortgage will be repaid using the insurance and so the lender will get their money back. The insurance company will also insist that whoever is paying the mortgage (whether that be a couple or individual) has life insurance that will repay everything owed on the mortgage should they die. It is also possible to take out insurance to cover mortgage repayments in the case of job loss, inability to work due to illness and redundancy. This type of insurance is not insisted upon, but the mortgage company will still expect you to make your repayments whatever your circumstances. Some people choose to pay for this security and some do not, it may depend on whether they can afford it, what their health is like and the security their job brings. Anyone with health problems will have to pay more for life and one that pays out in ill health insurance.
If anything goes wrong in the home, then the property owner will have to pay. If you are a mortgage owner, then this falls on you. Some repairs are more crucial than others and may decide to not worry about a broken kitchen cupboard but it would be wise to get a broken roof mended in case it causes even more damage through leaks. If you rent a property and have any problems with the building, then it is up to the landlord to pay for the repairs and they would be obliged to get them fixed pretty quickly as well. This means that if you rent, you will not have to pay for these jobs to be done, whereas if you have a mortgage you will have to find the money to pay for them yourself.
The costs of insurances and repairs will vary and it can be difficult to calculate whether they will add up to more than the additional cost of the rent. However, another factor needs to be considered and that is the increase in value of the property. Most of the time homes will increase in value. They may fluctuate a little in the short term but over time it will go up normally. Some houses will buck the trend, perhaps due to their location becoming undesirable but most will not. This means that someone with a mortgage will also gain through this. The rate that house prices rise does change depending on demand and interest rates but the increase in value over the time that a home is owned, could certainly outweigh the costs of the repairs on the property.
So the calculation can actually be pretty difficult. However, there are other factors as well as the price which may be considered as well. There is a security that comes from owning your home, that you know that as long as you pay your mortgage you will not be evicted, whereas if you rent you can be given notice to move if the landlords wants. However, if you tend to move around a lot with your work, then you may like the flexibility of renting, rather than having to buy and sell houses frequently.
