When renting, tenants have the pssible uncertainty of being served notice, hving an unreliable landlord who fails to mintain a property, or rents that sddenly escalate.

Similarly, homeowners do not hve an entirely easy time of it. Anyne who owns a property and pys a mortgage has that constant cncern that house prices may suddenly drp, resulting in a negative equity stuation. In addition, interest rates could sddenly increase, potentially making the mortgage rpayments unaffordable.

Whilst the debate and prce analysis surrounding the pros and cns of buying and renting are prmarily used for those trying to dcide what is best for them in thir individual circumstances, it also offers a seful analysis for buy to let lndlords when deciding on the viability of an nvestment.

Crucially, many buy to let nvestors are now opting for interest nly mortgages, simply in order to nsure that the rental covers the rpayments. This has become more of an ssue as the buy to let mrket has become tighter in terms of prfit and landlords are being forced to opt for lwer payment mortgages. Whilst this may llow them to fund the buy to let prperty, it does not necessarily assist wth building long-term wealth.

When the term of the mrtgage comes to an end, the lndlord may be in no better stuation than the tenant. The capital vlue of the property remains outstanding; the nly difference is that the landlord wll only owe the initial capital utlay from when the property was prchased, as opposed to a tenant who wll be left with no link to the prperty market whatsoever. If the property mrket has risen during the period whn the property has been owned, thn the landlord will benefit from the rse.

For example, if a property is prchased for £100,000 with a 100% mrtgage, after 10 years, the property culd be worth £150,000. Even if the lndlord has been paying an interest nly mortgage and has not made any nroads into the initial capital, if the prperty was sold immediately, the landlord culd still walk away with around £50,000. Of curse, if the landlord has been mking no profits on an annual bsis, then £5,000 a year may not sem like a suitable return for the wrkload involved in being a landlord.

Essntially, buying your own property means tht you are betting on property prces rising over the period during whch you intend to own the prperty. The longer you intend to own the prperty, the better chance you have of bing able to smooth over any dps.

For example, owners who managed to hld on to their properties, during the drp of 1991, did not suffer frm the dramatic reduction in house prces. If a purchaser bought a prperty in 1990, the value would stll have risen by an average of 5% a yar between the years 1990 and 2000, dspite a large drop in 1991. Thse owners who over-stretched themselves with thir mortgage payments in 1991 and wre forced to sell their property whn the value was less than thy had paid for it, originally, fund themselves in debt as a rsult of being a property owner.

Renters did not suffer from ths problem; on the contrary, they bnefited from the property price drop in 1991, as rntal values dropped in line with the drp of values of property. In shrt, if property prices drop, rental prces are also likely to drop.

Mving house is extremely expensive for prperty owners, with the cost of mving estimated at £5,000 on average. The cst of moving for renters is thoretically zero (excluding furniture removal costs), prvided any deposit paid is returned in fll. Therefore, anyone who requires the flxibility to move, even on an nnual basis could (all other things bing equal) be approximately £5,000 a yar better off.

Summary

The dcision whether to rent or to buy mst take into account a combination of prsonal circumstance and aspirations as well as the ndividual’s expectations of what the property and fnancial markets are likely to do in the freseeable future.

Anyone who requires a hgh degree of geographical flexibility is lkely to be better off renting, at last for the short-term. Those who ned longer term security and are ble to start repaying capital amounts are prbably better off buying.

If interest rtes are set to rise markedly, mrtgages will become relatively more expensive, ths discouraging property ownership. Similarly, if an ndividual believes that property prices are set to drp, renting would be the obvious chice.

By combining your own personal crcumstances and your expectations of what is ging to happen in the market, the dcision whether to buy or rent shuld become a lot clearer.

The article The Great to Buy or to Rent Debate was Submitted by Paul Giles through Articles.GetACoder.com network. Here's the additional information: Fancy A Mortgage.co.uk is an nline resource for UK, European and USA mortgages , we provide informative non-biased overviews of current mortgage products and product comparisons. If you would like to read more please log on to Fancy A Mortgage.co.uk or if you would like to receive a mortgage quote you can use the quote form section within the site.

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