It’s a question that’s been the subject of many a dinner debate. In the United Kingdom, we’re well-known for being obsessed about buying a house. On the continent and wider, approaches to property are different and buying isn’t seen as the holy grail.
But what’s the right answer?
To our mind, the key question is: what would you do with your deposit if not putting it in the property? Ibrahim and I have both been through the house purchasing journey recently, so we wanted to create something that would help others to make that decision.
There’s a value to your deposit
Because house buying is so ingrained in our minds early doors, many people simply assume that it’s a sensible thing to do. In reality, there’s a whole host of reasons why buying might not make sense.
Key amongst those reasons is if you are sinking say £30,000 of your hard-earned money into your house as a deposit, you’ve lost the ability to use that £30,000 elsewhere.
The reason I personally went for a lower deposit for my own house was because I wanted to invest the extra money into a couple of small businesses. I might have enjoyed lower monthly payments on my mortgage if I put more in the deposit, but I wouldn’t have been able to buy the businesses I have.
Buying a property isn’t as simple as saving up as much as you can and putting it all in a deposit. You need to think about what else you can do with that money. And it needs to be a rational and well thought-out decision, rather than just “renting is throwing money away”. Renting can actually bring lots of benefits like flexibility, maintenance covered, etc.
A calculator that works it all out
Having gone through the pain point ourselves, we wanted to create a tool that helps you to figure it all out.
Introducing the IFG Should I Buy or Rent? calculator. The calculator has been weeks and weeks in the making, and works out whether you’d be better off buying or renting. It factors in increases in mortgage payments, rent, your buying costs, etc to help you understand what will be best for you over the long term.
It’ll even tell you what annual return you need to achieve on your deposit in order to make it worthwhile renting instead of taking out a mortgage!