Being an adult can be hard, and the hardest thing about it is that you have the ability to make your own decisions.
Sure, your parents will occasionally butt into your life offering well-meaning advice, but ultimately, whether you take that advice is down to you.
They’re your decisions, and you’re stuck with them for better or for worse.
If you want to keep a menagerie of exotic animals in your back yard, or go backpacking around the world that’s up to you, but some decisions will have lasting consequences and either leave you sitting pretty on a cloud of perpetual bliss, or cast you down into a bottomless pit of despair.
Like getting married. Or buying a house.
Both of these decisions are easy to make when you know that you’ve found ‘the one’, and both can leave you in a contractual hell from which you’ll struggle for years to free yourself.
We’re not qualified to give relationship advice, but we can give you a list of reasons why renting may be better for you than buying (a house – not a spouse).
Do you have any idea how much a new boiler costs? Or replacing a roof? A lot – that’s how much. If you’re interested in actual facts and figures, the costs are roughly £1000 for the boiler and £4,000 for the roof. Can you afford that? If the answer is anything other than a solid ‘yes, I have savings put away for exactly this eventuality’, then you’re probably best leaving the cost to someone else.
As a tenant, essential repairs are not your responsibility, and the potentially crippling costs of maintenance are not your responsibility. You can sit back and relax while someone else foots the bill.
You can afford it now, but…
Great. You’ve a pot of money stashed away for emergency repairs, and you’ve been to see the mortgage advisor. You can easily afford the payments.
Or you could last month.
After more than a decade of the Bank of England base rate resting at a record low 0.25%, it was jacked up in November by another 0.25%. Not much at all, but that’s going to have a knock on effect on mortgage payments. As you come out of a fixed rate term, that rate is not going to be available to you again. And for the poor unfortunate souls who are on a tracker mortgage, following their bank’s own base rate, their payments will have already gone up by the time you read this, and what was once affordable might not be for much longer.
And there’s no guarantee that the rate won’t go up again. And again. And again. And then where will you be?
Do you know what happens when interest rates rise rapidly?
The market slows. People fall behind on their mortgage payments. Houses don’t sell. And there’s even a chance that the market value of your home may fall. Leaving you with a huge debt, a house you no longer want, and no way to move somewhere else, unless you want a converted broom cupboard in a dodgy area.
It’s called negative equity and it isn’t much fun.
Well done! You’ve worked hard, maneuvered your way up the corporate ladder, and finally been offered the job you’ve always wanted!
Unfortunately it’s 80 miles away.
Sure, the distance is just about commutable, but you’ll be getting up at 5 am, and you won’t be home until an outrageous time in the evening.
It makes far more sense to move close to where you’re going to be working.
If you own your own home, it’s time to get things moving. You need to get listed with an estate agent (two weeks), have solicitors on standby, wait until a buyer is interested, wait until they’re able to sell their current home, and secure a mortgage offer on yours. And hope to hell that they don’t change their mind at the last minute. Or that their buyer doesn’t change their mind. Or that their buyer’s buyer doesn’t change their mind. It’s called a property chain for a reason, and it’s what will keep you in the same house for up to a year after you decide to sell.
What are you going to do? Carry on paying your mortgage and rent a new pad in your new town? Commute 160 miles every day? Or take a huge loss on your property by selling below its value to a buyer with ready cash?
If you’re renting, these problems aren’t even problems. They don’t even exist. You hand in your two weeks notice, find another place, and hire a van to move all your accumulated garbage to wherever you’ve decided to move.
Home sweet home.
Photo credit: Investment Zen