Ocean Finance analysed monthly housing expenses data from ONS and talked to 2,000 UK homeowners and rental tenants. After crunching the numbers, the investigation found that those tied into a mortgage could end up paying an average of £77,241.61 more over a 25 year period, than a rental tenant pays out over the same timeframe.
While stepping onto the property ladder has the well-known costs of funding a deposit, solicitor’s fees and surveys, the real savings for renters were found in the accumulation of home maintenance, decoration and buildings insurance costs over the span of a mortgage period. Even though rental tenants will incur higher moving charges, as the study shows renters are most likely to move to a new house every two years compared to homeowners moving every 10 years, these additional costs still didn’t make an impact on the overall savings.
While those in rental accommodation don’t have the security of owning their own home, the maintenance and buildings insurance costs that are covered by a landlord build up to huge saving over the years.
Other findings suggested that 1 in 10 British homeowners regret buying their home, 75% of Brits suffer at least one major house maintenance issue each year, spending an average of £380 in order to fix the issue and the average homeowner will spend £1,068.43 on home decoration each year.
With 75% of Brits suffering at least one major house maintenance issue each year, the importance of having adequate insurance to cover your home is imperative for homeowners, however this also comes at a cost. The average British homeowner will spend £2,805.83 on buildings insurance over a 25-year period, and an additional £9,500.00 on maintenance costs outside of insurance cover.
One of the most frustrating aspects of living in rented accommodation can be the inability to put your own stamp on the property. While some landlords are happy for tenants to decorate the property, it’s more likely you’ll need to put up with magnolia walls for the duration of your tenancy. Homeowners are able to change the look of their home as they see fit, however this does come at a cost, with the average homeowner spending £1,068.43 on home decoration each year.
With so many ongoing costs to consider when buying a home, it’s no surprise to see unexpected maintenance as one of the biggest reasons behind one in 10 UK homeowners stating they regret purchasing their current home. 44% of homeowners who regretted buying their home said that spiralling costs relating to maintaining their home made them regret entering into a mortgage.
The data also suggests that those who jump into the housing market early have the biggest chance of regretting their decision, with 35% of 18-34-year-old homeowners showing remorse at entering into a mortgage.
Ugo Arinzeh, Managing Director of Onyx Property Consultants, suggests that the personal and equity benefits should also be taken into account: “For many, owning their own home is the ultimate dream as it symbolises achievement and success. One of the major benefits of home ownership is that you are building equity, meaning that if a home appreciates in value (which most do long term) you have an investment asset that will generate wealth upon sale (or refinance) in the future.
The monthly mortgage you pay means that your money is going towards building this equity for yourself as opposed to rental payments that at the end of the period you have nothing to show for it. Also, it is a rare investment option where someone else (a lender) will loan you the money to acquire it.”
Ian Williams, Director of Communications at Ocean Finance, commented on the findings: “With the financial gap between renting and buying becoming closer than ever in terms of monthly payments, and ‘Generation Rent’ seemingly further away from entering the property market than ever before, many are facing a difficult decision when it comes to financial planning for their housing future.
While there are hefty savings to be made by staying in a rental agreement rather than stepping onto the property ladder, the money saved would need to be invested wisely to match the equity gained on a mortgage over 25 years. What is clear from the research is that more care and attention is needed before entering into a mortgage agreement, in order to better plan for unexpected costs and minimise the chance of regretting your financial obligations to a single property.”
