In order to decide whether you should buy or Rent your home, there are a numerous factors for you to consider. The following text evaluates pros and cons of Renting and buying.

Renting a Home

Renting a home permits a certain level of flexibility (subject to your contract terms). At the same time, renting simplifies life by removing numerous liabilities which you take on by buying a home, for example quite often there will be supplied furniture or repair costs will be landlord's responsibility. The cost of moving into a rented home is often much lower and can be broken down into two distinct categories: initial and reoccurring costs. Initial costs include deposit, agency fee, hire of transport vehicle, land-line telephone connection, etc. Reoccurring costs are rent (usually the most expensive single element), utility bills, and other living costs.

The contractual agreement can sometimes be just one month (although contract length of six or twelve months are most frequent); this gives you a high degree of mobility in case there is a sudden need to relocate. Furthermore, the contractual agreement often includes a "break-clause", which enables you to end your occupancy early without having to pay full remaining rent liability.

It is not uncommmon that repairs are landlord's responsibility; therefore this reduces the risk of sudden financial demands on your income. Finally, renting permits a relatively inexpensive method to move into an unfamiliar neighbourhood; therefore, you can take your time to understand the advantages and disadvantages of living in that area, before making a significant financial commitment (purchase of a home).

Buying a Home

It is fair to say that the earlier you take your first step up the property ladder, the faster you would be able to climb it. However, this is often constrained by your financial ability to do so. The costs arise from a number of factors, including the initial deposit on home, surveyors' and solicitors' fees and ongoing loan payments. In comparison to renting, you should expect higher move-in costs, such as furnishings, repairs and house insurance.

However, repayment of loans does make financial sense, as opposed to paying rental charges (which you will never gain any returns from). Purchase of home is an important investment decision, which enables you to gain a valuable asset. However, acquisition of such asset also brings with it a number of financial liabilities, which you must consider and evaluate. The questions you need to ask are - how capable are you to meet the relatively higher ongoing costs? And will you be able to overcome any unforeseen circumstances, such as urgent repair work?

At the end of the day, it all comes back to risk and return - the two most important components of any investment decision. Renting a home involves a much lower level of risk and financial demand. However, it is only by purchasing a home and by paying off the loan, will you be able to acquire an asset with significant and relatively stable value.