This Is Why You SHOULDN'T BUY A House!
If you're like us, you've probably been sold the dream that buying a house at all times and at all costs is what you need to do 😅.
Many people see renting as “dead money” and as such, will go as far as blindly buying a house at a time when property prices remain high and interest rates continue to rise.
We're big advocates for owning a house that becomes a home, provided you buy it sensibly at a price that makes sense and you have a game plan to become mortgage free fast.
Even though we love and promote the idea of homeownership, we're also fully aware that for some people, renting could be a smarter option for some people over time.
In the current economic circumstances, it might make sense not to buy a house depending on your personal circumstances.
Advantages Of Buying a House
Here are some advantages of buying a house:
1. Retirement
One reason we worked hard to pay off our house in 7 years is to give us the option of never having to think about paying a mortgage at retirement.
Given most people are not saving enough for retirement, having housing costs to worry about in addition is not ideal.
2. Security
The peace and security that you have with owning your own home cannot be quantified in financial terms.
You can do as you wish. Paint and decorate it, etc. Plus, it is a great way to raise a family with stability and so on.
3. Wealth
There is a direct link between owning a home and building wealth over time.
If you look at the stats on Ethnicity Wealth Gaps in the UK, one of the key reasons for wealth differentials is the degree to which different ethnicities own houses.
White and Asian households have homeownership rates of over 80%, whereas, Black households typically have ownership rates of around 25% and 45% according to the ONS.
When you own a house, you build equity over time that you can release in the future by remortgaging or downsizing.
Plus, it can be passed on to the next generation.
Why You Should Not Buy a House
In the current climate, here are reasons why you should not buy a house.
It might be better off for you to rent and build up your savings and then reassess things as time passes.
1. You Can't Afford It
The average house price in the UK is around £286,000. A 10% deposit is £28,600, which many people struggle to raise on their own.
On top of that, you take on a phenomenal amount of debt, thanks to the high prices of the last few years.
If you earn, say, £3,000 a month and live near a major city, the least you'll pay for a mortgage is £1,000 a month.
On top of that, interest rates have hit over 6% for a 2-year fixed rate and the Bank of England is expected to raise the base rates further.
If you're buying in London, expect to pay over £500,000 for a property. Think carefully about what that means for the debt you'll take on.
Marathon Mortgages are becoming the norm now with people extending their mortgages from 25 years to 35 years or more.
Most of those people don't fully understand the implications, and in some cases, the interest over the term of their mortgages rises by over £100,000.
Then there are all the costs of buying that you'll never recover e.g. Stamp duty, legal fees, arrangement fees, etc.
If you do choose to buy a house, aim for your mortgage payments to be a maximum of 25% before any overpayments.
2. You Aren't Prepared For Ongoing Maintenance
When you rent, if your boiler breaks or the washing machine stops, you call the landlord to fix it.
If you own a home, all unforeseen costs are on you.
You not only have to create a space in your budget for these additional costs, but you also have to think about renovations.
If you own a flat, it gets even worse. You have the problem of uncontrollable service charges to think about.
3. You Want Flexibility
When you rent a house, you have the flexibility to move for a new opportunity in a new city or country, or if costs rise too much where you are.
If you own your own house, you're usually stuck there and it is not as easy to move.
Take the example of having bad neighbours. When you own your own house, you'll have to live with that or sell or buy another house.
When you rent, you serve notice and move if you need to.
4. You're Not Ready To Settle Down
I've lived as a single person who was a homeowner and paid high-interest rates of 5.99% for 5 years.
It is very difficult to have all the costs on you and a lot of the time, you feel like you have no money left over.
Buying a house when you're ready to settle down always works out better because you can share the costs and you have the benefit of double income potentially.
Of course, if you're single and want to remain single and can afford to buy a house, go ahead.
Otherwise, it makes sense to rent until you're ready.
5. You're Buying a House To Get Rich
Buying a residential property as a path to getting rich is not the best thing to do. It's not the right motivation for doing it.
Yes, property prices do rise over time, however, when you've factored in all the other costs, it might not be the wisest thing to do.
In addition, that house is really the bank's as it's an asset on their balance sheet until you own it outright.
For some, it will work out, but overall, property is usually a way for preserving wealth.
Conclusion
👉🏽Buying a house is a good idea if you can comfortably afford it, buy sensibly without too much debt and have a plan for mortgage freedom sooner not later 😀.
However, it is not the only game in town and you should not feel forced socially to own one or feel unsuccessful if you're not on the property ladder.
Although not perfect, it is ok to rent and in many parts of the world, it is the norm.
It also allows you to invest what you're not putting into a property and build wealth.
We need to let go of the obsession in this country to own a home at all costs and question our deep-rooted programming.
If you do manage to get on the property ladder, great! 🙌🏽
Do everything you can to resist extending the term and if anything, focus on becoming mortgage free faster because it is life-changing.
Read more on buying a house:
- Need coaching for your finances? Book a Power Hour
- I Wish I Knew This Before Getting a Mortgage
- How To Buy a House In 14 Steps
- Remortgage Explained: How To Remortgage (Step-By-Step)
Watch more on buying a house:
What are your thoughts on buying a house vs renting? Do you own a house or rent? Comment below with your experience.
I rent but can’t buy as will be too old to raise a decent deposit. I’m 52 and stared well paid private work on the side of statutory job. I can now save £1500 per month so do I save it, invest it, do both 🤷🏽♀️
I’d personally invest rather than just save. If you save, there are some decent returns from fixed savings accounts of up to 7%. However, you can only pay in so much. The rest you need to invest. For investing, read this: https://thehumblepenny.com/best-vanguard-funds-etfs-and-index-funds-for-financial-independence/
I’m 57.Paid off our mortgage back in 2018.Id won £2k on the local football teams super draw so thought with only 6k and 18 months left to pay that would be a great idea.Great feeling when that letter comes through to say you’ve paid up.Our first house was £15k back in 1988.Takes the pressure off like you said.Wish I done it sooner.
Andrew, very good move. I’ve never regretted a moment of it and at 57, what a way to enter retirement. By the way, £15k in 1988 – WOW! What part of the country is that?
I rent (in a large town close by, minimal transport costs, no car), because I work for a big global employer – going through tough times now – who I absolutely cannot trust not to leave the region and even the country. They can do this, it would not be politically popular, but they can do it.
Were they to do that wholesale (even more than they are *already* doing now, I detect a clear tendency… (unlike the famous frog in the saucepan))
the property prices and demand in the whole region would tank.
I prefer not to put all my eggs in that basket.
“Flexibility” is an aspect you do need to consider before deciding to buy property, depending on your individual employment circumstances, *even if you could* finance a house purchase with no mortgage.
Spot on, Kate! Thank you for sharing. Flexibility is an aspect that too many people give up to own a house and with that, they also give up on many potential opportunities.
Thanks you so much for your many nuggets of wisdom.
I continue to learn so much from your articles.
We’re current home owners and up till recently I really did think that was the best thing one could do, more so if you’ve got a family. I still think so, however, I’ve been told that there are other ways the millennials are going about housing, the reasonably wealthy ones though.
This involves not necessarily owning a house, but investing heavily in funds with high yields, enough to provide income to cover all expenses and surplus on a regular basis.
This way they are comfortable not owning a house.
I think it’s still a good idea to own a house though even if it’s just the one, more so for those who are not wealthy enough to afford large investments.
Hi Seyi, really good points you’ve made. I think if you can afford to own, you should. Plus it diversifies you away from equities. However, one size does not fit all.
Thank you so much for your many nuggets of wisdom.
I continue to learn so much from your articles.
We’re current home owners and up till recently I really did think that was the best thing one could do, more so if you’ve got a family. I still think so, however, I’ve been told that there are other ways the millennials are going about housing, the reasonably wealthy ones though.
This involves not necessarily owning a house, but investing heavily in funds with high yields, enough to provide income to cover all expenses and surplus on a regular basis.
This way they are comfortable not owning a house.
I think it’s still a good idea to own a house though even if it’s just the one, more so for those who are not wealthy enough to afford large investments.
Great post! 🏡💰 Homeownership is a goal for many, but it’s essential to consider personal circumstances and financial readiness. Renting offers flexibility and can be a wise choice too. Thanks for shedding light on both sides!