Property Guide:Looking to Rent
Making the Best of Renting
There are some advantages of renting. Firstly repairs and maintenance to the property are not your responsibility. You will also escape costs such as buildings insurance; after all it's not your building.
Secondly your life is completely flexible. Most landlords require just one months' notice if you want to leave, at which point your deposit is returned, and you are free to go wherever you wish. Note: you would normally have to sign up to a six month tenancy before being able to take advantage of the one month notice period. Your landlord, however, has to give two months' notice.
However, while you are paying the landlord's mortgage with your monthly rental payments, they are counting up the rising value of the property – equity that you could only benefit from if your name was on the deeds. In addition, you may be restricted as to how you can decorate your home and even if you can have pets.
Providing the cost of your rent is reasonable, you can use your time as a tenant to prepare for home-ownership. As renting usually means fixed costs, it should be easier to budget.
Put aside as much as you possibly can each month towards a deposit for your own future home. Maybe even consider cutting costs or taking on an extra job to help you save. When you come to buy, the more you have versus the value of the property (known as your Loan to Value), the greater number of mortgages will be available to you.
More importantly, the better mortgage deal you will qualify for. Even saving a five per cent deposit can save you around one per cent in interest.
Just one per cent makes an enormous difference to your monthly mortgage repayments.
Some lenders offer incentives to save for a deposit. If you then take a mortgage with the lender you may receive a reward to put towards the cost of furnishing your new pad. However, it is important to look for the best overall value in a mortgage and not be swayed by gimmicks that will soon have paled into insignificance.
If you cannot save because you still have debts, most likely from university, pay these off first. Start by tackling the most expensive such as store or credit cards and work your way down to overdrafts and personal loans. The advantage of doing this is that an increasing number of mortgage lenders now calculate what you can borrow on an ‘affordability' basis – that's what comes in and goes out each month – rather than on straightforward income multiples such as ‘3.5 times single salary.' Therefore the less debt you have when applying for a mortgage, the more you will be able to borrow. For example paying off £2,000 of debt could mean being able to borrow a further £8,000 on your mortgage.
If you just have student loans to pay off, which come with inflation-linked interest, don't let this deter you from applying for a mortgage. Lenders take kindly to these and some discount them altogether when calculating affordability.
Don't forget to pay off your loans as soon as you can. Saving on the interest will help you gather the finances to put towards a deposit.
Most useful and most popular pages on this site:
Look for your First Property
l Seek First Time Buyer Mortgage Advice
l See our Best First Mortgages Comparison
Table l Find out about First Time Buyer Mortgages
l Find out How to Buy a House
l Learn all about The First Time Buyer Mortgage
l Shared Ownership