Thinking of Purchasing a House?
24th Oct 2023
In 2019/20, 65% of households in England were homeowners. The 2014 British Social Attitudes survey found that, given a free choice, 86% would prefer to buy their own home rather than rent.* source
Home ownership can offer many benefits, such as stability, potential for building wealth, and a sense of pride and belonging. However, it also comes with several disadvantages that individuals should consider before purchasing a home.
- Build Equity: When you make capital and interest mortgage payments, you are essentially paying down the principal amount of your loan, which helps you build equity in your home. Over time, this equity can become a valuable asset and a source of wealth.
- Stability and Security: Owning a home provides a sense of stability and security. You have control over your living space, and you don’t have to worry about a landlord raising your rent or asking you to move.
- Appreciation: While not guaranteed, property has historically appreciated in value over the long term. This means that your home may increase in value over time, potentially providing a significant return on your investment when you decide to sell.
- Building Credit: Making timely mortgage payments can help you build a strong credit history, which can be beneficial for future financial endeavours.
- Control and Personalisation: Home ownership allows you to customise and personalise your living space to your liking. You can make renovations, decorate, and landscape according to your preferences.
- Community and Roots: Owning a home often leads to a stronger connection to your community. It can provide a sense of belonging and the opportunity to establish roots.
- Rental Income: If you have extra space in your home, you may be able to obtain your lenders permission and rent it out to generate rental income, helping offset your housing costs.
- Generational Wealth: Many people pass down their homes to their children or heirs, creating a form of generational wealth and financial security for future generations.
- Long-Term Financial Planning: Home ownership can be a part of a long-term financial plan, serving as a stable asset for retirement or other financial goals.
- Predictable Housing Costs: With a fixed-rate mortgage, your monthly housing costs remain relatively stable over the life of the product term, making it easier to budget.
- Investment Diversification: Owning a home can be a way to diversify your investment portfolio. Property can perform differently than other asset classes like stocks and bonds, providing a barrier against market volatility.
- Financial Commitment: Owning a home typically requires a substantial financial commitment. You’ll need to make a down payment, pay for solicitors, and cover ongoing expenses like mortgage payments, council tax, insurance, maintenance, and repairs. These costs can add up quickly and may limit your financial flexibility.
- Lack of liquidity: Property is not a liquid asset, meaning it can be challenging to convert your home into cash quickly if needed. Selling a home can take time, and market conditions can impact the sale price.
- Repairs and maintenance: As a homeowner, you’re responsible for maintaining and repairing your property. This can be costly and time-consuming, especially for unexpected issues like a leaking roof or a broken boiler.
- Taxes and insurance: Council tax and house insurance can increase over time, adding to the overall cost of home ownership. These costs can vary significantly by location and the value of your property.
- Limited mobility: Owning a home can tie you to a specific location, making it more challenging to move for job opportunities or other personal reasons.
- Market risk: Property markets can be volatile, and property values can fluctuate. A decline in property values can lead to a loss of equity, which can be particularly problematic if you need to sell your home during a down market.
- Opportunity cost: The money you invest in a home could potentially be invested elsewhere to generate higher returns. For some individuals, renting and investing the difference may offer better financial outcomes.
- Initial costs: The upfront costs of purchasing a home, including the down payment, and closing costs, can be a significant barrier to entry for many people, making home ownership less accessible.
- Commonhold fees and restrictions: If you live in a community with communal areas, you may be subject to additional fees and restrictions on how you can use and maintain your property and pay additional fees for maintenance of common areas such as gardens, parking areas and thorough fairs.
- Market downturns: During economic downturns or housing market crashes, homeowners may face difficulties, including declining property values, potential repossession, and difficulty selling their homes.
Ultimately, the decision to buy should align with your financial goals, lifestyle, and how long you plan to stay in a particular location. It’s essential to consider your long-term financial objectives, housing market conditions, and personal preferences when making this choice. Consulting with a financial advisor can also help you make an informed decision.
At 3mc, we have a team of expert advisers who can discuss all your mortgage requirements. If you would like to discuss your options, give the 3mc team a call on 0161 962 7800.
All calls are recorded for training and monitoring purposes. 3mc for intermediaries only.
*Your home may be repossessed if you do not keep up repayments on your mortgage. 3mc (UK) Ltd is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register https://register.fca.org.uk/s/ under reference 302992. Please note: The FCA do not regulate Business Buy to Let Mortgages.