F2 - Rent or buy? (part 1)

Is it cheaper to buy or rent? This will depend on many things – including how long you’re planning to live in an area, fluctuating house prices, the maintenance needed on a property and where exactly you choose to rent and buy.

To assess whether buying a house may be the right choice for you try asking yourself these questions:

If you own your own house and keep paying the mortgage no one can evict you. You have the security of knowing you can stay there indefinitely.

However if you buy a house you are making a commitment. Should you subsequently need to sell this can be hard work and expensive. You will be responsible for putting your house on the market and arranging a sale and this will involve paying solicitors, estate agent and surveyor fees. You will not be able to move until you find a buyer which could cause problems if you are trying to coordinate your move with the start of a new job or the purchase of another house. You may also have to pay moving costs.

If you are moving to a new city for your foundation years you may want to spend some time getting to know the place in order to assess which area you want to live in long term.

Also house prices may dictate the area you buy a house in. For example attractive, desirable areas popular with young professionals tend to have higher house prices as do properties in the centre of town. House prices in your preferred area may be out of your reach or you may get a lot less for your money.

If you own your own house you are not reliant on a landlord to carry out maintenance and repairs. You will not be at risk of having a poor landlord who is hard to get hold of or who cuts corners when it comes to maintaining the property. However this means that there is no one you can call up when things go wrong. You will be responsible for arranging repairs, maintenance and house insurance.

If you rent a house you know exactly how much you have to pay each month - and maintenance and repairs will be paid for by someone else.

If you own the property you have to pay for repairs yourself meaning it is harder to predict monthly costs. If major damages occur such as a leaking roof or burst boiler these could be expensive.

However if you rent a house you are paying out money each month and getting nothing back in the long term. This monthly rent could be going on a mortgage that in the long term will lead you to owning an asset – your own home.

This asset may rise in price over time, which means buying a house would be a good investment. However it could also fall in price. In a worse case scenario you could end up in negative equity, meaning you owe more in mortgage payments than the house is currently worth.

You can significantly reduce the risk of negative equity by buying when house prices have fallen significantly, rather than when they have been rising and look to be approaching their peak.

To buy a house you will have to pay a relatively large sum of money up front. Fees may include stamp duty, solicitors, surveyors, valuation, mortgage advisor and arrangement fees and VAT. These can add up to thousands of pounds.

Mortgages used to be easy to get but the credit crunch has changed all that. Lenders are more wary and want bigger deposits

- with average deposits of 24% in spring 2009. However, as a doctor, you may be assumed to have significant income potential and relatively high job security, so this may mean you won’t need quite such a big deposit.

You will also need to furnish the house (including purchasing washing machines, fridges, cookers etc), pay for house insurance and make sure you have money set aside for maintenance and emergencies. You will probably also want to ensure income protection insurance, to help you continue to pay the mortgage and avoid repossession if you are unable to work due to accident or illness.

Monthly mortgage repayments may also be more expensive than rent, especially if you have a high mortgage.