According to a new study from Barclays released today, stepping onto the property ladder has enormous financial benefits over an adult’s lifetime. Owning a home instead of renting will save £194,000 over a fifty year period. This is before the value of the property the buyer will own is accounted for.
The total cost of mortgage repayments, maintenance, and other costs associated with home ownership add up to £429,000 over fifty years. This is based on an adult buying the property in his early thirties. Renting a similar home over the same period would cost £623,000.
The study comes as Barclays launches a new mortgage scheme which is designed to help those to get on the property ladder, called Helpful Start. This mortgage scheme incorporates a Family Affordability Plan which enables parents to help their children with loan affordability.
The Family Affordability Plan allows parents to help their children get on or move up the property ladder without being put on the property deeds. Both incomes are used to calculate the mortgage amount and the scheme is available across all mortgage rates, including NewBuy.
Being a tenant is initially cheaper than being a home owner as mortgage repayments tend to be higher than rental costs. However, rents inflate over time. Home buyers also have one-off costs at the outset such as the deposit, stamp duty and solicitor’s costs. They also have to pay for maintenance and insurance for the home. However, at the end of the mortgage period the buyer will also own his home outright, which increases the advantage of owning over renting to an average £595,000.
Andy Gray, Head of Mortgages at Barclays commented:
“The cost of stepping on or moving up the housing ladder can be a big barrier for many, but the long term benefits hugely exceed the initial expense. Not only will you save money by becoming an owner-occupier, but you will also own a substantial asset once your mortgage is paid off, providing financial security for your old age. Those who choose to rent permanently will have to pay their landlord out of their pension income, while owner-occupiers enjoy minimal housing costs.”
Over a fifty year span, roughly 50% of the cost of occupying your own home is made up of mortgage payments. This makes up £210,000 of the £429,000. Two fifths of that figure is interest cost, with the rest being capital repayment. The second largest outlay is maintenance, which costs £170,000. The initial deposit is the third biggest cost. The rest of the figure is made up of insurance, stamp duty and other costs associated with the house purchase.
There are regional differences shown in the study. In London, buying a home would save £396,000 compared to renting over a fifty year period. This is followed by the North West, where the difference between owning and renting is £300,000. The lowest savings are found in the South West, where owning a home would save £34,000 compared to renting.
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