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Rent Or Buy - Ask A Mortgage Broker

Mar 3, 2008
Mortgage brokers are more important in today's market than ever before.

Without good advice, losing your home to banks carrying out repossession is a strong possibility and this is where mortgage brokers should come into their own.

Losing a job or the break-up of a relationship are the most common causes of repossession but for many reasons people are finding themselves in a financial situation they are unable to cope with. In 2007, a total of 21,700 homes were repossessed, that's 75 per day, every day, throughout the whole year.

On top of that are the soaring numbers of people who are in the first stages of repossession action. A homeowner has to have missed a total of 6 monthly mortgage payments for proceedings to begin and it's very possible that the stress of this is actually causing the break ups. This, surely, is often down to bad advice or irresponsible homeowners asking for help when they first get into difficulties.

Mortgage brokers are finding the repossessions are only accounting for a small number in the drop of home ownership statistics. Many people, concerned with the unstable property market, are choosing to rent a home instead of buy one.

Home ownership is now at its lowest level for more than a decade with a drop of 83,000 people buying property during last year. This begs the question to mortgage brokers: Is it really worth buying or would our money be better spent renting a home?

The Council of Mortgage Lenders conducted a study in December 2007 on this very subject. They found the average mortgage taken out by homeowners was 80% of a home value at 129,000 pounds With an average mortgage interest rate of 6.05% this puts the repayments on an interest only mortgage at 655 pounds a month and on a repayment mortgage, would leave the borrower 855 pounds out of pocket. On top of this is a deposit of over 32,000 pounds.

Mortgage brokers will tell you a repayment mortgage is constantly reducing the overall debt so for rent/purchase comparisons, an interest only mortgage is the one to consider.

Rents vary in all areas of the country as do house prices but if you consider putting that same deposit total into a high interest savings account and the fact that maintenance on a rental property is the responsibility of the owner, then renting begins to look like an attractive prospect.

However, most mortgage brokers will tell you that renting is dead money. At the end of the day you would have paid out ludicrous amounts of money and just paid someone else's mortgage, with nothing to show for it yourself.

This is backed up by findings from a 2007 report carried out by top mortgage lender, Abbey. They worked out the average cost of buying a home was 437,925 pounds over a 25 year period. To rent over the same amount of time would cost, on average, 443, pounds 736. This leaves a difference of 5,811 pounds in the pockets of home owners.

With the right advice from a mortgage broker you can do your best to secure a good deal that you will be able to cope with for many years, unforeseen circumstances not taken into consideration. And let's face it, if you're going to spend close on half a million pounds, it's nice to have something to show for it.
About the Author
Finance expert Catherine Harvey looks at the assistance a mortgage broker can offer in the rent or buy debate. To find out more please visit http://www.pennypeople.co.uk/
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