Homeowner or Tenant?

Seems like the continual boom of the “Buy To Let” trend or the struggles first time buyers face continues to be one of the main topics in the real estate world.

If you are not renting, you are buying. If you are buying then you are either doing so for your own use or to have your property rented out which brings us back to the Buy To Let trend.

Either way, the cycle continues to be the same. The only difference is that those who were once homeowners could now be tenants while those who were tenants could now be homeowners..and the cycle will most probably continue as well.

With all that is currently going on and with the economy now being in the state it is in, the question posed is not whether one should buy or rent rather, which is better, to be a homeowner or tenant?

Of course if you have the means and a huge backing of funds, then this doesn’t really apply to you. But for those who are facing uncertainty and are wondering which is the better option then hopefully, this update will help give you a better understanding of both worlds.

First up – Being A Homeowner – Pros and cons –

There’s a different feeling in being able to be the master of your own domain. To do whatever, whenever, however you want without first asking for permission to do so. The knowledge that you are safe and that at the end of the day you have a guaranteed place to return to is comforting. However with that said, its not always rosy for homeowners. You are responsible to maintain your property in every area.

You have to purchase a long list of insurance to cover your home in case an unpredicted mishap occurs. You have to pay back the mortgage, pay for the renovations, pay for the extra touches you want to add on and of course that is just the house. There’s also the bills, the car loans, the health insurance and if you have a family, then the list goes on and on and on…

THE PROS -

- Freedom. The ability to make any changes in your home whenever you want. Want a colour for your house, go on right ahead and paint it on..it is your house and no one can stop you.

- Tax Benefits. As a homeowner, you get to write off the interest you pay to the mortgage company each month. In addition to being able to deduct the interest you pay on you home loan, you can also deduct the cost of your homeowners’ insurance and property taxes.

- Equity. Each month that you make your mortgage payment, a little bit of the money goes toward the principal balance. After 30 years, if you make all of you payments as agreed, the property will be your’s free and clear. It’s also nice that most home loans allow you to make additional payments towards the principal allowing you to pay less in interest and own your home sooner.

THE CONS –

- Freedom. Although it was listed as a pro, this can also be a con. As a homeowner, you can’t just pack up and decide to move without figuring out what to do with your house. If you choose to sell your home, you have to deal with your house possibly sitting on the market forever, losing money if your home has decreased in value or having to come out of pocket to close the deal if you do sell the home. If selling your home is not a favorable financial option, you find yourself becoming a landlord.

- Maintenance. If you are the homeowner, you are your own landlord. When the toilet backs up or the water heater goes out, your are responsible for the repairs. Remember that home maintenance fund mentioned earlier? Here is where it comes in handy.

- HOA. If you live in a newer subdivision, you probably have a homeowners’ association. The responsibility of the homeowners’ association is to keep the subdivision looking nice and helping to maintain property values. Although you can do what you want on the inside of your home, the homeowners’ association usually has the final say on what happens outside your home. Usually, there are rules governing paint colors, grass height, lawn decorations and rental restrictions.

- Higher Expenses. Buying a home usually involves spending more money. If you are buying a home that’s larger than your rented place, your monthly expenses will probably increase. Having more space means higher utility bills.

Renting a property -

Being a tenant has its ups and downs as well. The tenant is not as free to do as they please compared to homeowners. They are restricted to certain things and have to continually live under the shadow of their landlords. Then there is the case of renting a property with a landlord from..well you know where..

However, unlike homeowners, tenants are not responsible for the maintenance of the rented property, not responsible for insuring the said property and will not face the messy, long steps needed to be taken if the property is to be sold.

The Pros –

- When something goes wrong with the property it doesn’t cost you anything to get it fixed

- At a time when it is looking like we’ve reached the peak of the present housing boom, you can hedge your bets on where the market is going by renting

- You are immune to negative equity

- Renting a property is cheaper than paying the interest on a mortgage at todays prices

- You are unaffected by increases in the base rate for the duration of your rental agreement

- You can turn on a sixpence when it is time to re-enter the housing market

- Rent is generally cheaper than an interest only mortgage on a similar property

- You avoid taking on someone else’s debt by not buying their MEWed up property

- Buldings insurance is covered by the landlord

- High service charges on flats are paid by the landlord

- If you have to move due to work commitments then it’s easier to give notice on a rental property than to sell a property.

The Cons –

- You can’t alter the house and/or garden without the landlord/lady approval. (decoration, etc)

- Can’t save on energy bills by making the house more energy efficient (cavity wall insulation, loft insulation etc..)

- You don’t own the house at the end of payments

- You have to find another place to live when you are given notice by your landlord

- You may not be allowed pets in a rented property

- You will not benefit if there is any appreciation in property value

- Rental prices might increase and unless you decide to move out, you have no other choice but to pay up.

So there you have it. The pros and cons of being a homeowner or a tenant. As the saying goes, “there is two sides to every coin”. The same could be said in owning a property or renting one. At the end of the day, being smart and knowing your financial standing and “who” you prefer to be will help you make a precise decision.

Source Google Images

Repossession is a term used to describe a “financial institution” that allows you to take back an object or property that was used as collateral, rented or leased. It is a “self help” action in which the rightful owner of an object or property is able to take back what belongs to them without invoking court proceedings & it is also up to them to do as they seem fit with it.

Repossession is usually carried out in accordance with a purchase contract or credit contract, in which the consumer agrees that the seller, “the lienholder” may repossess the object if the signers are past the grace period which is a 30 day time frame in which payments have not been made. However, most banks or home owners will usually wait until mortgage arrears reach 4-6 months before looking to take such action.

There have been cases where owners who are contemplating on repossessing their properties find themselves up against tenants who refuse to move & vacate and due to this, owners are forced to acquire the help of repossession agent to help repossess their properties on their behalf.

WHAT CAUSES REPOSSESSION?

Repossession occurs when the tenant has defaulted in payments which causes the home owners to take the necessary measures. Most of the home owners see repossession as a last resort therefore they will not hesitate to take harsh action and repossess the property if the tenant continues to have mortgage arrears.

WHO IS RESPONSIBLE FOR THE WHOLE PROCESS?

Home repossession is normally undertaken by a bank or building society who hold the first charge on a borrower’s house. Repossession can also be carried out by any other party who has charges on the property and by anyone that has a Charging Order secured following a County Court Judgment, although this is extremely rare. Building Societies are entitled to seek repossession action if the loan is 2 or more months in arrears.

WHAT ARE THE STEPS / STAGES THAT IS INVOLVED IN REPOSSESSING YOUR PROPERTY?

1) The first stage of the repossession process involves the home owners writing to the respective tenants asking you to pay your mortgage arrears or to arrange to pay the arrears over a certain time period. If they do not receive a response back or are unhappy with the response given, a second letter is given, warning the respective tenants that they intend to take them to court. This letter is called a Notice of Intended Prosecution. They can then apply to your local court for a possession order.
Ignoring these letters it unwise as these are the stages that proves to be beneficial to tenants to work out whatever misunderstanding and come to an agreement with the home owners.

2) The second stage is when the home owner has made an application for possession to the court, the court will write to the tenant with the basic details of the home owners claim and a date when the case will be heard in court. The letter will include a reply form, it is very important that you complete and return this form. If you are in the process of selling your home to repay your mortgage you should advise the courts of this – they may be able to delay the repossession court hearing.

3) The third stage is the “Court Hearing” where the only people present will be the judge, the home owners solicitor and the tenant. The judge will listen to the evidence from the solicitor and listen to what you have to say before making any decisions. The judge will give you the chance to pay back the arrears, to suggest an alternative way to repay your mortgage. The court sees a repossession as a last resort so you should explore all your options.

After all has been said done the judge will then decide what should the next step be. There are four measures that can be taken such as –

* Strike-it-out
Meaning the court will halt all actions on grounds that your lender has no case against you. This is only possible if you have managed to settle all extending payments.

* Adjourn
Meaning your case has been delayed, usually 4 weeks if you are able to prove to the judge that you are able to pay back what is due.

* A Suspended Repossession Order
An agreement that is reached between you and the mortgage lender to repay the arrears, usually by installments. However this is still a type of repossession order, so if you do not keep to your agreed payment plan the lender can obtain a bailiffs warrant to evict you without any further court hearings.

* A Possession Order
This means that your house is repossessed and a set date for eviction, this is typically a 28 day or a 56 day possession order, after which point if you have not left the property the lender can apply to the court for a bailiffs warrant.

The last stage is the ” Repossession ” stage itself whereby the judge decides that the property is to be repossessed and the court order sets a date for you to leave. Failure to do so will result in landlords applying to the court for a bailiff’s warrant. The bailiffs will write to tell you when the eviction is to take place, and when they come, they can remove you from your home. Please note: There is no negotiating with bailiffs; they just do their job and evict the debtor.

Source: Google images

If you own a house, then you will need home insurance. Your home is likely to be the single largest financial investment you make in your lifetime and you need to protect it against possible disasters that may affect both your property and possessions. Home insurance offers a financial safety net, buying you security in the knowledge that you are covered in the event of a number of scenarios. However, not all insurance policies were created equal and it is worth taking the time out to compare home insurance policies and premiums to ensure that you get the deal that suits you best.

Types of Home Insurance

Broadly speaking, home insurance falls into two main categories: buildings insurance and contents insurance. Buildings insurance covers the actual permanent structures of your home. It offers protection against structural damage caused by conditions such as flood, fire and criminal damage. Some policies also extend the protection to certain permanent fixtures within the dwelling such as fitted kitchens, baths and sinks. If you are taking out a mortgage, you’ll find that most lenders insist on buildings insurance to protect their investment before they will approve a mortgage application.

Contents insurance is used to protect your possessions against scenarios such as fire and theft. While buildings insurance is mandatory if you’re taking out a mortgage, contents insurance is usually left up to the owner. However, it would be prudent to take a policy of this sort out and be prepared for the unexpected. The sum total of your belongings and items such as computers, furniture and books, can swiftly add up. Once again, there are often differences between the policies offered, so it is worth taking the time to compare home insurance policies of this type.

Shopping Around

While there are certainly differences between policies, another benefit of shopping around is that you can find the deal that suits you in both financial and practical terms. The home insurance market is an
extremely competitive one and providers are always keeping an eye on the opposition to ensure that
their own policies are more attractive. Consequently, you are likely to find that different policies offer different perks and incentives, as well as different price tags. Finding a good deal may also give you a degree of leverage with a preferred provider. By letting them know that you can get a similar policy at a lower price, you may be able to haggle your way to a better deal.

Shopping around is a relatively simple process. Although the Internet is full of providers and deals, there are a number of online comparison websites that can help. These sites are independent and collate the data from home insurance providers, presenting them in table form so you can see the main differences between policies at a glance. Many of these sites offer links directly to the pages of providers’ websites so that once you have weighed up the pros and cons, you can contact them direct. While there, it is also worth investigating the small print to check that the policy you want does exactly what it says it does.

I has become essential to buy insurance cover for your investment otherwise might find yourself paying out on any kind of compensation claim in regards to your property.

There are really two types of Landlord Insurance cover that you need to think about when you look into getting a quote. The first is Landlord Buildings Insurance and the second is Landlord Contents Insurance.

Landlord Buildings Insurance will cover you for damage to the buildings of your property. This would include damage from events such as a fire or flood. The insurance is there to protect the actual structure of your property from damage that might happen to it.

This type of insurance is important for a number of reasons. Accidents happen, and fires and floods can damage your property to the extent that it is unliveable. Your property is probably an investment and you will lose a lot of money due to tenants not being able to live there or the value of your investment falling.

Being a Landlord you also probably don’t live in your property. Sometimes in these situations it’s difficult to see damage happening to your property which could be occurring slowly over time, and by the time you see it it’s too late to do anything about it.

Permanent fixtures like a fitted kitchen are often included in your Landlord Buildings Insurance so you often don’t have to take out a separate type of cover for that. If you aren’t sure what you’re covered for make sure you speak to an insurance professional when buying your insurance who will be able to give you the correct advice as to what is and isn’t covered.

Landlord Contents Insurance is there to protect your property if you furnish it for your tenants. If your furnishings are damaged you would normally be able to make a claim for the cost of the damage.

Landlord Insurance is vitally important to anyone who owns a buy to let property. Make sure that you get the cover that is right for your property and your individual circumstances.