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We all need somewhere to call home but with the property market crumbling around our ears and the country entering recession, investing in bricks and mortar may seem more like a life sentence than the time-honoured way to get rich slowly.
The news that 11,300 homes were repossessed in the third quarter of 2008, up 12 per cent on the second quarter, was just the latest piece of bad news. Mortgage lending also fell 44 per cent in October compared to the previous year and 2.5 million homeowners could be in negative equity by the end of 2009. Altogether, these are a timely reminder that buying a home isn't necessarily the best option for everyone.
"As a nation, we are a bit obsessed with owning our homes. Around 70 per cent of houses in the UK are owner-occupied, which is a much higher proportion than in the rest of Europe," says Jim Hodgkins, managing director of CreditExpert.
"If you are already a bit stretched, you may find that you are better off delaying your move until you have cleared some of your existing debts and are in a stronger position to finance your new home."
To rent or not to rent
The most obvious alternative to buying your home is renting - but the big question is, will you be any better off without a mortgage? According to Abbey, unless you live in Northern Ireland, West Scotland and the North-East of England, the answer is no - and the gap seems to be widening.
Abbey's June 2008 Rent Vs Buy Index shows that, over 25 years, the cost of a mortgage is around £10,000 less than renting in most parts of the country - whereas six months before the difference was just £5,800. This compares with a differential of £135,000 in favour of home-buyers in 2001.
While these figures take into account the cost of home maintenance and inflation-fuelled rent rises, they do not allow for changing property values or take into account the fact that a buyer ends up with an asset. They also do not show that the picture is changing.
In August this year, the Royal Institution of Chartered Surveyors declared that rents were rising at record pace as would-be buyers who could not get mortgages drove up demand. But towards the end of the year, estate agents reported that rents were falling because so many frustrated owners were taking their homes off the market and becoming landlords instead. So, the real answer as to whether rental is cheaper than purchase must be - it depends.
A fair exchange
Council house tenants and holidaymakers have been doing it successfully for years - and now it seems the credit crunch has opened the door to home-owners swapping their properties.
In the US, an increasing number of people are using house swaps to relocate cost-effectively. Over here, estate agents are using the same principles to manage a game of musical houses for up to three owners at a time.
Not surprisingly the technique works best when all the parties are in the same locality and have flexible views on prospective new homes. Be warned that this is not a way to beat the system - you will still have to pay all the usual costs, such as legal and professional fees and stamp duty.
If you can't beat them, share with them
Desperation is forcing some home-owners into unusual measures to offload their existing homes or, when that's not possible, finance their move. One high-risk strategy is to operate a prize-draw for the property by selling tickets at a few pounds a time - a legally-fraught marketing technique that has left some owners in very hot water.
A safer option being explored by a growing number of would-be sellers is to hire out rooms separately in the style of an old-fashioned boarding house. That way you get rental income from individual tenants and can keep a room or two for yourselves. The downside is that the rental income is taxable, if you rent more than one room for more than £4,250 a year, although there is no capital gains tax to pay if the property is sold within three years.
If you want to move but are not sure whether to take on a mortgage, these tips will help you plan.
• Do your research - find out as much as you can about all your options and work out what it's all going to cost before you make any major decisions.
• Sort out your finances - work out how much you can afford and start looking for ways to cut back on everyday spending.
• Check your credit report regularly - lenders usually look at it when they decide whether to make you an offer and prospective landlords can also ask permission to see it, so it should be up-to-date and reflect your circumstances accurately.
• Be realistic - know what you can afford and don't waste your time targeting deals that are clearly not suitable for your situation. You'll only be disappointed and will leave tracks on your credit report that other lenders will see.
• Save, save, save - moving house has lots of hidden costs so try to save as much as you can for the big day.
• Wait for the perfect home - it's a buyer's market and not expected to bottom out for another year, so don't rush to put down your deposit. Wait to fall in love with a home and tell yourself that it's a place to live, not a speculative investment - that way you're less likely to be disappointed when it doesn't shoot up in value.
• Don't be afraid to haggle - it may not seem very British, but haggling is becoming the norm post credit crunch. Do your research first, keep calm and get a better deal on everything from your new furniture to your rent.
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