Mortgage cheaper than rent?

It's comparing apples with orange trees, absolute nonsense comparison. A mortgage can be split over 5 years or 40, can be IO or capital&interest, might be fixed or variable in interest rate and therefore repayments. The reality is people decide what they can afford per month and define their mortgage from there; given house ownership means more costs, it's sensible to pay a little less for mortgage than you could for rent. And that is how mortgages end up cheaper than rent.

If you consider renting forever takes you to the end of your life, renting will generally cost more than buying will over a lifetime wherever you live. Thats the only comparison which really makes any sense.

Yes that’s true. And if you factor that in you also need to factor in that you need a substantial deposit when purchasing a house, far greater than a rental deposit. And then on the other side you need to factor in that a portion of your mortgage payments is basically paying yourself in the form of equity. And that your mortgage is likely to go down over the term of it, whereas rent will always go up. And also that you will only pay your mortgage until you own the house (and you have an asset at the end of it), whereas if you rent you will be paying forever (and no asset). And that houses tend to increase in value.
Which is why it’s an entirely pointless comparison to make, as you are not comparing like for like and there are too many considerations to make it meaningful.

Isn't it recommended that you save 1% of a property's value each year for maintenance? You might no spend it all in one year but on average you would. Which would be factored into rent, not mortgage.

OP do you understand what a market is?
The market value directly relates to landlords and their underlying costs. It's not a number plucked out of the air by the market gods.

when comparing the two, you really do need to factor in the cost of maintaining a home. For example? My house desperately needs new windows. I’ve looked into the cost and I’m looking at £6k if I’m lucky. There are a bunch of other things that need doing that I simply don’t have the money to pay for at the moment. If I was a tenant, I wouldn’t have to pay for these costs. The landlord would.

Rent would be about 3 times my mortgage where I live

Our mortgage is about £400 cheaper than rent for the same property in the same area. I’ve literally never come across anyone who pays more for a mortgage than they would for rent in the same property. Apart from social housing but that isn’t really ever like for like.

Same for any business - you don't just look at the income - you need to look at short term and long term, fixed and variable costs. To be fair we do the same with our household income - we have a maintenance budget - always have - any landlord who doesn't budget for annual maintenance when they invest and decide on rental income is not running a business in the conventional sense - I'm sure there are plenty who do it this way though.

I bought a house last year in the same area where I’d been renting, and my mortgage is actually higher than what I was paying in rent, so it’s not always the case that mortgages are cheaper. The house is slightly bigger than our previous place, but not by much. We also put down a fairly large deposit, but we’re in a desirable area with high property prices. Mortgage rates are also higher than they have been previously so it's more likely you'll have higher repayments these days.

You pass the costs on when doing the initial calculations for the rental.

I have had investment flats over the years (don’t any more). I always weighed up maintenance costs at the outset. If the numbers didn’t stack up and I couldn’t cover the maintenance costs out of the forecast rent, then I didn’t buy the property. There was always more than enough cash built up in the property accounts to cover things like replacing the boiler, full redecoration every 5 years or so etc.

For the same house in terms of size and location? I’d have thought fairly obviously rent would be more expensive because you’re potentially covering the landlord’s mortgage, plus landlord’s costs (insurance, management fees etc), plus some profit for them.

@limeandwater It really depends on area, and your own situation. For many, it's true that mortgage is cheaper.

Of course, it's not static. Rents go up whereas your mortgage is within your control and you'll soon find that rents keeps going up and up and you end up having more equity and can negotiate better mortgage deals. Perhaps even an interest-free one (you would need to have plans how you will pay it off, either downsizing or other means).

I was in that lucky generation that could get a 95% mortgage in the 1990s, think it was 6-7% interest rate. Not cheaper but about the same as renting. But I was happier paying 'myself' as it were as the equity growns.

This is not a boast, but just to show how important owning is. We now live in a 7-bed period house with a large garden with a value of around £2.8M. We have a mortage of around £800k on it (because we have bought another property that we're letting out etc) with a mortgage (we were lucky to grab it at the time) of around £1,700 per month. For that around here, you'd be lucky to get a 2-bed cottage!!

Costs are related to rental income when deciding whether or not to invest in a rental flat! Of course they are!

If Person Y’s buy to let mortgage offer is only just covered by the rental income with not enough surplus after maintenance costs to generate an attractive yield then it’s not a good investment and they should either not buy it or sell it if they became an accidental landlord.

Person X needs to weigh up the yield, after maintenance costs, against alternative investment options for their significant amount of cash tied up in the rental property.

It's cheaper to buy most things than rent them due to the transfer of risk and capital .

But surely when deciding to buy a btl (or retain one if an accidental landlord) you look at your mortgage costs, maintenance costs etc vs the market value of the rent to decide whether or not it’s a good investment?

The price of replacing the boiler every now and again, or giving the place a bit of an overhaul every few years is factored into those initial calculations and therefore already covered by the rent over a period of time.

Yes, mortgages are cheaper per month round here (Kent) compared to renting the same sized house/flat. Obviously you need a deposit to buy a flat/house though, and you're liable for your own repairs.

Our mortgage on a three bed house is less (monthly) than a one bed flat that is up for rent in our village.

When did you take out your mortgage?

My mortgage on a four bed semi is £750 a month. To rent at that price in our village you would get a two bed flat for £800 a month

It's a bit of a shame that you take this stance, and your reaction regarding 'squandering' feels almost like a personal attack. It is certainly pretty aggressive.

I really do hope that they can do something nice together when they retire, and perhaps fulfil a long held dream.

My mortgage is 500 and to rent similar would be about 3 times that. Definitely cheaper each month to mortgage I think.

Of course it is, because otherwise the entire business model doesn't work.

But OP is just on a complete wind-up anyway.