Mortgage cheaper than rent?

We live in a flat and our mortgage is about 840 a month. The flat downstairs (pretty much identical) is currently being advertised to let at 1125 per month, so definitely cheaper here.

This. Just the mortgage where I am (SE London) would be cheaper than rent, but as a homeowner you also pay for ground rent, service charge (if leasehold) and maintenance, all in all this makes it more expensive than rent.

This is why so many landlords are selling up in large parts of the country.

It always used to be the case that, even if you couldn't quite cover the rent, you would make a leveraged gain on the value (so buy a £500k house with a £450k interest only mortgage. 5 years later the house is worth £600k so you sell, meaning that you make £100k profit on a £50k investment).

Prices in lots of areas are now falling in real terms so it no longer works.

True here.

My mortgage is £1150pcm, rent of my house is in the region of £1800pcm

I’m selling but had a rental valuation as part of weighing up options.

True in my area, to rent my house I would pay a couple of hundred more, plus my mortgage reduces over time, whereas rent increases.
We bought the house 3 years ago on a high mortgage rate too

A 100% mortgage is probably not cheaper than rent on month 1

But you have more control. You'd expect by month X it might be cheaper and certainly cheaper by the time you come to pay the final month.

So it depends on what value you place on the mortgage and what your situation is long term / short term

We moved from rented. Mortgage was £908. Old house was put up for rent at £1700. Old house 3 bed 1 bath semi. New house 4 bed 2 bath semi. Same area.

But none of this is a fair comparison is it because people are speaking in abstract and from experience! What are you hoping to get out of this thread when you already that the answer is “sometimes paying a mortgage is cheaper than renting; sometimes it isn’t”?

Yes, a year or two. Not long term, and not on average across the full market otherwise, obviously, the whole thing doesn't work.

Most start renting at market rate in area - then a few don't raise.

If they own the property outright and the teannants are good ones it can be worth getting less in rent and having the stablity and covering rapair costs.

Most landlords aren't going to want to make a loss overall though.

I never get MN hatred of landlords. There was a decade we had to save deposit ( no bank of mum and dad for us ) and had to move round country with work for careers. Without landlords willing to rent to us we'd have been fucked.

There's been quite a bit that landlords say have driven them out the market in recent years the results seem to be scarcity of accomodation and rising rents in areas affected. Landlords are providing a service for a profit - while I wish rents were lower and standards higher - I think expecting them to make losses will just mean renting gets even harder and more expensive.

Also rent involves costs and inconvenience

You could have to move every year if landlord decides. rent likely increases. Plus time and money invested looking for new property and packing and moving again and again

I understand why, for comparison only, you say deposit should be excluded (I think most of the people here understand that in theory).
BUT if you're excluding the deposit, then you ALSO have to factor in that the mortgage has an end date whilst the rent does not.... so there's really not a straight comparison in that sense and people look into monthly outgoing costs.

But you are therefore covering the costs in the total "project period" because you might make some losses, but you'll have the equity to cover said losses. So to your own example, you aren't being realistic.

In terms of considering the deposit.
How much is the deposit, say 10%, going up compared to your capacity to save for a 10 % deposit of what the house is worth in two years.
Can your saving compete with how much the value of the house goes up (and also keep paying an increase in rent)?

Also, if you invested the exact same deposit and continued to pay rent (and add savings to your invested deposit if you can), would it end up to your benefit in ten years?

It is interesting. I prefer the security of paying to eventually own property.

I have read that older people on the aged pension are better off if they own their own home.

You’re posing an essentially unanswerable question here.

mortgages are not a set monthly amount, or “rate”, in the same way a rent payment is.

A mortgage loan is for the amount of the property than you cannot afford upfront. That could be anything from 95% to 1% (theoretically) of the property value. That will affect how much your mortgage payment is.

You get to choose the term of the mortgage (within reason) so you could choose anything from ten years (large monthly payments) to 35 years (potentially tiny monthly payments).

Once you’ve had the property for a few years you’re likely to remortgage, be in a better position because you owe less now and get yourself onto a cheaper deal.

If you’re struggling on a monthly basis, you can call up to extend your term and thus lower your monthly payment.

After 20-39 years, your mortgage will be paid off and your outgoings reduce again, AND you own a valuable asset. The cost to you was just servicing the loan throughout that time. The rest was going into your asset.

Rent is based on the value of the property and is ongoing into perpetuity. It will never reduce like a mortgage it will only ever increase with market rates. You don’t obtain an asset at the end of it.

So overall it’s very possible to have a mortgage lower than rental rates on your property because of the flexibility of being able to adjust your mortgage term to make it longer for the early years of ownership. It WILL reduce in the future as well because you won’t owe as much AND in ten years time you’ll owe less money, earn more money, and the value of your property will have increased.

So yes. I’d say a mortgage is cheaper in the long run. But “per month” you could make a mortgage cost more than rent depending how you have it set up.

Nope.

You can't directly compare rent to a mortgage.

You compare cost of housing. So rent != mortgage costs. It equals your interest portion of a mortgage.

It’s definitely true for us. Renting a 3 bed around here is £1500+ a month. - our mortgage is just under £700 a month. We did have a really good deposit of about 15% though, maybe a bit more I can’t remember exactly.

But you haven't explained it.

It really has broadly always been the case that a mortgage is cheaper than renting in comparable properties.

My anecdata evidence for this, as well as endless general observations. 30 years ago we bought a 2 bed terrace with a 5% deposit. The mortgage was £180 pm.

Similar houses on the same street were £300-350 to rent, which we couldn't afford. So we saved up about £2500 over a few months while living with parents for the £1600 deposit and fees.

Its surprising if you've been in the business for 21 years that you think otherwise. There must be something very atypical about the properties you deal with.

What landlords in any sort of sane mind are there that are happy to make a loss on renting out property?

BTL landlords who assume that house price inflation will give them a windfall when they sell up

DD is renting a house for 800 per month. The house is worth 130k . If she got a 100% mortgage at 4.5% over 25 years she'd be paying 722 a month. So on that basis mortgage is cheaper....not forgetting she'd own the house at the end of those 25 years.

Losing money is an end goal?

Property isn't a lose-leader. If you aren't charging rent to cover a BTL mortgage, you are doing it wrong.

Well the mortgage payments may be lower but you then have other costs - maintenance and repairs etc and take on more risk. However, you also build up equity in the house so overall it is hard to fully compare. Also rental properties often come furnished.

but yes in lots of places mortgage payments are lower as the rental needs to cover the mortgage of the landlord plus other costs - rental agency fees, landlord insurance, repairs and maintenance, maybe furniture.

True for me, my mortgage is still cheaper than the rent I was paying 6 years ago, blows my mind.