Mortgage cheaper than rent?

I have 4 bed detached near. Rental is bit bigger actually. Assuming the rental was bought with some developer deals on. These are relatively new builds.
Rent - 1700
Buy with 10%, 4.5 rate - 1625
Then adding costs of owning house... Yeah, OP wasn't wrong really. Unless one has big deposit or buys on a good deal.

Flats in the same building 2 bed
Rent 1000
Buy 750 BUT then you have 2k service charge (for what for on that ones, ok it includes building insurance, but man...), 100 ground rent + usual owning property costs

Oddly the costs on these are quite the same at the end, but yes, you are payong off your own

I understand what you are trying to achieve.
The fairest way to compare would be if your mortgaged the property TODAY at 100% of current market value, and compared it to the rent you would get pcm. However, in that equation you are then ignoring the length of the mortgage vs the length of a tenancy and the inevitable changes YoY.

For example, when I purchased my house, I was paying £672pcm (25yr term) mortgage and a further £198 pcm on a seperate loan that was my deposit (5yrs terms). I also had insurances for another roughly £50. So my pcm cost was £920 for the first 5 yrs. I could have rented the property for £1200.

However after Yr 5, my mortgage rate changed and the 5 Yr loan was gone. I was then paying £1102pcm. I could have rented the property for £2000+. But the value of my property increased in that time so perhaps my mortgage would have increased if I relocked at 100%.

But you can't always look like for like.. it doesn't make true sense. You can really only compare was the incurred / lost cost is at a point in time.

Well also, if you’d invested the amount you’d saved for deposit you’d ve making a decent income off that which would counteract the rent, and no maintenance costs

It’s quite clearly because rents go up, usually ever year, whereas the amount you borrowed just goes down and the mortgage - not accounting for interest rate changes, which can and do go up and down - stays the same.

Maybe on day 1, mortgage might be £2k and rent £1.9k but fast forward three years down the line and the mortgage is still £2k and the rent is now £2.05k. Fast forward ten or fifteen years and the mortgage is still £2k (with a now favourable LTV which protects the owner somewhat from interest rate shocks) and rent is £2.6k.

This is exactly why you end up in the position where people love to moan/ brag “I wouldn’t be able to afford my house were I buying/ renting now..!”

It depends to start with on exact circumstances. A Landlord might be making a return on capital as well as rent, so their assessment will look at both potential return streams. The point I would emphasise though is if you borrow x amount, over time the real repayment on a mortgage will be impacted by inflation. Over five years your mortgage payments should be broadly the same. Rent on the other hand has a really nasty habit of rising sharply.

I rent out an extension of my house and that pays for the full mortgage of the house, that's in London.
In my experience, for London, that's is definitely true in most cases.

My house would be £2K to rent based on nearby houses. Our mortgage is £950. When we first got it pre-Truss we were renting a 2 bed flat for £900 a month, and the mortgage on our 3 bed house was £750. To rent an equivalent house was about £1500.

So much affects it though. We went from 75% to 60% LTV quickly because it was a do-uper and we are in the very fortunate position to be able to overpay. We got a 25 year mortgage so obviously a shorter mortgage more expensive, longer would have taken it down more.

In the 2000s and 2010s some LLs definitely were prepared to accept an initial monthly loss in the short term, because they were expecting rent increases and capital gains in the long term.

My mortgage is £1180 for a 4 bed detached whereas the tiny 3 bed next door is rented out for £1400 a month. Rent is more than mortgage round here for 2-3 beds due to high demand and low stock.

Why are you speaking in these cryptic teasing posts @limeandwater ?

Is it to try and sound knowledgeable?! 😅😂

Does it depend on when someone bought? We bought our house in 2016 and our mortgage is £579 (+£110 pm of rates) where the equivalent rent is £1,000.

Its usually the long game with mortgage being cheaper i.e. rent will be £1,500 by the time we retire but the monthly mortgage payment will be £0 (hopefully!)

If the system wants to assess risk, why is it happy to bank on an individual paying someone else’s mortgage (in many cases) on a temporary basis rather than invest in property that will be cheaper on that person’s pocket? I’ve never understood it.

My wife's youngest was working for NMW & paying about £500/month for a one bedroom flat. He rented for five years paying about £30,000 in total because he couldn't get a mortgage. He moved to a higher paid job & was then able to buy his own much nicer one bedroom flat with a 10% deposit & is now paying around the same in mortgage repayments as he was in rent.

Rent will always be at today's market prices. A mortgage becomes relatively smaller over the years.

Those saying 'my mortgage is £350' are unlikely to have taken out that mortgage in the last year.

I found the initial costs of owning higher than renting but that changes year on year.

Why is it "the only fair way to work it out" if it doesn't represent real-world realities?

That's like saying "If you take the US out of the equation, which global power" etc...

It makes it a completely pointless exercise if you do that.

Because people don't get mortgages in the UK without a deposit.

Have you actually seen the figures for what people put down as a deposit in the UK?

It's tens of thousands of pounds. And they do it to get the preferential monthly payments so that they can meet the affordability ratings.

So I'm sorry, but your whole exercise here is COMPLETELY pointless if you're trying to take out the one factor that is the engine driving mortgage approvals.

Like I said - the number of people who get 100% mortgages aren't even a statistic that can be reported on, the figure doesn't exist in statistics.

A couple of things that are being ignored here.

Firstly the long term maintenance cost of a house is around 2% of the value. Spending any less than that will reduce the value of the property in the long run.

Secondly, the market is currently in a very different position than it has been for the past generation. Buyers could easily lose money on recent purchases whereas renters are protected from that.

No, but you need to include all costs for a fair comparison. If someone buys with a 10% deposit of £30k that's £30k that they no longer have in the bank, so that is a cost. They could be investing that money elsewhere. One way to account for it is to say what if it was a 100% mortgage.

To make it clearer; I bought with a 40% deposit. So that drove down my monthly mortgage cost a lot. Ignoring that wouldn't make sense.

Our mortgage is so much less than paying rent each month. About 50% less. It used to piss me off for years when I paid rent at how much I was paying whilst trying to save a deposit for a mortgage. Thinking if I wasn’t paying so much rent I would have a deposit so much sooner and my quality of life would be improved so much. Most people I know who share this kind of info are paying an awful lot less with a mortgage.

In the long term getting a mortgage will generally be cheaper especially if you start young and get lots of years of living in the house with just the maintenance after you pay off the mortgage.

I'm sorry, what?

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

Of course a mortgage is cheaper, even if it's not cheaper lol if that makes sense.

For example, say both are £2k per month

£2k mortgage X 25 years = £600,000
£2k rent X 55 years = £1,320,000

there are a number of people who state that a mortgage is often cheaper than the rent.

For our first house it was about the same in the early years till an insuarance payout due to DH being in accident not his fault meant we could pay a lump sum off then it went down and felt more managable. It also cost a fortune in fixing up.

We currently have a fixed repayment mortage and pay just under what we starting rate was decade ago - so overpay each month. We pay 550 a month - to rent a 3 bed in same area - we have a four but they are rare - is currently £1200 - 1300 .

However if we were buying now this house would be 100,000 more to buy than we paid.

I pushed to buy as neede stablity as kids started school and becuase I didn't want to be paying rent out of a pension. It wasn't easy as DH work area there lots of movements across country which is a pain. There are upkeep costs and maintance costs though so swings and roundabouts.