Mortgage cheaper than rent?

Anyone else thankful that OP is not their landlord? Some very strange emotions-driven thinking and a lack of basic understanding that I feel probably doesn’t translate to being particularly well suited to either the people side or the financial side

We had a shared ownership property. It was owner 50-50 with a housing association. 50% mortgage - 50% rent.

When we started out we paid less for the rent than the mortgage. The rent was linked to inflation - so 7 years down the line we ended up paying more for the rent than the mortage.

At this point we thought it crazy. So we tried to buy the other half of the house. Our income had more than doubled since we'd bought. The house had reduced in value overall too. This had wiped out our equity, though we had some savings.

The Building Society looked at our numbers and thought it was nuts - they couldn't offer the mortgage as we only had 10% to put down. They offered 10% deposit mortgages to first time buyers only - but despite it being our first house we didn't qualify. We had to find another 5% from somewhere else.

In the end we borrowed it off parents because it was absoluetely insane to be paying more per month on 50% than if we owned the entire house!

The thing is other houses on the estate were HA only - and had similar terms on the mortgage. So whilst our house price had declined in that time the rents had increased. And still continue to increase year on year. They absoluetely were paying more in rent than we were paying in mortgage.

I know how much houses like ours on that estate have subsequent increased since. Given that the rent increases in a compound effect it will be much bigger than the increase on an initial mortgage as a first time buyer - on similar houses.

Most of the houses which were shared ownership have been sold on - probably as a result of this madness. Very few remain shared ownership - they are now fully owned because the HA couldn't resell them on the original terms as they were more than mortgaging the full house! The HA struggled to get tenants at one point for the rental only properties despite the area being desireable because the terms were poor.

The whole thing is absoluetely insane. The HA properties were supposed to offer an affordable alternative to lower income families. What actually happened was quite the opposite and pretty scandalous. In theory the HA was supposed to be not for profit. In reality it was pissing money up the wall. The staff were a whole new level of shit and they had more people defaulting (which the paying tenants had to cover) because they inflated rents so much. I have no words for how badly the whole thing was run and managed.

No words can describe how dreadful this Housing Association was and probably still is.

They would be better off saving any equity they have (if they downsize) for the repairs and maintenance on the smaller property. Not squandering it on 'travelling the world.'

People are generally never given notice for social housing though. The vast majority are lifetime tenancies.

People are generally never given notice for social housing though. The vast majority are lifetime tenancies.

Houses in my area to rent are £800-1000. My mortgage is £440. I wouldn’t be able to afford to rent.

If you’re really a landlord, you’d know how to spell “tenant”.

On an individual level maybe not, but when it comes to the wider economy absolutely these are relevant questions.

For example, it astounds me how people are juat looking at the monthly mortgage bill but ignoring the opportunity cost of the deposit in the buying cost.

Not in REAL LIFE, which is where the majority of us live OP.

Well for us 1.5 bed flat (the landlord called it a 2 bed, you weren't fitting anything more than a cot in the 2nd bedroom we used it as an office) = £1,500 per month

3 bed house with a garden = £700 per month on a mortgage

Difference in area is approximately 10 minutes apart so it was much cheaper.

Of course there's costs that come with owning a home but overall it's been cheaper for us.

On the other hand, they could sell their property and buy something smaller, creating a rather nice nest egg with which to travel the world.

Your OP was perfectly clear.

You’re just wrong - and that really is ok!

But again, this is completely MEANINGLESS.

It doesn’t transfer to the real world. Your question is pointless as it has no basis in real life.

... rent is always higher than rent?

So, when you pay rent it goes into somebody else's pocket. It is 'dead money'. If you are paying a mortgage, the money you pay go towards building equity in the property. Even if you are on a interest only mortgage, you benefit from the rise in the property's value.

Of course, the property market could crash, which wouldn't be very pretty, but even then, everyone's in the same boat, and you haven't lost anything by spending your money on a mortgage rather than in rent.

A nice two bed mid terrace down the road from me is up for £1200 a month. I live in a nice four bed end of terrace. My mortgage is £720.

If I were to buy it at its market value now with a 10% deposit I think it would be close. But within just a few years that would change. I was paying £1350 when I moved in eight years ago, and even if I hadn’t remortgaged onto a better rate, I think we can safely say it would be rented out for more than £1350 now.

Yes but almost every purchaser taking out a mortgage needs a deposit. The point you are trying to make is meaningless and doesn’t transfer to the real world.

Rent is almost always higher than rent.

It really does 😂

But it does, otherwise what’s the point 😂

You sound very naive OP.

Have you had many mortgages and rented lots of properties?

I’ve worked in the property sale industry for 22 years and I’d say, for the vast majority of cases, rent is almost always higher than mortgage payments on that same property.

My house is five beds. In my area rent would be around £2,500 per month.

Our mortgage, for somewhere around £250,000, is £1,400.

I’d say my mortgage is cheaper than the rent!

In the case of one of my DC, they were paying £1100 in rent. House was too small .
They got into a 3 bed shared ownership for £1100 a month, roughly equal between rent and mortgage
The house they left was immediately advertised for £1400 a month rent.

Easily true!
3-bed ex-council semis in my street are usually let for approx £1800 pcm.
Our neighbours bought the house they had been renting a few months ago and their mortgage is now £790 pcm.
This is a suburb of a city in the SW.
The size of the deposit and the length of the mortgage term makes a big difference to monthly repayments. And is it like for like? We moved from a tiny city studio flat (rent: £450 pcm) when we bought one of the aforementioned semis twenty years ago and paid £385 pcm for our mortgage.

I guess it must depend on the area. For us to get a mortgage in the very expensive area that we live in, it would be around £1000 more a month and we’d get a lot less for our money than what we have now in our lovely rental property. We really saw some absolute disgusting dives when we looked into buying, and like I said, it would’ve been around £1000 more than our current rent

We used to rent with a plan to buy further down the line with a bigger deposit. But then we needed somewhere bigger with another on the way and rent was sooooo expensive so we bought and yes we would be paying almost double to rent similar size near by !