Rent or mortgage does it matter??

[Catty1720]

Me and my partner rent a lovely 2 bed apartment for 825 per month. We comfortably pay rent and bills between us and have enough left for the month.
He’s older than me (47) I’m 31.
We don’t have money for a deposit as we had to use savings when I became sick and needed time off to recover. My partner never ever begrudged this as a lot of the savings were his. We live in a town near to London so it is pricey to buy (or in my opinion it is)
I worry we don’t have a home of our own and probably due to ages never will. I save money for our DD so she will have something when she’s older it won’t be a lot but something.
Should I worry we won’t ever have a home of our own?? Am I unreasonable to stress over it? Would you say There’s pros and cons for both?

There is no comparison - when you have a mortgage, you own something and eventually (hopefully) you'll pay it off and own the whole thing. Renting, you have nothin, and you're always at the mercy of your landlord (and there are some shockers out there).
Obviously owning has big drawbacks - responsibility, repairs etc.
But I would always be trying to save up to buy.

[quote NeedCoffeeToSurvive]@Sway19 I am clueless about property ownership, buying/selling a property and mortgages because I don't own a property and don't have experience of this. I moved in December, from one rental to another, and it cost me probably around £2500. Like I said if we owned this property, I'd probably sell instead of fixing the issues because the property has a low value already, the issues could cost thousands to fix and won't actually add any value to the property.[/quote]

@NeedCoffeeToSurvive

Completely understand that you're not familiar with buying & selling costs when you've never done it. It often comes as a shock to first time buyers too.

For info, there are options for insuring things like plumbing, pipes, drains, electrics, heating, etc, so you pay £20-£30 ish per month for cover, rather than £1000s if you have to cover it from scratch.

Not to say there aren't other things that will cost a lot of dosh, but many things are just factored into the monthly budget.

I've had both and I intend to have another mortgage soon but only because I'm concerned about paying rent when I retire.

However, buying a house is not a golden ticket always. I lost alot of money on our last house and ALWAYS something needed doing.

You can only do what you can do

@2bazookas our two wages together are comfortable we had to use savings as I had skin and bowel cancer I had to have time off and my sick ran out I was also pregnant at the time so with a baby and being unwell we had to do what we could. If we can save again payments wouldn’t be an issue depending on what our repayments would look like but we wouldn’t be silly we only need a two bed house or apartment

Yes, buying a house is usually more cost effective in the long run.

Example figures:
£600 x 300 ( monthly payments) = £180000

House value at purchase:
£150000, cash deposit circa £23000

Even if you don’t have an increase in house price over 25 years then it’s still worth £150000 you’ve spent £30000 borrowing the cash to buy the house and £23000 for deposit. Then it’s yours, just maintaining it.

Comparing to rent, assuming it’s the same to rent the house, probably isn’t though:

£180000 later and you are in the same situation you were at day 1, you’ve spent £180000 and have nothing to sell to recoup.

Even if you include maintenance into the cost of buying the property, it still is a sound investment, if you spent £50000 on repairs over the 25 years, you can still sell for £150000 and you’ve spent £103000 (the 30k interest, 23k deposit and 50k repairs) still a lot less than the £180000 for the rent.

Rent will need to be paid until the moment you die unless there are good investments elsewhere, few compete with property though.

I would never look down on someone for renting but it is beneficial to have a mortgage. We have lived in our house for nearly 6 years, the mortgage payment has gone down over that time by about £200 a month and we have managed to build up a lovely chunk of equity.

Yes you do have to pay for any issues yourself as the homeowner but my house would be about £6k more a year to rent and have only had about £500 of essential work the whole time we have been here. So the savings are massive.

I could also choose to take money out of the mortgage if we needed it for any work and we also have home insurance.

Long term unless you move around a lot it makes sense to buy

@Joeblack066 that all depends on whether you are mortgaged to the Max and at the top of your budget or whether you have been sensible and not over spent and still have spare money, just incase these events occur.

I would always advise Buying a property as opposed to Renting it really. Dont forget Mortgages will go down over the years ,and there is always scope for home improvements or a mortgage holiday if necessary .

It matters, but there are risks and benefits either way.

On one hand, I agree with many of the posts that tenant protection in the UK is shite compared to many other places and what there is can be very difficult to enforce. Part of the rent is the service of getting repairs and things, and some people get a great deal on that and some really don't. It's better for flexibility, I've heard it said you're unlikely to get the costs of buying back if you sell within 7 or so years. It has its risks, especially with age or when you're really settled in an area. Our landlord started off okay, but has gotten dodgy over the years and the rental market in my area does not handle disabilities well outside of homes I'm not old enough for, so we're in the process of buying (mid-thirties).

On the other, no matter how many checks you do, you can end up with a moneypit place or one that ends up unsellable for reasons out of your control. There are risks there too. It's all about which risks suit you better - I'd rather risk having the boiler go in my own place than the one here with all the shite I'm going through now.

Also, we can't compare rent directly with mortgages as owners need building insurance and the costs of maintenance that the landlord is meant to take care of. The calculations I've heard most often is to take the value of the home that you are considering, multiply it by .04 &.05 (4-5%), and divide by 12 to better compare a mortgage payment to rent (or reverse to give an idea of comparable house price) and 1-4% home value per year is a very rough estimate of what's a good idea to budget aside for house care issues that crop up.

@BiBabbles that’s a helpful way of figuring it out. Thank you

All really great advice so thank you very much. I think there’s some saving to be done we are very good with money we would only buy what we needed I was just gutted my health got in our way but I feel better for reading peoples advice/stories.

My friend lives in Denmark and renting is the norm there.

We bought a house in June - in 7 months, it's estimated to have gained £30k in value (supported by sales within 4 houses of ours either side). You'll never gain equity or an asset when renting and mortgage payments are usually much cheaper than rent

My friend lives in Denmark and renting is the norm there

No it isn't. 60% of people own their home ( compared to 63% here)

For a country supposedly obsessed with home ownership we don't seem to be very good at it!

en.m.wikipedia.org/wiki/List_of_countries_by_home_ownership_rate

Of course buying is better , if you are savvy you will be mortgage free by 45. The. You can downsize and live off the profits later on in life . Renting is forever and it's sooo expensive .

@fridgepants you say this but that is nothing new and all it means is that people will have to carry on working for longer or relying more on family to survive - eg multi generational households. Happens everywhere, all the time. And people are stressing that buying is better than renting because that's what the OP asked about?? Who cares what the option is for many, that's beside the point.

There are a lot of advantages to buying (renting from the bank). Property long term is mostly an appreciating asset and offsets living costs in old age.

Could you perhaps look at investing in a cheaper property up north, possibly to rent out or even invest in a low cost parcel of land with future potential?

Some pensions offer a lump sum on retirement, if you’re eligible this could open up options for you - could it be worth ramping up contributions to increase your employer contribution? Perhaps someone more knowledgeable on pensions can advise, although I’ve read recently that quantitive easing and the impact on investments from Corona could affect pensions so might not be the best plan atm. But if you were willing to relocate to somewhere cheaper 2 good pensions with a lump sum payout might stretch to a little place to call home.

My grandparents dabble in stocks and shares but have no idea the risk etc.

Like pp suggested, speak to a broker/financial adviser, no harm in seeing what your options are, you might be in a better position than you think. Think the property market is in a huge bubble atm, if you were in a position to save over the next few years the market might change.

Would usually suggest staying away from Help to Buy (IMHO) however it might be something that could work for you in the future, if you chose the right area, have a bit of wiggle room and a good exit strategy. Some new builds (historically around here) can depreciate short-medium term but house prices overall do tend to recover long term if you plan to stay in it. H2B is expensive with restrictions but seems to have worked out for some people.

Even if you continue to rent, home ownership isn’t the be all and end all, there can be pitfalls as with everything, putting a nest egg away for your daughter would definitely pay off. Does anyone know if the lifetime Isa’s still available? Sure they could be used for either house deposit or retirement.

@CremeEggThief

Have you applied for social housing? You might be waiting for years, but it's definitely worth doing.

My friend who is a full-time primary teacher was offered a lovely, brand new housing association house last year, after I encouraged her to apply followed a relationship breakdown.

Also, to everyone posting with worries about affording the rent when you can no longer work, please remember that you will get housing benefit and/or pension credit, so don't worry too much about having to rent in retirement. The State has a duty of care to anyone in this position.

Thanks to covid UK is going to be in serious financial trouble for decades. The State does NOT offer a bottomless pit of money to retired people(or anyone else).

There is absolutely no guarantee that HB or pension credit will even exist in 20 years when OP's DH retires, and as both are means tested, their private pensions could exclude them from those benefits.

[quote 2pinkginsplease]@Joeblack066 that all depends on whether you are mortgaged to the Max and at the top of your budget or whether you have been sensible and not over spent and still have spare money, just incase these events occur.[/quote]
Yes, true. That was the mantra in the 80s and 90s- borrow as much as you can!

I suppose it leaves a bad taste in your mouth. I’ve lost 2 houses to divorce and never been able to get back on the ladder and you don’t see that coming either!