Mortgage cheaper than rent?

[limeandwater]

On this forum and plenty of other social media sites to be fair - there are a number of people who state that a mortgage is often cheaper than the rent.

It's not true is it? In fact it is quite a long way from being true.

I was paying £1650 rent for a two-bed flat in a run-down road with no garden in 2023/4, my mortgage is £1750 so no, not cheaper, but we are in a house with a garden in a much nicer road, and renting this would be more like £2k. Homeowning comes with additional expenses such as repairs, maintainence etc so in general I have found renting cheaper in the short term than having a mortgage - and where the landlord already owns the property outright as is often the case or where they have a small mortgage due to having paid it off there can be a huge difference between the mortgage/costs to the owner and the rental price.

This article suggests on average there isn't much in it. moneyweek.com/investments/property/buying-vs-renting-which-is-cheaper It really depends on what the rental market is like and what the housing buying market is like in your area. In the very long run a mortgage will be cheaper than rent as you end up with a house at the end of it.

Well it's very much true for me.

My mortgage is £600 and we overpay another £600.
Next door rent for £1200.

3 bedroom house. I used to live in a studio flat 2018-2021, it was £550 pcm and went up to £675 when I left.

My friend is paying £900 for a one bed house rental in the same area I live.

So it's very true for us.

My mortgage is £800 per month, next door is rented at £1450 per month - both are terraced townhouses with 3 bedrooms. One of my DC has a booking for private student halls in Sept which works out as approx £1256 per month 😳 (uni owned halls only for 1st years, we are hoping she’ll manage to get a house share as that’ll “only” be £800-£1000 a month 😭

It is perfectly rational to let a property and lose money in the early stages, but be profitable in the long term.

Much of the profit comes from the increase in value of the property over time. Over the long term, property values in the UK tend to increase significantly, despite periodic fluctuations.

In addition, parts of the early costs, such as mortgage, remain fixed whilst rent over the long term, tend to rise, so properties become more profitable.

If a landlord with multiple properties has a portfolio of established rentals which generate profit, these can be used to subsidise new rentals. And yes, 100% mortgages are largely a thing of the past, particularly in the Buy to Let market, but releasing equity from established properties as their value increases pays for deposits on subsequent properties.

It would’ve been true for us if we’d have bought before Liz Truss got in and got a fixed rate. Small deprived town in the North-West and I’d say it was relevantly normal to rush into a mortgage as it was cheaper than rent.

Now we are looking at a mortgage being £800 per month whilst our rent is currently £500. I’m not sure how much of that is due to interest rates rather than natural house price increases
though.

Spot on.

It really depends on a number of factors:

The reason why someone could be paying a higher rent than if they took out a mortgage, is because they haven't got a deposit saved, and therefore can only rent.

It also depends on location. Properties in london are expensive therefore it's easier to rent than buy. However if you have decent deposit your morgage could be lower than paying rent.

Mortgages are also higher now than during covid - at around 3 plus % atleast. 3.75% being the Bank of England base rate currently - with the ongoing war, this could look to get higher.

It all really depends..... in the long run, if you can try and save for a deposit and buy, that would be the best financial long term plan - as then you build equity in your own place rather than your landlords.

Someone I used to work with paid less per month on her mortgage than I paid rent for a room in a shared house, another colleague's rent was twice her neighbour's mortgage, (and she was told she couldn't buy a house as she wouldn't have been able to afford it!) Rent prices are utterly ridiculous, and the same for the criteria for getting a mortgage.

As an example, a starter home near me is £300k. To buy it now, if you had a 10% deposit, the mortgage would be around £1,270 depending on the rate. To rent the same property would be £2,000 per month.

My mortgage is way cheaper than rent but we have a lot of equity and been paying it a
long time. But I just did a rough calculation online. Buying a house like mine worth £250k with 5% deposit and 35 year mortgage would be £1147 a month. Rent on a similar house I saw online would be £1300.

To rent our house would be 2.5x higher than we pay on our mortgage (currently 60%of value of house, if we had a 100% mortgage, it would still be cheaper to own). Landlords factor in paying their mortgage, insurance and management costs and then making a profit - ie they are obviously charging more than they are paying on their mortgage and more than a private owner would be paying.

The reason people tend to rent isn’t because of the monthly payments, it’s because they need a minimum deposit (impossible for many to save for with high rents), a perfect credit history, and many other factors that make getting a mortgage administratively difficult. There is also, as some people mention, the additional financial burden of owning a house that is the landlord’s problem - replacing boilers, dealing with plumbing and electrical issues, roof repairs etc. whereas rent includes/protects renters from most of this.

It's different on any given day. The month before the 2008 crash we took out a 5 year fixed rate mortgage at 6.99%. House value 125k with a five percent deposit. Payment was £750, rent on next door was £600.

My current house would rent for about £1200 and a 35 year mortgage at 4.9% with 10% deposit would be about £1260 a month so basically the same. But in 2022 you could get 2% mortgages and the house value was the same so it's always fluctuating.

Thank god it wasn’t just us, fixed on a 5.85% deal for 5 years as interest rates plummeted and we didn’t have enough money to pay the redemption penalty to get out of it.

I think it very much depends. I live in a very cheap area but even so the price of private rentals has shot through the roof. It’s now £800 to rent an ex council house with a basic kitchen and bathroom and an identical council house next door is £380 a month. You could buy the privately owned house next door for around £125k but with a full rtb discount on the council house it would be £99k. So I’m pretty sure that the mortgage would definitely be less than £800 a month. My DH bought a council flat. Was valued at £62k and he paid £19k about 8 years ago. His council rent was £440 a month back then (nice area) and his mortgage is £260 a month fixed over 10 years but will be repaid fully in a few weeks. Now valued at £100k . So it really does depend on your circumstances/area/council tenant etc.

Very true. Our mortgage is £900 a month, rent on the same house would be £1300-1400

A mortgage is much cheaper. I’m looking to separate and rent. Ex DH would have £750 mortgage and my rent would be £1700/£1800.
(I’m not being entirely screwed over, there are reasons why it’s me moving out)

...But not actually a sustainable business model, long term, without significant investment or money coming from elsewhere. And it's subject to huge risk, as the crash 2007 - 2009 made very clear.

And not the norm in the rental market, not by a long shot.

I bought my one-bed flat last year (Zone 4 London) for £250,000. My mortgage is 800pm. The same flat would rent for about 1300pm.

Its very true where I live in the south.

My original 3 bed 30s semi has now had a huge extension (double storey extension, loft conversion, large kitchen/diner etc) done by us over the years. We paid by increasing taking out another mortgage & increasing our monthly mortgage repayments. Our mortgage is £1500 pcm. Its now a 4 double bedroom home with a office.

The house we're joined to is still a standard 3 bed 30s semi with the only addition the lean too that was put up in the 80s.

A landlord bought it last year and did it up inside (new kitchen & bathroom, knocked wall down between tiny kitchen & dining room to make it bigger). Very cosmetic apart from that & they didnt even chnage the windows that had been in nearly 30 years.

It was rented last year for £1800 pcm. My mortgage is definitely cheaper & my house is significantly larger than next door.

For us, our monthly mortgage payments are cheaper than rent in the same area. We were pushed to buy our first flat when our landlord raised our rent by £200pm! £1,400 to £1,600pm for a 1 bed flat. We bought a 2 bed flat and our mortgage is £1,300pm.

However, we obviously now have to maintain the property, carry out repairs, and pay the service charge (£200pm 😭).

We are now moving to a 4 bed house in Wiltshire and our mortgage will be £1,600. Comparatively, houses in that area rent for £2,500+ for 4 bedrooms (of the same spec and location).

True here. My mortgage is £350; next door rents theirs for £690.

I’ve voted YABVVU as you haven’t said what your AIBU is and you are being snide and arsey with posters who disagree with you.
Whats the point of this thread??

The mortgage on my 2 bed house is £485 a month. Most I've paid on mortgage for this house is £550. The house we rented before moving to the £550 mortgage was a smaller, older 2 bed and it was £625 at that time. That very same, as in exact house, is back up for rent just now and it the best part of £1000. Half a mile apart in a large village.

😂

Our mortgage is £875 and our neighbours rent their house out for £1250 / month. Exactly the same style and size house literally 3 doors down.

I mean surely you can understand that people get fixed mortgages (and at good rates) but rent is generally increased annually in line with demand / house prices?