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.

My dd just bought a flat in Watford and mortgage is definitely cheaper than rent. Also you eventually pay off a mortgage, we paid our mortgage about 3 or 4 years ago,so only have upkeep and utilities to pay.

The OP is totally confused. I cannot work out whether they are a clueless landlord or a annoyed tenant.

They also arent answering any of the sensible questions posters are asking.

Could you imagine dealing with someome like this in life?

You cannot compare rental to mortgage.

1. What if the landlord brought the house outright
2. What if they put down a hefty deposit
3. Rent is minus all the costs like letting agents fee, maintenance contracts for utilities
4. A risk to landlords that they will get bad tenants with little recourse in getting them out in a timly fashion or getting their money back for damage cause.

If you have been a landlord for 21 years and haven't been pulling equity out of the house when you remortgaged, surely your rent from the house you purchased 21 years ago in 2005 more than covers your mortgage

Of course it does, but I am saying it's now always the case.

Lets say one year you get hit with a section 20? Which happened to us last year.

You’re completely loopy

We have just put an offer in to buy a house - we have rented for 15 years and saved a meagre 5% deposit! However, our rent is 1400 per month. It started at 1100 and has gone up every year for the last 4 years following the RPI index as a percentage indicator so the first year it went up by 12%. It was awful. However, our mortgage in principle says our mortgage rate and if we have calculated it right, our new home will cost us about 957 a month. The home is the same size in the same town in the north east.

For us, it absolutely is true. No big deposit skewing our figures. Just a mum and dad in their 30s (just about) no family money and no additional help x

To add to this- I’ve assumed you would buy the flat for sale at full asking price- but it’s been on the market a while and so I’d presume you’d actually end up paying less for the flat, and therefore even less per month for the mortgage compared to renting the other flat in the same building.

Obviously it’s cheaper to buy.

Even if the price is the same at a starting point. The house gets cheaper every year because you locked in the price and the rent gets more expensive as inflation and everything gets more expensive.

Obviously not true if you factor in stamp duty and move every few years.

But in general it is true. Up until now our house has been cheaper than rent (might change my mind when we renew at current interest rates!). And we have been able to build equity in ways we never could have renting.

Ie. We have spent c. 100k on mortgage and deposit in the past 9 years. Our equity is 300k.

It is almost always the case that you might not make instant profit from day one, but several years down the line, the mortgage will be cheaper than rent. So what is the actual point you are trying to make on this thread

And I fully agree with you, of course further down the line you will make profit.

But, you may very well have to be prepared to ride the storm.

It's not like the good old days where you could offset your mortgage.

95% mortgage, went in last year at top end rates of £1003 pm. A house 2 doors up just went for £1100.

Depends on the type of house, the postcode I live in a 3 bedroom semi-detached house is between approx. £1,000 to £1,350 to rent. Prices to buy for a semi-detached are around £230,000 to £270,000. Putting the figures into Right Move to buy the £270,000 semi with a £10,000 deposit would cost you approx. about £1,200 in mortgage payments.

There's no point in comparing "Oooo bought 8 years ago so it's cheaper" to today's rents.

The relevant questions are:

(1) for someone making the buy/vs rent decision today on the same house or directly equivalent houses, is it cheaper to rent or buy? That then brings in questions like over what time period do they expect to be in that home, do they have a deposit, and if so what return could they get on the deposit by investing it instead?

(2) for someone who owns a property they don't need to live in, are they better off renting it out or selling it? That then brings in questions like local wages and demand, other overheads of landlording, capital commitment, how long before they need an income and so on.

It's entirely possible that even though renting is more expensive than buying over 10 years person A is better off renting for 3 years than buying and selling over a short period than being hit with stamp duty and maintenance that mostly benefits the next owner.

Similarly, it's entirely possible that since the cap on both mortgage and rent is the occupiers' affordability, a landlord looking at a 10+ year investment is happy to rent at a loss at first to secure the property at today's price, knowing over time she can increase the rent as inflation pushes up wages.

What is the point of your thread/what are you hoping to find out if YABU about?

So your whole point about the thread is that if you get 100% mortgage somehow as a landlord (don't think thats possible) you would be paying temporarily more than someone would be paying to rent the house... I mean that's been the case most the time for many years and something you have to accept if you want to be a landlord

Oh I see.

It was prompted by some post that keeps going around on social media. This isn't verbatim, but you will get the gist. Goes something like "bank turned me down for a mortgage at £1000 pcm because I am paying £1500 pcm rent."

For me it's short sighted.

Rent may be more expensive, but you also have no repairing obligations. When the roof costs £20,000 to fix, a homeowner will be paying that. So your "saving" of £200 per month is very quickly swallowed if you are paying out for repairs and maintenance. Yes, you have an asset once the mortgage is eventually paid off or paid down. But you also have a liability, whereas you have none with renting.

Very dependant probably on country and location. Prior to 2008 when house prices were high where I am a mortgage repayment was in general as cheap as if not cheaper than rent and in fact the 100% mortgages that were available then were introduced to enable people who were renting and couldn't save buy a house, because they were already paying the repayment amount monthly in rent it enabled them get a mortgage without also having to try save a deposit.

Rents are extremely high now so I'm not surprised mortgages would be cheaper in many cases but these days deposit will have to be saved before mortgage so an awful trap for some people.

Very much true here - renting similar house on estate about £1200 - mortgage about £550

How much are the houses?

Yes true for me I paid, 1200 rent only pay 500 mortgage

It really is true. We’ve gone one bed flat (£700 rent) to 3 bed house (£686 mortgage). Five minute walk between them. That was 4.5 years ago. I’m about to remortgage at £705 and that flat went up last year for £950.

10% deposit, 25 year mortgage, South Sefton (Merseyside).

House has three double bedrooms and two reception rooms. Flat had one bedroom and one reception room.

I don’t get why OP thinks it isn’t true.

Depends where you live. DS was paying £1000 a month for a crappy one bed flat in Surrey. He's just bought a lovely three bed house in Wales at the edge of a national park and pays £800 a month. This will be going steadily down and he'll eventually own it.

My house which we moved out of as we moved area for work costs us £750pcm in mortgage (will go up considerably at the end of the summer when 5 year fixed rate ends) and our tenant are paying £1300 pcm to live in it.
We had a 10% deposit and it’s worth around £280,000 in the midlands.
We are now paying £1500 a month for a two bed flat.

Those are two wildly different areas. You can't compare Mayfair and Wigan.