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.

But you haven't factored in service charges, ground rent and maintenance costs so the rental will be quite a bit less per month than the purchase.

It's not at all short-sighted.

Many people are trapped in a loop of not being able to save £20-30k for a deposit whilst spending thousands on rent payments, year on year. But the total money accrued in rent payments does not, in the bank's eyes, make you responsible to lend to.

For example, my DP and I paid ~£1.5k a month in rent in London for 10 years, totalling around £180k. But if we don't have a wedge of cash in the bank, I can't buy a house. I think the fact we've paid nearly £200k in rent means we can be trusted to pay a mortgage off.

When I bought 16 years ago my half of a £900 mortgage in southern commuter town was a lot less than the rent on a double bedroom in fancy famous university town houseshare I had been paying. My wage was low so it made a huge difference despite having to commute to uni town for work.

We have nearly paid the mortgage off now and house has increased in price, was very lucky to get on the housing ladder at the time.

One of the reasons we rented for so long was because it was much cheaper to rent the house we wanted in a good area than it would have cost us in mortgage payments. Obviously we were likely paying more than the landlord’s mortgage, but that’s not the same thing.

When we bought our current house, similar size and probably similar value to buy as our rental, we paid £1250 mortgage compared to £950 rent.

A lot of people being very disingenuous that their mortgage is £x and a similar house would rent for more, the question is “would it be cheaper for a first time buyer with a normal deposit to buy” not, “did you buy your house a long time ago so could now make a killing in rent”.

This.

If that's what you were actually asking then in my area you can buy a house for £220000 with 10% deposit over 22 years for about the same as renting the same house, if you extended the term to 35 years, buying would be cheaper per month, rent would also always increase.

We bought 10 years ago with a 5% deposit and our mortgage was approximately half of what we were paying in rent. Now, the rent of a similar property has increased significantly but our mortgage is roughly the same as it was originally.

Ok, one example I know of based on Rightmove and Santander prices today.

£100k for a 2 bed terrace house.

Rent is £800 a month.

A first time buyer mortage with a 5% deposit would get a fixed rate repayment mortgage of approx. £600 a month.

So this is cheaper to buy even when there is no equity - and the mortgage will only get cheaper over time as equity is built up.

Everybody knew even back in the 1980s that renting was more expensive than buying. The hard bit was always getting a deposit together.

I’d say it’s definitely true in London.

I could rent out my house for double what my sizeable mortgage costs me a month.

Finally 1 example out of about 200 that agrees with you, and you think you are in some way vindicated?

Sure.

Yes, on my road, all v similar houses

1 house rent £1100
1 house for sale £215k

If 10% deposit can get a 5 year fixed for 4.4% so £960/ month repayment mortgage over 30 years.

It was certainly true for my DS who rented then bought in the same area. They had a 5% deposit and the mortgage on a 2 bedroom new house with 2 bathrooms and a garden is cheaper than a one bedroom basement flat.

I am not looking to be vindicated.

If people want to disagree with me or tell me I am wrong, that's ok.

it's true- we apay around £700 mortgage and bills on top, to rent the same house would be around £1300 and still have bills on top

Just a few things here . . . a significant proportion of homeowners I'm sure would like to live in London, but have sacrificed that convenience so they can buy a property rather than rent. In other words they felt owning a property was more important than living in an expensive area. Secondly I am absolutely sure that many homeowners have gone without so they could save a deposit, including putting off having children, pets, and going out. My point being it's not luck or being 'in a loop' for the majority of us who could save . . ..

I could easily rent out my house (£700 mortgage pcm) for £1100+. I’d have my pick of tenants. Average house, average area, huge demand and a big premium on rents). I

I just wouldn’t have anywhere to live.

At some point you should probably just accept you were wrong, though.

If it makes you feel better, sure.

BTL landlords might be willing to accept the occasional loss but most don’t offer the service as a charity and can’t sustain loosing money year on year.

Agreed.

This. I think it is often true. In my street there is a similar property to rent and my mortgage is just over half what the rent is.

I don't live in London anymore, I moved out so I could buy.

I don't have a pet. I don't go on expensive holidays. I haven't started a family yet. All of my friends are in the same position.

Guess what? Deposits are expensive. Renting is also expensive.

I cannot stand this constant demonisation of young people and the narrative that failing to get on the property ladder is due to some kind of moral deficiency rather than the symptom of an utterly broken housing market and soaring costs.

Banks aren't charities.

The deposit covers the risk that the house goes down in value and doesn't cover what you owe in case of default.

I think it's more complicated than that
Landlord mortgages often don't pay off capital- at least everyone I have been offered do
You tend to pay 3-4% more interest on a landlord mortgage than a regular mortgage
The property i rent out I get 800 a month rent
700 is the mortgage- I am paying off the capital
However in 15 years time I will own it
The house is worth 180,000

Oh I see, so you did manage to buy.