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 am fully aware that banks are not charities. I think that banks should offer lower deposit mortgages to individuals with extensive rental histories. And some do already! Brilliant.

When did I said I've bought?

I have moved out of London in order to have a chance at buying. I'm still saving up for a deposit.

I think in theory if you only compare mortgage Vs rent it will always be cheaper but that's clearly because upkeep/maintenance, repairs etc are all needing to be factored in. After that I'd say similar, although, I do think if you have an area of shitty landlords and so needing to move often rather than renting 1 home for 20 years it probably does have high costs when renting because of deposits/fees/removals etc..

I agree.

If you can show lets say 3 years of rental payments without missing one, I think that should be considered to say maybe get a 95% mortgage.

Would help a lot of people.

When I bought my first house in the 90s, my rent on a studio flat had been 320/month. The mortgage on our 2 bed house (55k, 10% down) was 265 a month.

These were in the same area, don't know what the flat would have sold for, but it was brand new, while the house was a small 2 bed semidetached cottage built in the 1700s - cute but poor insulation, old systems, etc. When we moved abroad a couple of years later we rented it out for 340 a month, going up over the next decade to about 450 a month. Mortgage went up because it was no longer our primary home, so with agents fees and maintenance, etc. we were just under breakeven for the first few years.

At the time it was generally the case that if you could pull together a 10% mortgage, at the cheaper end of the market it would be cheaper to pay a mortgage than to rent. What I didn't appreciate fully until we bought our first house was all the other expenses involved in maintaining a property.

So many financially illiterate people on this thread not taking account of the equity they have in their property, whether funded by their initial deposit, paying sums off their mortgage or a rise in value. Yes, my mortgage is cheaper than the market rent for my home…but my equity is 50%. If I bought at today’s value, with a 10% deposit, the mortgage would be much more than the market rent.

The figures don't stack up. You'd be better off putting that in an ISA as you're losing quite a bit of money.

You haven't included the essential cost to the owner though of the communal service charge for the block/ house. This is usually a minimum of £1800 a year £150 a month) but can be a lot higher - up to £5000 a year, £400 a month for a flat in a fairly average block. Managing agents cost a fortune!
And then the owner has to include an element for repairs and replacement of items in the flat.
Don't forget the owner is also paying tax on the WHOLE amount of the rent at their marginal rate, 20 to 45%, and rising next year, with only a small offset allowance given.

That has been the point I have been trying to make.

It's a little bit like saying "I went out for dinner and had a 3 course meal with wine for a tenner", but leaving out the fact you had £100 quid in vouchers you put towards it.

My son and gf pay £1,000 + rent for 2 bed flat. They could have a mortgage for £600 on a 2 bed house so they are moving back with me to save.

It's not entirely clear if op is trying to compare first time buyer vs renting or buy to let landlord vs rental income.
With the first time buyer situation is pretty much the case it'll be roughly similar to buy with 10% deposit when comparing monthly payments initially, then overtime they will pay far less per month as rents go up and their mortgage largely stays the same, it may go up or down a little but over the long term it's cheaper
With landlords they may have a few years of not earning as much monthly as the property is costing them but in the long term as rents go up, then eventually there will be a profit but it may take a few years

DS pays £1100 pcm for his 1 bed furnished flat. A flat is for sale in the same block and a mortgage on that with a 10% deposit would be about £800 pcm. BUT the rent includes service charge (£2000 per year) whereas DS would have to pay that on top if he bought. Then of course if anything goes wrong (new boiler needed for example) the landlord pays whilst he's renting

I did suggest to him he looked into buying, and that we could help him with the deposit, but he said he really wasn't sure where he wants to live long-term and likes the flexibility of renting. I can see his point.

It's not just about the headline rent Vs mortgage figure.

It dependd o n your deposit. A 2 bed terrace in our area sells for 250 rents for 1200.
If you are buying with a 10% deposit you will be similar or slightly higher. If you can stretch to a 20% deposit you will be a bit cheaper.

Yes generally.. of not at forst, definitely further down the line. A house up the road exactly the same as mine (fairly new build so no changes etc) is over twice in rent what my mortgage is. Houses round here all rent really quickly so not overpriced

But why do you think renting (long term) is ever cheaper than owning over the same period?
At the end of 30 yrs of mortgage payment a person has an asset to sell potentially one that has gone up in value. A renter has nothing.

YABU. We have a 4 bed and our mortgage is £1200 a month. On our estate, we regularly see two beds being advertised for rent at £1500pcm!!! 😮 😮 Most don’t even have parking and the gardens are the size of postage stamps.

It’s 💯true where I live.

our mortgage on a large semi detached 4 bed house is £800, I recently had it valued and was told if we rented it we could charge £2000 + per month.

Rental prices when I live in the southeast are insane unfortunately

🤞🏼🤞🏼I hope it all goes through soon & you can enjoy the summer in YOUR new home 🏡 💕

Yep it's accurate for my area in North East Scotland.
Mortgage rates per month on a 3 bed house between £750-£1000 depending on equity. Rent on a 3 bed house start at £1300 per month.

Flats are even more obvious can buy a flat in Aberdeen (not quite my area but closest city) for around 50-80k now. Rents start at £550.

When we bought our house we paid £50 more then when we were renting but went from a 1 bedroom flat to multi bedroom house.

Can we stop comparing the rent today with the mortgage you took out 20yr ago.

Where an earth in the south east can you buy a 4 bed house for £800pcm?

This with bells on!

It can be but often a sizeable deposit is needed so you aren’t borrowing the full amount. Also with a rental you aren’t not responsible for some things eg buildings insurance, repairs eg boiler etc when you own you need to be saving to cover said things

I live in Brighton, the rents are eye watering. I know for a fact my mums mortgage is less than what the renters are paying next door to her, no idea about her deposit etc though. Surely if a mortgage was higher than rents all round there wouldn’t be many landlords, unless they were mortgage free?

Our mortgage is definitely cheaper than what we were paying on rent. ETA: we're about ten years in on ours. We got the mortgage just before things went crazy.