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’m I think you’ve just proven the point though? Because your parents didn’t rent for life - they bought in the end. So whether they front-loaded that investment by taking on a mortgage or waited to be cash buyers the end result is the same: a mortgage-free house.

Yes in my case, and has been for a while when others told me what their mortgage payments were

@limeandwater are you trying to only compare immediatel monthly cost and ignore future changes?
Also are you trying to compare first time buyer with a small deposit vs rent or are you trying to compare landlords cost vs rental income if they bought today?
It's very unclear

Even if you ignore the initial deposit (and assuming you don't remortgage) then mortgage payments will always be linked to the amount you borrowed when you bought the property. Yes, interest rates can go up or down, but that is always applied to what you paid for the property (or the outstanding mortgage value, which will typically be lower).

On the other hand, unless you have a very generous landlord, rents will usually be linked to the current value of the property, reflecting the fact that landlords need a minimum return on the value of their asset.

So even if a mortgage costs more than rent on the day you buy the property (and I'm not sure it always does), within a few years that rent could be materially higher while the mortgage payment is more likely to be unchanged.

But how much equity do you have in your home? If you bought it at today’s prices with a 10% deposit, would the mortgage still be cheaper?

I can compare like for like as we bought a few months ago and were renting before then. Our mortgage is the same as our rent was because we took it over a shorter term, so our monthly outgoings remain the same. However, the feeling of security and stability (e.g. we were served a section 21 in a previous house) is invaluable, and we have already made a small dent in the capital we borrowed, which is nice to see month by month. When renting the money is just wasted, whereas at least with a mortgage it’s an investment for your future.

So despite pretty much everyone saying mortgage is cheaper than rent, you're just going to dig your heels in & keep repeating your incorrect view.

right.

🤣🤣🤣🙇🏻‍♀️🙇🏻‍♀️🙇🏻‍♀️

As a long term investment mortgage is cheaper. Rent the money is gone. Mortgage will be paid in full after 25 years and you’ll have a whole house to show for it.

It's only incorrect if you look at it in a bias way. Many people are now understanding what I mean.

Landlords jack up the rent each year because they can. They say their expenses like agents fees, insurance, maintenance etc have increased. Yet most of these are tax deductable business expenses and can be passed back to the tax man. At the same time these landlords are offering nothing extra for the extra rent. I suspect that there are some dishonest landlords who pass these expenses onto tenants and ALSO claim for them as tax deductables. Effectively double dipping.

The landscape will change after May 1st. Tenants will be free to challenge rent increases and appeal to the 1st tier tribunal. This will particularly benefit long stay tenants who have seen no improvements to the property during their tenure. Many such dwellings may be below accepted market standard with outdated kitchens, bathrooms and heating. Landlords wont like that, so they will be more inclined to negotiate and accept a lower rise than having to wait 12 months or more for a tribunal decision.

It is here. This is why there are next to no rental properties available. Its a nice area with a very high ownership level.

So much of that isn't true.

are you trying to only compare immediatel monthly cost and ignore future changes?
Also are you trying to compare first time buyer with a small deposit vs rent or are you trying to compare landlords cost vs rental income if they bought today?
It's very unclear

"Bias way".

Yes, that £100 < £200, that kind of bias.

😂

its true for us since we bought a cheap flat that is a doer upper lol not sure if we had bought a new or large house maybe wouldn't be the case.

If you were to take a mortgage on your house now though? With say 10% deposit.

I pay £1100 per month on mortgage

if I rented my house out It would be for roughly £1750 pcm

It's hard to compare, often people buy a different type of property to that which they would rent, e.g. a starter or a small terraced family home rather than a flat or flatshare, and sometimes in a different area as they've reached a milestone such as marriage or having children and leaving a city centre for the suburbs.

They may not be able to afford to buy a property as nice as the one they are currently renting, but it does enable them to get on the property ladder.

I’ve just looked on rightmove at houses to rent around my post code. Our mortgage for our 4 bed detached house is about £1k (can’t remember exactly). The only things cheaper than that in terms of monthly rent are a 2 bed flat above a shop and a 2 bed flat in a semi that appears to have converted into 2 flats.

So not only is mortgage hugely cheaper but you also get at least 3 times the space.

Yes, and forgetting that landlords need to pay tax on the whole amount of the rent before taking the mortgage payment into account.
This, imo, is probably the biggest change (that occurred over a few years, a few years ago) that has pushed rents up so high.
Also, landlords have mostly reached the end of their lower fixed rate interest rates fixed 5 years ago or so when rates were much lower, and are now paying much higher rates.
The figures just don't stack up any longer for landlords, and together with new legislation and increased risks, they are selling up in droves.

You can’t stop comparing rent now to mortgages 20 yrs ago because home ownership is a long game.
Some risk on profit based on area but even then it provides long term secure living accommodations.

You are right OP.

I am in a 300k house. The rental cost of houses on the street is about 1.2k a month.

The current Lloyds calculator says that, assuming I had a 10% deposit, my mortgage would cost me £1,504 a month.

The sums don't stack up any more. As you say, people are quoting house prices and interest rates from 20 years ago...

Before im retired my mortgage will be long paid off, so when I am retired my mortgage will be £0. How much will your rent be when retired?

This.
It's possible that short term mortgage + upkeep costs/insurance might cost more than rent, but if you actually want to compare the 2 you need to look at lifetime costs, and take into account that not only does the mortgage end at some point, but you then own an asset. The person renting has to continue to pay rent and doesn't have anything at the end of it.

But over time the rental costs will increase by far more than the mortgage will, and, as I said above, the mortgage will end resulting in 0 payments (not including upkeep costs) and an asset, whereas rental payments don't end.