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.

Let’s face it it’s a ridiculous premise for a thread because an accurate comparison can’t be made. It’s impossible to get a 100% mortgage, so a deposit is always going to have to factor in to the calculations. Equally renting includes things like maintenance and essential repairs whereas a mortgage doesn’t. And it will all depend on your mortgage rate… mine is 1.4% so buying my house on my rate is likely to be cheaper than renting it would be.

The social media posts the OP is referring to are making the point that it’s frustrating to be refused a mortgage based on affordability when you’ve already proved you can afford the same or a similar amount in a rent payment each month. That’s all.

It used to be true, and renting was a waste of money but now it depends where you live I think. Knew the mortgage of an old neighbour a couple years ago, then saw how much he put her rent up. I think she was paying just shy of £1,000 a month more than his mortgage was.
Why? Market rate of renting around here went through the roof. He put her rent up overnight £500, because he could.

I’d imagine that’s the norm. Your rent has to cover the landlords mortgage, any agent costs, poss insurance costs, maintenance costs, and taxes. When I bought my first flat in the late ‘90s I paid £200 a month for a whole one bedroom flat (4 rooms) in the same block where I was renting a single room in a three bedroom for the same money.

"Passing on" is a phrase that is invented. It doesn't mean anything in the real world.

Lets say I have a flat that I can command £1500 pcm for. The market has dictated that it's worth £1500 pcm. On a good day I might get 1600 on a bad day I might get 1400 - but the market had dictated the price.

Lets use a real life example that happened with one of my properties last year. I got issued (along with all other owners) with a section 20 for some serious works that needed doing at the complex. There wasn't enough money in the sinking fund so a cash call (or section 20) was requested.

It cost us several thousand.

Now I can't pass that on to the tenant and put the rent up to lets say £2000 pcm because she wouldn't pay it nor would anybody else.

The market has dictated it's £1500 pcm so all this talk of "passing the cost on" is pure fabrication.

Of course, but that isn't the point of this thread!

There are plenty of areas in the south where a 3 bed house will cost you upwards of around £500k, which is a £2k +/- monthly mortgage cost after a modest deposit, where rent will be at least that amount, and probably £2,200 ~ £2,500 a month. Though the purchaser will have insurance and maintenance on top of the mortgage cost. However, medium / long term the mortgage will always be cheaper because it will go down over time as the mortgage balance reduces, but rent will always go up over time.

There are so many variables in this comment that it is not really easy to tell.
ie; the size of deposit, (which itself can affect the interest rate), the interest rate itself, etc.
However, over time, as the cost of living goes up, rents usually go up, salaries will increase, but the mortgage payments will stay the same (especially if you have a fixed rate term)
However, maintenance costs will be on you, whereas renters do not have that cost.

But when did you buy it, even factoring in this extra few £k if you bought years ago, you may have already made back some of this money with increased rental payments over time and future increases in rent will help offset this cost where your mortgage remains roughly the same
Again, you have to look at property as a long term investment if you are a landlord or owner occupier. If you are the person renting then obviously you don't have to worry about these big one off payments but you have to accept that if your landlord bought the house 20 years ago you may be paying 2/3x what the mortgage is.

I agree with most of what you say, my point is you can't just pass the cost in as a residential LL.

As a commercial LL you often can.

In most cases even with a 100% mortgage it's going to be cheaper than renting the exact same house, because otherwise the LL is losing money. Obviously.

And that's disregarding the fact that you obviously don't understand at all, which is the cost of a mortgage is the interest only, and not the full cost including capital repayment.

I am not sure that is right.

It is.

Sim landlords would have ended the current contract and tried their luck with £2000pm. They might get lucky or have to settle for £1700pm if it’s an area with a shortage of properties and enough desperate tenants.

Just because the market says it’s worth £1600pm doesn’t mean it will go for that. It’s a theoretical number based on all tenants and available homes being equal.

Ok.

It is completely area dependent and complicated by the fact you’re comparing 2 different markets (sales and rentals) that have different market forces.

If you are in an area with a very strong rental market (lots of students, lots of transient workers, lots of immigrants driving up demand for rental properties) but with a low house sale market (due to rising interest rates and/or national or global economic instability) then typically it will be cheaper to scrape together any sort of deposit to buy a property and your monthly costs will likely be cheaper than rent.

Conversely, some areas may have a low rental market and very strong house sale market (exclusive areas such as highly sought after villages with excellent schools often fall into this bracket) will often cost a lot more to buy in than to rent in.

It is the point of the thread!
People's mortgage is totally dependent on how much deposit they put down in the first place.
People's rent will be dependent on the market rate which will be determined to an extent by the landlords's mortgage companies who will stipulate the minimum that the landlords have to charge rent before they will lend them the money.
You asked where you could get a place for 800 pcm. I gave you an answer to your question
You are comparing apples and oranges

Why would you have to do that? It is part of what makes house ownership cheaper overall. Money paid and in the past. Unlike with renting that money is just gone to the landlord. Month on month the mortgage costs are now less. You got to look at it over the longterm.

When I bought my house around 10 years ago, my rent down the road was £375, landlord hadn't put it up in the 10 years i was there but rented it at £500 when I left. I got my house with a 9k deposit and my mortgage has always been between £430-£470. Currently £450. Houses the exact same as mine on this exact street are now renting for £850-£900. So you could argue my mortgage was more expensive than my old rent now but buying this place has massively protected me against rent rises and now I got around £80k in equity.

If I had managed to rent for the last 10 years at the £500 and no further rent rises i would have paid £60k and have nothing to show for it.

Who are you trying to convince that renting is the cheaper option?

So when I bought my house in 2013 for 90% ltv, I was paying £850 a month, my rent in a slightly smaller property was £650. However I realised the interest on my mortgage was much less than my rent (maybe in the £500s) so I considered that the comparable part.

However, rent 11 years later was £1400 and my mortgage was still £850. I had saved so much money in not paying rent increases (plus all the rental fees of moving every 2 or 3 years etc) We overpaid and paid off the mortgage early.

Buying always works out cheaper in the long run and you get to own it at the end (or at least have substantial equity) I've now got another mortgage as we had children and wanted a bigger place and my 5 year fixed mortgage is now £1400, the same as what my first smaller house would cost to rent. I would never be able to afford to rent my current property so the equity I accrued from the first property has made this possible.

I live in a fairly expensive part of the North West, if thats useful for comparison?

Glad we agree.

We do agree.

A mortgage for a house purchased in 1957 is defo cheaper than renting the same house at today's rental rate.

100%.

Our mortgage = £850.
To rent a house the same size as ours with the same land = £1500

The mortgage in 2026 would be cheaper too.

That is entirely the problem of it being a leasehold flat with a management company that can do pretty much what they like as it's so hard to get them out.
You can't pass that on. I think that will come under service charge. Which again, you can't pass on .
Other general costs can absolutely be passed on or landlords will not make a profit. Why would you not pass on at least some of these costs?

😂

Because as I have said a number of times it doesn't work like that.

And rightly so.