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.

Then finally you accept that when you have had costs you put the rent up.

It's really not hard

That isn't what I said.

I honestly give in
I'm out

It depends on how much you borrow but if you buy a similar size house in the same area then your mortgage would be cheaper. My daughter is about to buy after renting for a few years and it's definitely the case for her.

You can give in - but I am not going to agree with something that isn't the case.

Yes if I put a new kitchen in I may be able to raise the rents so in your words "pass the cost on."

However, if the boiler packs up and I need to get a new one then there is no way I can pass the cost on. The tenant would expect heating and hot water and for them the property wouldn't have improved.

I live in a 2 bed flat in a medium sized Scottish city. Very similar to the rented one I just moved out of. Like for like area. Rented flat - £750 per month. Current mortgaged flat - £595 per month.

But you do not know what rents will do in the next 25 years. As I said there are too many variables. Rents in my area (SE) have trebled over 30 years. The base rate has moved between 7.5% and 0.25% in the same period- no one would have predicted that wide a range.

You are thinking about this backwards.

The landlord doesn't set their rent at whatever they need it to be to cover their costs.

The tenants collectively set the maximum rent for the market based on what they are able to pay.

Doesn;t matter what the cost to the landlrd is - landlords can't push it any higher if the money isn't there to pay it.

So potential landlords start by looking at the achieveable rent and decide whether it will cover their costs or not.

Yes once a landlord is in, if an additional cost comes up, the LL can try to pass the additional cost on by raising the rent. But they run the risk of losing their current tenant and not getting anther one - it's not a given their tenants can suddenly cover higher rents just because the landlord's costs have gone up.

Just as when food goes up, some people may pay more for the same food but others may already be at their limit so their only choice is to pay the same amount as before but get less for it. And some tenants, faced with a rent increase, will downsize/move areas instead.

In other words, the ultimate limiiting factor for both rentals and purchases is not what the LL or the seller wants to get, but whether any tenant/buyer is able and willing to pay it.

After all, landlords who bought years ago and so have very low costs don't go round charging less than the market rate, do they?

We used to rent with a plan to buy further down the line with a bigger deposit. But then we needed somewhere bigger with another on the way and rent was sooooo expensive so we bought and yes we would be paying almost double to rent similar size near by !

I guess it must depend on the area. For us to get a mortgage in the very expensive area that we live in, it would be around £1000 more a month and we’d get a lot less for our money than what we have now in our lovely rental property. We really saw some absolute disgusting dives when we looked into buying, and like I said, it would’ve been around £1000 more than our current rent

Easily true!
3-bed ex-council semis in my street are usually let for approx £1800 pcm.
Our neighbours bought the house they had been renting a few months ago and their mortgage is now £790 pcm.
This is a suburb of a city in the SW.
The size of the deposit and the length of the mortgage term makes a big difference to monthly repayments. And is it like for like? We moved from a tiny city studio flat (rent: £450 pcm) when we bought one of the aforementioned semis twenty years ago and paid £385 pcm for our mortgage.

In the case of one of my DC, they were paying £1100 in rent. House was too small .
They got into a 3 bed shared ownership for £1100 a month, roughly equal between rent and mortgage
The house they left was immediately advertised for £1400 a month rent.

My house is five beds. In my area rent would be around £2,500 per month.

Our mortgage, for somewhere around £250,000, is £1,400.

I’d say my mortgage is cheaper than the rent!

Have you had many mortgages and rented lots of properties?

I’ve worked in the property sale industry for 22 years and I’d say, for the vast majority of cases, rent is almost always higher than mortgage payments on that same property.

But it does, otherwise what’s the point 😂

You sound very naive OP.

It really does 😂

Yes but almost every purchaser taking out a mortgage needs a deposit. The point you are trying to make is meaningless and doesn’t transfer to the real world.

Rent is almost always higher than rent.

A nice two bed mid terrace down the road from me is up for £1200 a month. I live in a nice four bed end of terrace. My mortgage is £720.

If I were to buy it at its market value now with a 10% deposit I think it would be close. But within just a few years that would change. I was paying £1350 when I moved in eight years ago, and even if I hadn’t remortgaged onto a better rate, I think we can safely say it would be rented out for more than £1350 now.

So, when you pay rent it goes into somebody else's pocket. It is 'dead money'. If you are paying a mortgage, the money you pay go towards building equity in the property. Even if you are on a interest only mortgage, you benefit from the rise in the property's value.

Of course, the property market could crash, which wouldn't be very pretty, but even then, everyone's in the same boat, and you haven't lost anything by spending your money on a mortgage rather than in rent.

... rent is always higher than rent?

But again, this is completely MEANINGLESS.

It doesn’t transfer to the real world. Your question is pointless as it has no basis in real life.

Your OP was perfectly clear.

You’re just wrong - and that really is ok!

On the other hand, they could sell their property and buy something smaller, creating a rather nice nest egg with which to travel the world.

Well for us 1.5 bed flat (the landlord called it a 2 bed, you weren't fitting anything more than a cot in the 2nd bedroom we used it as an office) = £1,500 per month

3 bed house with a garden = £700 per month on a mortgage

Difference in area is approximately 10 minutes apart so it was much cheaper.

Of course there's costs that come with owning a home but overall it's been cheaper for us.

Not in REAL LIFE, which is where the majority of us live OP.