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.

the difficulty of mortgages is getting tbe deposit and getting over the psychological ‘investment’ barrier. When you rent you are paying off somebody else’s mortgage. When you have a mortgage the total
amount looks big in paper, but it’s an investment you will get a return on. It’s all about framing.

It's not even a case of directly comparing mortgage vs rental.

Unless you on an interest only mortgage, the cost of having a mortgage is not what you are actually giving the bank. The cost of a mortgage is the interest part of the loan, not the money which goes towards paying the capital.

So even is someone has a mortgage for the same cost of renting, the person paying the mortgage is still ahead.

It's obviously the case that having a mortgage on a property is cheaper than renting, otherwise the entire rental market would collapse.

Our mortgage is £1650 per month. The exact same size house over the road is rented out at £2300 per month.

The house next door to me is rented out for 3 times what my mortgage is. We have had our mortgage a long time but ds has been looking at buying a flat or small house and renting is way more expensive than buying in and around our area.

No idea. I was just answering the question asked by the OP...

I think people have failed to understand the question.

Or perhaps I have not been clear.

We recently sold a house for 140k. With a 10% deposit a 25 year mortgage would be around £700pcm. The house was bought by an investor/BTL. It is currently advertised for rent at £900pcm. No work looks to have been done to it in the few weeks since we sold it.

Yes mortgage monthly payments are, in most cases, cheaper than rent, and that's for first time buyers. I mean, all you have to do is Google it and there are plenty of reports about it.

Depends entirely on LTV.

Our 3 bed is worth 350k, a 90%LTV (so minus a 35k deposit) mortgage is just shy of £1600.

A smaller 3 bed nearby is £1350pcm to rent and a 4 bed is £1800.

I can't see mortgage rates going down for the foreseeable so wouldn't want to be remortgaging any time soon.

It's just not a meaningful comparison if you don't take account of the deposit or if you're comparing today's rents with a mortgage based on a purchase years ago.

My house would be about £7000/month to rent.
I pay £1700 mortgage and have about 90% equity.
So to borrow the value of my house today would mean a mortgage payment of £17k a month. No landlord would consider buying a house like mine to let (the only rentals tend to be eg people letting their family home while working abroad). And the days when you could guarantee that prices would rise and you could leverage gains are long over.

I suspect that the economics are rather different for flats, where the rental sector is busier. But they're still not great, which is why so many landlords are selling up.

This isn't comparing like for like, as the landlord's mortgage is likely to cost significantly less than a buyer's mortgage.

The majority of landlords use interest-only buy to let mortgages, and buyers will generally have repayment mortgages. The repayment mortgage includes interest plus paying off the capital, whereas buy to let mortgages do not reduce the loan value.

For me in Cornwall, owning the house and having control on how damp and mouldy it is - is worth everything.

our last rented house had rising damp and the house before that had a leak. Neither landlord wanted to fix ☹️ The amount of money to replace mouldy and damaged clothes and furniture is ridiculous

House before that ended up having a mineshaft under the patio 🤣

True where I am in South Yorkshire. We pay £1036 a month for our mortgage. Rent on similar properties in my area are £2k plus a month.

It’s all relative. My current mortgage is probably double what I was paying the last time I rented. House along the road for me up for let approximately £400 more pm than I’m paying for mortgage on same house. I doubt there is a simple yes/no answer.

Not in the UK, but the monthly rent for a 3-bedroom flat in a medium-sized city was €1200. The mortgage repayments on a 4-bedroom house with large garden in a fairly rural area were €600.

Or perhaps you were just wrong?

They have.

Isn't it nearly impossible to say?

Mortgage with a big deposit, mortgage with a small deposit, rental of house that needs lots of work paid for by landlord, rental of house that never needs anything doing to it - they're all going to come to different amounts.

The only thing is that with a mortgage you get a marketable commodity and a roof over your head that nobody else ultimately controls (except the bank and that ceases when you've paid it off).

House to rent in my street is the same as I am paying for mortgage. And at the end of the mortgage term I will have a house. There are a lot of variables of course (how much you put in as a deposit, I didn't have much) and hidden costs for buying a house, however having rented for 2 years I never stop being happy that this is MINE, and i wont be given notice to leave in a minute.

For the area abd house sizes we are looking at it is still true. Maybe not the huge difference there was a few years ago though.

Even with a tiny deposit, obviously every mortgage payment increases your capital, once you’ve lived somewhere for even a handful of years you tend to have cheaper mortgage repayments than rent of an equivalent property. We’ve just bought in an expensive area and our costs would be exactly equivalent if we didn’t have a deposit.

Why would anyone be a landlord if rent and mortgage + maintenance didn’t leave them a profit margin??

You have to think longer term. The benefit of a mortgage is you fix your housing costs (interest rate rises excepted) at the time you buy, whereas rents go up. We bought our flat 10 years ago - our mortgage is £725 a month, to rent it now would cost £1600 a month.

And of course eventually with a mortgage will you pay it off and your housing costs will be minimal.

I do, however hate the whole "if you can afford rent you can afford a mortgage" claims as there are a lot of other ongoing costs in home ownership that have to be considered. We are looking at some basic updates to our bedrooms (new carpets, new blinds, paint refresh) that will be about £2000 and I will be doing the painting myself.

Generally, in the broadest sense, my credit score is ok with allowing Landlords and Letting Agents to fleece me on rent, but when I wanted to apply for a mortgage that reduced my monthly outgoings, that was a step too far for most banks and lenders.

If the system wants to assess risk, why is it happy to bank on an individual paying someone else’s mortgage (in many cases) on a temporary basis rather than invest in property that will be cheaper on that person’s pocket? I’ve never understood it.

Our neighbours rent out their house for over double my mortgage payment. We have been paying it for a decade and house prices and rents have gone up, whilst my post-Truss mortgage is higher the amount I'm paying it on is shrinking. I also won't be paying for accommodation in my retirement. If you know you aren't going to move much more and you can I'd definitely buy, even if it costs a bit more early.

Historically it was true.
But the hidden costs of home ownership are starting to tip it. E.g building work and maintainance
And if you need to sell frequently (eg every 3 -5 years) i think it becomes very questionable due to costs of EA , solictiors, movers and of course the dreaded stamp duty.....