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.

If this has been your business for 21 years @limeandwater than I really worry a bit.

You can't "exclude a deposit" from the realities of what people pay today.

Very few people are doing 100% mortgages out there. Who do you know that is doing this?

Let's get statistical for a minute:

Mortgages with >95% loan-to-value (LTV)* *make up only 0.5% of all lending

Actual 100% mortgages are not even separately reported in official statistics!

So why should we indulge you with this fantasy of working out what a mortgage would be on a £500k property, when NO ONE is doing this?

The reality of the UK is we've become a nation where parents are passing down wealth to 'children' in their 30s and 40s and giving them a chance at a bigger property to sustain their family.

You can't just factor this out to try and create a like-for-like situation here.

I had a quick look at two bed flats in a particular area. To rent was £2500 a month. To buy was £2300 a month. Deposit of £27.000. There would be costs to buy, but also costs to rent- deposit, some months rent in advance, so a reasonable comparison.

It is true for us.

I've just looked on Rightmove and a 3-4 bed house is around £350k, mortgage repayments would be about £1500 a month according to their calculator.
A 3-4 bed house to rent is around £1800-£2200 a month.

I've just had a quick look on Rightmove at rental properties in our immediate area.

The cheapest rental for same size/number of bedrooms etc is £2125 per month.
The most similar rental to our house is £2300 per month.
Our mortgage is £1100 per month.

It would still be cheaper, obviously, to buy in the vast, vast majority of cases, even on 100% mortgages.

My mortgage on a 3 bed house is £440 a month the same rent in the area for a similar house would be £1000-1200.

my house would sell for about £250k, assuming a mortgage of £200k repayments would be about £1300 a month. So if I was to buy now mortgage and rent but be not far apart but I would be building equity and at the end I’d own a house.

It’s the experience of everyone I know who has bought that their mortgage payments have been significantly cheaper than renting would have been at the time.

Once you factor in refurb and maintenance costs it does even out.

When I first bought I think my overall costs would have been about 1/3 of the cost of renting, as rates were at a record low. With the recent increases it’s about 2/3s.

But I have a small mortgage - thanks to buying a small cheap place not because I had a huge deposit - so imagine that for people with larger properties that disparity is smaller.

100% mortgages don't really exist you are quite right, but for the purposes of this question it's the only fair way to work it out.

But that means you're only accounting for the first couple of years after purchasing. For the first five years of my ownership (well, mainly the bank's ownership), I paid more for a mortgage than I would have done for rent, but the mortgage goes down over time (mostly - obviously there can be jumps in interest rate - but still true in the longer term) while rents go up.

Your view that the mortgage costs more may be true, but only in the short term.

I pay £600 pm for my mortgage, next door pays at least £1200 in rent, I know as it was bought, done up, then rented out approx 7 years ago and that was what they were asking for the rent. I’m sure it’ll have gone up to at least £1500 by now. However, I had equity to put down so my mortgage isn’t for the full market value but if it was it would still be less than ndn pays in rent. Also, I plan on paying mine off in May whereas ndn is retired and still paying out rent.

I think it’s often true. Also depends when you bought your house etc and how big the deposit was. Generally speaking I think you’re wrong.

I know the rentals around here vs if you purchased with a 10% deposit right now would def be higher. Even if you could get 5% deposit would still be higher for renting. The rentals market is very high £ and in demand.

We are currently renting before we move abroad and we pay £1100 for our house. We had neighbours move in next door last week and we got discussing this as we are the only renters on the street and they told us they bought at 10% deposit and are paying £740 a month in mortgage payments.

Our houses are semi detached, pretty much identical in condition as both are nice houses and well kept but our bathroom is newer.

I rented till I was over 40, so I'm not against renting. I moved around a lot and was on fixed term contracts, so it worked for me. But now that I'm a decade into ownership, I'm financially better off paying a mortgage rather than rent.

It's definitely the case for me. My mortgage is less than £500 a month but renting a similar house in the same area is around £1200 a month.

This question isn't static though and to pretend it is is disingenuous. Mortgages go down over time as you pay off equity, rent only ever goes up. Over a 15 year period you will pay more in rent than you will in mortgage repayments and have no equity to show for it.

My rent was £478 for a 2 bedroom house about 7 miles away. My mortgage is nearing £1500 a month as a FTB. However, rent in this area is nearing £1k for the same size house which is a 4 bedroom.

Comparing the cost of a mortgage with the cost of a rent isn't like for like. With a mortgage you have all the (sometimes very significant) costs of ownership. with a mortgage at some point you have to replace the windows, roof, kitchen, boiler etc. When you rent that is all covered by the landlord and are priced in, whereas home owners have to put money aside each month to cover it themselves.

True for everyone I know. Maybe you’re the outlier in this situation?

Renting is normally higher than the mortgage payments in my experience, due to the landlords having the resposibility for all the repairs / maintenace of the property. For a fairer comparison, owners need to add all their annual repair costs to their property. Plus many spend money replacing kitchens / bathrooms / flooring / repainting over the years and don't factor that in to the cost of owning. Finally, renters may be making better use of spare funds invested elsewhere (if they have them). Friends abroad rent (it is the done thing there) and the proceeds from the sale of their property in the UK is currently providing a nice return.

In my area it’s definitely true. The market rent for my house would be c£950pcm. I’ve just remortgaged at £600pcm

We bought the house we were renting.
We paid £750 a month rent
£325 a month mortgage

Unless in my case, there was a leak that wasn't fixed and furniture needed replacing. As did clothes. And loss of income due to pneumonia.

We were paying £1250 rent for a 2 bed flat. We bought a 2 bed house last year in the same town with a very small deposit (95% LTV) and our mortgage payment is £1000🤷🏻‍♀️

As I have said, I think the question has been misunderstood.

DH and I were just talking about this this morning.
It’s certainly true where we are in north east London. Our mortgage is £1700.
We’d be very lucky to find somewhere similar to rent for £2000-2200.
Obviously you need to factor in deposit. But also we won’t be paying the mortgage when we’ve paid it off in 17 years, or hopefully sooner if we overpay.