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.

We moved from rented. Mortgage was £908. Old house was put up for rent at £1700. Old house 3 bed 1 bath semi. New house 4 bed 2 bath semi. Same area.

Of course not long term, as you say if it was long term nobody would do it.

But like any business, you can lose at the start.

A 100% mortgage is probably not cheaper than rent on month 1

But you have more control. You'd expect by month X it might be cheaper and certainly cheaper by the time you come to pay the final month.

So it depends on what value you place on the mortgage and what your situation is long term / short term

True in my area, to rent my house I would pay a couple of hundred more, plus my mortgage reduces over time, whereas rent increases.
We bought the house 3 years ago on a high mortgage rate too

True here.

My mortgage is £1150pcm, rent of my house is in the region of £1800pcm

I’m selling but had a rental valuation as part of weighing up options.

This is why so many landlords are selling up in large parts of the country.

It always used to be the case that, even if you couldn't quite cover the rent, you would make a leveraged gain on the value (so buy a £500k house with a £450k interest only mortgage. 5 years later the house is worth £600k so you sell, meaning that you make £100k profit on a £50k investment).

Prices in lots of areas are now falling in real terms so it no longer works.

This. Just the mortgage where I am (SE London) would be cheaper than rent, but as a homeowner you also pay for ground rent, service charge (if leasehold) and maintenance, all in all this makes it more expensive than rent.

We live in a flat and our mortgage is about 840 a month. The flat downstairs (pretty much identical) is currently being advertised to let at 1125 per month, so definitely cheaper here.

Rent here is around £800-£1000 a month. My mortgage is £500pm… but when you factor in deposit then yeah not cheaper until further down the line I suppose but at least the money is still mine with a mortgage

True in my area. Houses £1200+ to rent, my mortgage £850

We bought our end terraced house in 2021 and even after the disastrous Truss budget, our mortgage is still over £100 less than the rent on the almost identical end terrace on the next block. It very much depends where you live, but rents in our Lancashire town have jumped massively in the last few years and families are struggling as a result.

So you agree it's not a sustainable business model long term.

Thus defeating your point.

We pay £750 a month mortgage on our 4 bed detached home. My next door neighbour used to rent her 3 bed detached home for £770. She had the opportunity to buy it and took it.

I don't think it defeats my point, I was just making the point that some years LL will lose.

I actually lose on one last year.

Not the end of the world.

I live in a 3 bed terrace, my mortgage is £670, the house 2 doors up which is identical to mine rents for £1200. I only paid a £12k deposit and Ive been paying the mortgage off for 10 years. So even if you added on £1.2k each year to cover the deposit, owning is much much cheaper. Im in Manchester, so not some random place in the middle of nowhere!

My friend just bought a house which is £100 a month cheaper than renting. The new house they purchased is a bit bigger than the rental and nicer all round. She did a 100% mortgage in the end too, so cant even say its because the deposit was large.

I have read that older people on the aged pension are better off if they own their own home.

Think it depends if they get a council/HA housing it may be better off not owning with risks of upkeep of owned house. Swing and roundabouts.

Pirvate rental vs homeowning then I think it's clearer homeowning is better though again depends on paying off mortage before retirement is is in some area happening less often than once did.

I thought it better we owned post retirment but then expect my pension to be low - so not having a large bill every month and an asset can potentailly exchange for a cheaper one freeing up capital seems sensible. Plus we may still get a few years mortage free before retirement and that extra can go to savings.

My wife's youngest was working for NMW & paying about £500/month for a one bedroom flat. He rented for five years paying about £30,000 in total because he couldn't get a mortgage. He moved to a higher paid job & was then able to buy his own much nicer one bedroom flat with a 10% deposit & is now paying around the same in mortgage repayments as he was in rent.

I just remembered that shortly after he moved in the guy renting an identical flat across the hallways was given a Section 21 & the flat advertised at £800/month

But it would be for most if not all LL if they make a loss year on year, meaning that without charging sufficient money for a LL to cover a typical mortgage, to fund repairs etc and to make a profit it's impossible for renting to be cheaper than buying.

My DD was looking to rent a house at a cost of €1,800pm (Ireland). She bought in the same area instead and her mortgage is €1,000pm. There's a house in my locality for rent at €2,650pm (for a 3 bed semi!!!). A mortgage on the same house would be around €1,200.

I'm in central Scotland in a flat, others in my block have sold for approx £50k.

Just ran through the figures on Compare the Market, for a £50k mortgage, 0 deposit for 25 years, fixed for 3 years.

It's offered me £280.46 per month with Lloyds. My rent has just gone up to £93 to the COUNCIL. As I get 4 free weeks per year, that works out as £372 per month, or over £100 per month less.

Why do you think it is not true?

In my postcode you could buy a 3 bed, 2 reception, 1 bathroom terraced house with a garden for £175,000. This could be around £800 a month repayment.

£1,200 is the cheapest rent per calendar month for the same size home in the same area.

Our mortgage is cheaper as we bought in 2010, there's no way we could afford to pay the level of rent required these days.

All depends where you live and what mortgage you have 🤷🏼‍♀️ I pay 495 for my mortgage a month but there's similar houses nearby up for rent about £300 more a month

YANBU

It depends on the property but it can definitely be true

I pay £2.3k a month in rent but to buy the flat would be £450k so the mortgage would be 2.3k plus £3k a year service charge, maintenance, stamp duty, legal fees etc then lost investment gains on the deposit. It would take years to break even.

If you are comparing a different property or your neighbours rent now to a property you bought years ago then yes a mortgage will be cheaper but there are circumstances where renting is cheaper.

Believing that buying is always better is what gets people into negative equity

Properties on our street are approx £280k.

Rentals in our row of terraces are approx £1300pcm.

Our mortgage is £800pcm.