Where is our incentive to buy a house?!

[pinkfishbluefish]

We are fortunate to have the option of really cheap rent (just under 600pcm). Price is fixed and will not fluctuate for at least another two years. We have a lovely little home, everything’s recently refurbished and modern. Very much a 2 up 2 down home, the rooms aren’t huge but we have two bathrooms and a large garden.
We are on average incomes that, 5 years ago wouldve bought us a 3 bed home in a nice area but we were 18 then and in no position to buy obviously! We work in the same profession and incomes are similar to that of a teacher. If we were to buy the house we are in, the mortgage repayments at current interest rates would be about £1200-1300. Over double what we pay in rent! I cannot comprehend that. We could afford it, just, but we would have significantly less disposable income and not much to save with.
To buy the same size house now we’d have to compromise on area and move away from the suburb we are in. We feel secure and can relax where we are as crime is very low. Everyone looks out for each other and works hard, there’s a real community feel and schools and amenities locally are great.

We can keep renting at this price or pay 2x the amount if we bought an identical place and in doing so have hardly anything for fun/holidays- the things that make life fun- all just to pay off a mortgage so we will own a small property of this size in 35 years time. Forget a bigger terraced house or semi. And in and amongst the horrendous repayments we’d have a bill to foot if the boiler broke, or the oven packed in. What is our incentive to buy?
Other than, as time goes on we will need a larger house than this. It does work for now and we are space savvy. We’re hoping to TTC next year and could happily afford a child within our budget but if an additional 800 from the disposable income pool were to go on a mortgage, things would be so much tighter especially when maternity leave came to an end and extortionate childcare costs kick in.

Am I missing something really obvious or is the system just not designed to help FTBs anymore? I know compromises have to be made but believe if you’re working things should be easier than this!

No, you aren't missing anything. If you have a good, secure house with low rent, stay there for now and see what happens to house prices in the next year or two. Save as much as you can in the meantime.

I expect you will get other replies saying housing is a great investment and house prices all go up though.

It sounds like you have a great set
up. For us, our mortgage was cheaper than our previous rent (and for a bigger place). But appreciate that’s not always the case. We did it up and just sold with a significant profit. With buying you do gradual obtain an asset

I bought because I wanted the security and control of owning my home and having the mortgage paid off before retirement.

i was willing to live in a small apartment for a few years in my twenties and have worked my way up the property ladder.

I am in my forties now and have launched a refurb project on my dream home.
I love building my ideal place.

but everyone is different - there is no pressure to buy and no rush. If you love your home now and you have a good lifestyle enjoy it. Build up a good level of savings and then see what you want to do in a few years.

the first few years of being a home owner can be brutal financially.

I'm in a similar position, renting a 4 bed in a fab area for £££s less than the mortgage would be, taken out now.

But I do own a house that xh lives in, and because I bought so long ago the mortgage is less than half of what rent would be. You just need to sit tight and wait til things ease up, and in the meantime try and save some of the difference towards a deposit (but also have fun, you're only young once!)

It's unusual for rent to be lower than a mortgage on a similar house.
Rents go up year on year, and need paying forever.
Inflation doesn't impact mortgage repayments, so they get relatively smaller with time - interest rate rises do impact repayments tho.
You don't run the risk of being given notice to move out (sounds like this might not be a risk for you?).

You loose the ability to move easily, and have to burden repair costs, but equally, you can do what you like with an owned property.

I'd buy if I could (I did buy), for the security as much as anything.

The difference will come later as rents increase but the relative value of the mortgage goes down with inflation.

You are also at risk of having to move while renting based on what your landlord decides to do.

Big cost difference now though so not sure what I would do though.

I mean it’s fine for now but do you not plan to retire at some point? You’ll never, ever own the house you’re paying for so will have to continue paying for accommodation until you die. If you never plan to buy I’d say make sure you have fabulous pensions. You’re only 23 so lots of time to save.

I think you nailed it in your opening paragraph... you have really cheap rent of 600 a month. What is the market rent, 600 a month rent house would probably cost about 100-120k to buy... which would be about 600 a month on a 25 year mortgage

@Alexalee yeah we’re fortunate with the landlord situation! I think if it was market rate it would be double as house is worth about 235/240

Don't buy a house then. It's a life choice not some kind of entitlement.

Let’s say you are 25 and buy with a 25 year mortgage. From the age of 50 you are living rent free, potentially for 40 years. Also as house prices and therefore rents go up your mortgage payments do not. You would also have a house to leave in your will.

That's a great rent. Who do you rent from? It's great that it's fixed for a couple of years but I'd be nervous to make long term plans based on the low rent as you don't know what will happen.

What happens if you get pregnant while in the rental but the landlord wants or needs their property back? Once you are paying for childcare or not working then everything could turn into a stressful disaster very soon.

I think I'd be tempted to save like crazy for a couple of years and only have minimal fun money. I'd leave ttc a few years until you own a house.

If you a renting from a close dependable family member then obviously you've less need to be worried about security

So you're answer is that you are paying well under market rent, as someone else said save hard and look at your options in 2 years, could be a very good time to buy

For me it was the security of knowing I wouldn't be evicted on a whim / LL selling up etc. Control over decoration. Intrusive house inspections. Unannounced visits by gas fitters etc (24hrs notice seemed to never arrive....). No one else with a key to my home unless I gave it to them.

Definitely it is the control issue. I've seen my mate hysterical twice in 3yrs because their landlord was selling up and giving them notice. He has MH issues and has housing benefit, so the prospect of how on earth he would get a new home really frightened him. The first time they withdrew it from the market. The second time they sold to another investor who has kept him as a tenant, but he'll always be at risk of this happening again. We have him on the council list now, but he's very low priority obv.

Pretty big assumptions in this post.
The OP has said that she could be a tiny house in a not very nice area a double her monthly payments. It doesn't sound as if the tiny house could be a final/ forever house for them as they want a family so she, along with most other people, is very likely to take on another, possibly bigger mortgage later in life.
Also assumptions that house prices will continue to rise and that rents will continue to rise and that mortgage payments will not. Mortgage payments are clearly rising rather a lot at present.

You are only viewing the mortgage as unaffordable because your rent is unbelievably cheap.

Most would be used to paying so much in rent the mortgage payments would be similar. Many young couples live with relatives to save up for their deposit.

Every time the government give FTB help they are actually helping to prop up an overinflated property market. Prices need to reduce.

I am you 10 years down the line. Our landlord sold up (low rent, nice area, lovely house), due to our incomes we could no longer afford rents in the area and childcare for DD, we have had to leave our jobs and move to a different area 2 hours away. Still can’t find anywhere to live due to ridiculous rental shortage so the 3 of us are piled into one room at a family members house while we search/find jobs/find childcare. Their house is also rented and landlord isn’t keen for us to be there but we would be completely stuck otherwise.
we were no means lavish spenders and have always saved but it’s never been enough to buy. I dream of the security of home ownership and no longer being at the mercy of a landlord and an insecure rental market. Enjoy your current rental place for sure but make a back up plan and save as much as you can

Yup, this is what I think too.

It only looks so unattractive to by a house because the starting point is an abnormally low/secure rental.

amazing you have such good rent.

I’d hang about till the market falls at least. People jump on buying very early - it’s understandable, but the lack of flexibility isn’t good for a young work force, plus you have much less money for travel and fun.

A rented house will always be your landlords property. You're paying his/her mortgage if they have one. If they decide to sell or the property repossessed (happened to a friend of mine who was renting from a private landlord) then you're homeless.

Personally I wouldn’t buy atm. But I would save hard and in a year or 2 take the plunge.

Whilst the £600 per month is affordable at the moment it is not always going to be at that rate and the more the government try to make it harder for btl landlords then less properties are going to be available. Which means prices will rise,
When you do want a bigger place you may find you are paying a mortgage amount just to rent or there just might not be a place to rent.

I was renting before Assured Shorthold tenancies and restrictions over renting a place out were removed and the places that were available were few and far between and for the most part pretty horrible

I know a few people who have stayed renting over the years. The issue is that if you add up the amount they have paid out in rent and continue to pay out in rent. They could have bought the place they are in 3 times over.
If you buy, at some point the paying out on mortgages stops but renting is forever.

Think about how many repairs you could do on a house for £600 per month because the person who owns your property at the moment, you are paying their mortgage on it and also creating a slush fund for them to be able to dip into if something needs repairing

landlord could sell and rent rockets / you need to move...you never know....unless you have some very long contract....it wouldnt be a rent regulated tenancy now either....they went out in the 1980's.

But house prices overall do rise.
There are dips and rises but overall it is an upward trajectory.

Mortgage payments at some point do stop
Rent payments never stop

Even if the tiny house isn’t her final forever home When she sells to move to somewhere bigger she takes with her the amount of money she has paid off the mortgage, the deposit and the amount the place has gone up in value.

Whilst we have too many people for not enough housing rents and property prices will still have that upward trajectory

At the moment I think it is all going down but in 2-3 years it will start to rise again and even at the lowest price this dip produces it will be more that the height before the last drop. IYSWIM

I wouldn’t recommend buying atm without looking at if you could afford to pay a mortgage if interest rates rise to 7 or 8% as I think mortgage interest rates will be rising a lot
But I would look at saving with a view to buying when we start to recover

Around my area £600 per month will not get you a room in a shared house.

@rainingsnoring but the reason I made those assumptions was because the OP sounded like they were considering staying in their current very small house. I was trying to compare this with.