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!

Buying something cheap to rent out sounds an awful idea to me. Lose your FTB status, gain all the hassle and financial risk of being a landlord, face additional stamp duty once you buy the house to live in or have to potentially evict and sell up to fund own house - all whilst house prices are flatlining or falling.

I think having your own home is great - but with a secure and cheap rental in a nice area, and still being young, given how crazy the housing market is right now, unless I came across a house I really loved, I'd save as much as possible and reassess in a year or two time

Thanks all - interesting blend of opinions on here that’s for sure! It feels impossible trying to time the market and we are happy here now and would be with one DC, just know we can’t stay here forever!

Have you researched childcare fees? They might help with your decision making. Mine is 5 days a week and 800 odd a month but with funded hours. Can you afford to buy/rent AND spend up to a grand more?

@Fritilleries thank you - good point! And yes, in fact if anything I am very guilty of doing too much research to fully make sure any decision is the right one.

Could very comfortably afford those fees whilst renting, without having much impact on disposable income.

If we were paying 700+ more on a mortgage on a property of the exact same size, we could probably afford fees - just - but it would mean we’d have little to zero contingency fund or disposable income for holidays and treats etc. Hoping interest rates come down as then I’m guessing it wouldn’t be as much as 700+ more to buy the same place as opposed to renting!

My family with young children rented a lovely house with a great landlord.Never any problems until he needed to sell after 11 years.There was nothing they could afford rents had doubled.They were homeless and have spent 6 months in a hostel.They hope to be offered a housing association property one day.Iwould save as much as you can and buy even shared ownership.Rentals are a gamble.

I think unfortunately renters are always looked down on which I find really frustrating.
I rent , I also am lucky because it's incredibly cheap ( £400 pcm ) 2 up 2 down 1 bath small yard .
I rent from a big HA and have lived here for 20 years.
New kitchen fitted 3 years ago CH 5 years ago . Gas checks every year , i can decorate however I like .
I am getting a housing stock check next week ( done at least every 4 years) to see if anything needs to be upgraded, I am hoping for a new bathroom but I may be been optimistic!

I realise i am very lucky and not many are in the same position as me and yet loads of people tell me I would be better off buying .

You are,23
No rush

i will just say that it’s no longer true that a mortgage is cheaper than renting. Not with interest rates the way they are. So I do wish people would stop trotting that out!

My mortgage on the btl property is £300 a month the tenants pay £800. If they bought it it would cost them £650, hope that helps.

Well we’ve almost paid our mortgage off, so we’ll own an asset worth 500k+ and never have to pay mortgage or rent again. You’ll have to pay rent forever. How will you afford to pay it in retirement?

I’m talking about new mortgages with current higher rates, not existing ones.

So am I
My BTL mortgage costs more than a residential mortgage so it might even be less.

My DS and his GF are the same age as you and have been renting since they were 18 paying £700 pm but also saving for a deposit.

They've just had an offer accepted on a house, their mortgage will be £1500 a month but they are going ahead based on the fact that £1500 is equal to the rent and savings they've been paying for five years. They will get a foot on the property ladder, have an asset and can always remortgage to a better rate in the future as their LTV improves.

I think they're very wise.

But it won’t stay at £600 per month

To be fair locally, rents have not risen a great deal. They’ve jumped from 650 and around 2002 to around the 850-900 mark now which is disconcerting because I would imagine the house in but if it hasn’t gone up accordingly.

But it’s more the house price inflation if it’s some point you decided that actually you did want to buy it’ll just be so far out of reach for you. It will be impossible.

Very very unusual to have rent substantially below a mortgage cost. And 600 for a 2 bed house is incredibly low. You’d normally only see that in cheap areas of the country and as such house price would be lower.and thus mortgage.

so I’d max it if I was you, stay put, save save save and capitalise on the situation,

why is your landlord renting to you at what must be a third of market value?

All I would say is hold off on TTC for a few more years if you do want to buy your own house and save every penny you can now.
in two years time you might need to move due to the landlord wanting to sell or something at which point hopefully you can buy the house you want in the area you live.

however a baby will affect your affordability and likely mean you wont get approved for the mortgage you’d need if you’re also paying the same amount in childcare or one if you isn’t working/ has reduced your hours.

I think if you’ve been allocated a council house, in todays climate there is good reason for it . Unless the financial circumstances have changed surrounding why you were allocated it, im surprised anyone is telling you to buy. But if you can buy and can afford it, then due to the shortage it would be better for you to buy and let someone else in need now have the property

I was paying below market rent for my house. I had no incentive to buy, it wanted to get on the ladder. Glad I did. As the mortgage is cheaper than the rent. And the prices round me have skyrocketed.

I bought the house I rented direct from the landlord.

Were in exactly the same position op, we're really lucky to have an amazing landlord who's told us she's not looking to profit from our rent it's purely her pension pot. she just wants the house in good hands and for someone to be able to grow their family here, which we have plenty of space to do for now.
Dsis has just bought a house round the corner one bedroom bigger than we currently rent and her mortgage is almost 3x what we pay in rent, we simply couldn't afford it at the moment.
We are saving as much as we can so we can hopefully afford to buy in the future but I'm glad we don't have to worry for now.

The whole point of becoming a homeowner is security in later years. It might seem a long way into the future but imagine being over 60, possibly with declining health, battling to find somewhere to live because the LL is selling.
Its true you will probably have to cut back on luxuries, meals out, holidays etc but the knowledge of nobody being able to kick you out is worth it

Lots of useful comments here but if you do want to buy it's best to do so before having children as your joint income takes a massive hit one way or another after (childcare, reduced hours, often a combo of both). You would get approved for a mortgage that would be out of reach after.

i personally would stay low rent for the 2 years you think the rent is secure and save the rest for deposit. The incentive is an asset an security - also don't compare rent and mortgage costs - compare the amount you would pay in interest versus the rent as this is a fairer comparison as the rest of the mortgage cost is buying u the asset

In a very similar position! Cheap rent at £675/month- moved in just before covid and were incredibly lucky to be chosen for our home...we were the first of 8 applicants to view it in just one day and were straight down the agent with our forms after, which luckily paid off and they went with us.Still feels like we won the lottery with it tbh, as its a lovely 3 bed family home in a secure, pleasant, quiet and fairly affluent area- local school just around the corner which DD5 is at is OFSTED outstanding and great reputation.Our neighbours are also really good, especially our NDN.
To get a mortgage we would have to move to a town on the coast 15/20 mins away where I work, which has it's fair share of problems (even if the area we bought was in one of the nicer suburb parts, the high schools and main town still would be an issue)
We would have all the added upheaval, cost and inconvenience of moving to be living in a less desirable and convenient area, would need to foot the bill for lots more ourselves in terms of repairs and renovations, and we would be paying double what we pay now monthly...with no savings either.
I work part time currently so a mortgage wouldn't be affordable for us anyway until 1yo DD starts school and I can go full time, so sitting on some savings for now 'just incase' but unless house prices and mortgage rates drop significantly in the local area so we can stay here, I don't see us buying anytime soon.