Is it mad to consider renting over owning?

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DP & I have 5 DCs between us 12yo -15yo. They are all with us EOW and some of the time during school holidays and mine are with us 50/50. We live in a 4 bed house (shared ownership, we own 50%) where the 4th bedroom is a tiny box room & 3 boys have to share the biggest room. It’s not really tenable any more.

We live in one of the most expensive areas outside London & to afford a bigger house we would have to take on a terrifying mortgage that makes me feel ill just thinking about it. However our ideal property has come up for rent for significantly less than the mortgage payments would be on an equivalent property.

Is it totally mad to move from our own home into rented? We’d have to sell as we can’t sublet. It just seems so counter-intuitive but our quality of life would be vastly improved.

Reading the threads on here where renters have been given notice because LL is selling and they now will have moved 3 times in 2 years, or the rent has been increases and they can’t afford it, I don’t think it’s something I would do tbh.

Once you have sold your property it would be easy for money to be dipped into and then harder to get back on the property ladder if you wanted to. Can you imagine having to find rent money as a pensioner v being mortgage free (or almost).

There is a house in our street that is rented out. The monthly rent is double what we pay for our mortgage!

Sounds like it’d be worth it for you. A happy family life is priceless.
I guess long-term security is the biggest concern, do you think you will be in a position to buy a smaller property, perhaps in a cheaper location, once the children fly the nest?

Yes @hereiamagainn the plan would be to move to a cheaper area when they have flown the nest, there’s nothing tying us here except schools.

I do worry about the LL moving us on @ThereIsAnEchoInHere . I hope we’d be disciplined enough not to dip into the deposit fund but who knows :-) I quite like the idea of having no chain when we come to buy again.

It can definitely be worth it! Non-Brit here, currently own but as a nation we have more renters than buyers, so are very aware of the pros and cons for each. You'll be paying rent but won't be paying interest on a mortgage, however you'll still need iron discipline in saving and ideally should invest in another appreciating asset class which for most people will mean index funds. Different if renting is just for the interim of course.

Second, it all depends on the rent to buy ratio where you live, so typical house price divided by annual rent. I used to live in NL and houses/flats then typically went for ca 13 annual rents, so big incentive for buying. South Germany, often 20+ annual rents so much less advantageous. (Granted that's with decent tenant protections in place.)

In your situation I would absolutely go for the rental, maybe keep much of my savings in liquid funds though given the volatility of rental markets just now.

https://www.thebalancemoney.com/using-price-to-rent-ratio-to-decide-between-buying-and-renting-5117070

Ooh that’s such good advice @GrumpyPanda thank you!

That figure where I live is 33! Blimey.

It sounds like a good idea in your situation, but I would just check Rightmove to see what else is available in your target area - it's not such an issue if you live in a larger town or city, but supply is such a problem now that if you were evicted from that lovely house after 6 months or a year, would there be options? How many homes of the size you need are to let at any one time?

It's just because the rental market is awful in so many places. In my town of 30000, there's only one 3 bed house (nothing larger) available, and that came on yesterday, and I expect will be taken over the weekend if recent trends are anything to go by. It took me 5 months to find a home when we were evicted in 2020, dozens of applicants going for each property. It's something that has never been an issue when I've needed to change homes before, when it's been just a case of 'identify preferred house, view house, sign for house'.

There's always been the security issue when it comes to renting, but until the las few years, I've never had to consider before that there might just not be something to move on to! There was Radio 4 programme on the other week focussing on the desperation of would-be renters in Leeds called Hunt for a Home, so it's a city issue too.

Also good advice @ChevreChase I did take a look around & there was half a dozen suitable properties (although not as great as the one we have our eye on). But of course, who knows if that will be the case if we needed to move quickly.

It sounds like it would be best for your family, but I would wait until one Bank of England cycle passes when interest rates are not further increased before taking the plunge. With the latest rise, I calculated that the .25% rise, which put most 5 year mortgages up by .40% (but other durations down), would cost us an extra £184pm on the house we were intending to buy.

Somewhat cruelly, the rises a few weeks ago (which they did anticipating an interest rate rise) seem to target those with equity the worse. 25-40% equity in your house meant .7% rises (we would have only been 5%). My other half reckons mortgage companies are targeting BTL LL's, though I have no idea where he got that from or what rationale they would have to do that.

So, it seems like a good plan, but it would be prudent to wait until the rises stop so you have the best reassurance you can that whichever LL you chose can still afford to rent when interest rates are 5%, which is what the stock market is currently predicting.

As per @GrumpyPanda I live abroad and rent long term. It is the norm in cities in Switzerland. However here we have very strong tenant laws, which currently the UK does not have.
Unless the rental property you are looking at is owned by a large portfolio letting company, I would be thinking very carefully.

There are too many single or ‘few’ property small time landlords who would evict you, for whatever reason. Most landlords are older/elderly and will be selling (allegedly) over the next 10 years or so as they age/retire, their circumstances change, rental laws become stricter or they just want the equity themselves.

What would happen if you took the rental, and this time next year your husband loses his job and at the same time the landlord sells up?

3 in one room is not optimal nowadays, but both myself and one of my friends were both 4 in a bedroom as teenagers and survived.

I’d have a look at rental prices of properties you’d consider in the desirable area. Rental prices have gone up significantly in the past year. Just a year ago we could rent for £400 less! I hope things work out either route you decide to go.

Don’t just think about cost. It also means relying on someone else to give a crap about doing repairs.

Problem is if you have a lump sum sitting there earning interest you will have to pay tax on the interest, although obviously you could max out ISAs.

Could you alternate the weekends you have the children to take the pressure off instead?

(I know it's not ideal, and we stretched ourselves to afford a 5 bed for our blended family with 4 children, but I think renting is precarious and finding a big enough place if your landlord then served notice would be a nightmare)

You could sublet my shared ownership property after a certain amount of time-you just had to ask for permission. The fact that you qualified for this this time, may prevent you from being eligible for similar schemes in the future. Also shared ownership possibly means you can’t afford to buy on the open market (possibly even in a cheaper area). I think you are mad if you give this up to rent, if you can’t sublet i think you need to stay out for all your sales but mainly yours and your children.

Sakes!

It's insane to switch to renting, There is zero security in that and rents are going up and up and are much more expensive than a bought property.
Do you have a garden? I built an insulated summerhouse on ebay for 1K for DS and his friends to live and sleep in because my house was very small. They were very happy in there. And it meant I knew where he was.

Although you've seen a house for rent less than your mortgage now, would that type of property at that price still be available once you've sold your house?

Supply of both houses for sale, and for rent is at a real low. Any properties which come on have many potential renters fighting over them, which can end up in a bidding war if many people want it.

Is it possible to extend your current house at all? Either up into the loft or out into the garden? I'd probably look at doing that, rather than give up the long-term housing security of having my own house to go into a rental for more space.

Thanks everyone, we already have a ‘shoffice’ in the garden & nowhere else to extend.

Alternating weekends with the kids is not an option as they wouldn’t have it! They get on really well & would miss each other.

The point about security is the thing that is giving me most anxiety, but taking on a massive mortgage doesn’t feel much more secure if one of us loses our job.

Feels like we are a bit trapped in our (perfectly nice but) too small home.

how much equity do you have ? Could you afford to buy a buy to let while you rent a home for yourselves?

I’d be worried about renting when you are retired.

We could probably buy a small property to rent @pavillion1 - the market is pretty robust here. I’m only in my mid 40s @Batalax , I’ve got a couple of years to get back on the ladder :-)

in that case you could really have your cake and eat it .. owning a property in your later years does not need to accommodate a large family.

Can you afford to take the rental while you sell your half of the house ?

I wouldn’t want to rent in retirement. If you stick with your house, you’ll be mortgage free by the time you retire. Also, your LL can move you on at any time & you lose all your security.

We’d only rent for 4/5 years whilst the kids are still at school. Our plan would be to buy in a cheaper area once we are not tied to this area for schools anymore. If we find a good place in the area we want to move to we could buy to let there in the meantime (although I don’t really like the idea of renting out a property I’m not local to).