Buying Cheaper Than Renting in 75% of UK

Procrastinator333

chucky wrote: »

your repayments are higher then. i understand your logic but not convinced by it that's all.

what has more downside? the wait to see what happens then buy or the buy and be settled?

I will post an example later. Repayments are not larger if the renter saved the difference.

Agree it is then a choice on what is the bigger risk to the individual, but it is then an informed decision.

chucky

Procrastinator333 wrote: »

I will post an example later. Repayments are not larger if the renter saved the difference.

Agree it is then a choice on what is the bigger risk to the individual, but it is then an informed decision.

please don't, i'll take your word for it. it's not that important - the responses you'll get won't be worth the effort that you'll be putting into it

Idiophreak

chucky wrote: »

your repayments are higher then. i understand your logic but not convinced by it that's all.

what has more downside? the wait to see what happens then buy or the buy and be settled?

The repayments *aren't* higher though, so I don't think you do understand the logic...

If you take a mortgage, in year 1 you might repay £100/month of capital, but pay £600 of interest.

At the end of the year, you will have £1200 in the house.

If you can rent the place for £600, you can just save the £100/month you would have been paying in capital.

At the end of the year, you will have £1200 in the bank, which you could then put straight into a property. And take 1 year off the potential mortgage term in doing so, without increasing repayments.

the_flying_pig

i just had a quick look at the actual figures.

http://www.zoopla.co.uk/rentbuy

i don't know other areas well but the supposed London [one of the areas where it's supposedly cheaper to buy than rent] average monthly 2-bed rental of £2,155 is really very high indeed.

anything above £400pw for 2 beds and you're getting into fairly prounounced des res territory. even the [ridiculously generous] new HB cap for 4-bed places is only £400pw. london's median wage is a touch over £32k... such people [especially the ones who only live in 2-bed places] are clearly not going to be spunking £26k p.a. on rent

i wonder if the numbers aren't maybe just a load of old rubbish? after all, there is no equivalent of land registry or even haliwide for rents... perhaps the sample for rents is tiny and somehow biased towards more upmarket properties?

chucky

Idiophreak wrote: »

The repayments *aren't* higher though, so I don't think you do understand the logic...

If you take a mortgage, in year 1 you might repay £100/month of capital, but pay £600 of interest.

At the end of the year, you will have £1200 in the house.

If you can rent the place for £600, you can just save the £100/month you would have been paying in capital.

At the end of the year, you will have £1200 in the bank, which you could then put straight into a property. And take 1 year off the potential mortgage term in doing so, without increasing repayments.

i did understand it - i looked at repayments on a 25 year mortgage compared to a 20 year mortgage. interest is the same but capital repayments is higher on a 20 year mortgage than on a 25 year mortgage. which is what you're saying.

but this is going back full circle to not being able to compare like for like. how sure are we to say that you would rent the same property type as you would want to buy and the mortgage would be the same?

for me personally i would rent a cheaper property so that i could save even more to put together a higher deposit.

Idiophreak

chucky wrote: »

for me personally i would rent a cheaper property so that i could save even more to put together a higher deposit.

Personally, I'm one of the 75% who find it cheaper to buy than rent - makes saving for a deposit even easier

IveSeenTheLight

Graham_Devon wrote: »

There was actually some proper research done on renting vs buying.

Worked out that the break even point was 42 years (could have been 40, or 44, though think it was 42).

So basically you could rent for 42 years and break even with the homeowner. It was only after that point that the homeowner would start gaining on you and the renter would start falling backwards.

Was based on the figures when the research was actually done, but included stuff like legal fee's, insurance, repairs, maintanance. Basically all the stuff a mortgaged homeowner would have to pay for, that the renter would not have to pay for. It also included an average amount of moves, think it was 4 moves in total that they used, as every move will cost the mortgaged person a hell of a lot of money. Cost 10k to move? Well thats over a years rentals for the renter for example.

Not going to go hunting the research down, I'm sure we all know and accept that those buying do have extra costs, moving being the biggest one, and it's not good just comparing rent to a mortgage payment.

Graham, it would be extremely helpful if you did search out that link so we could discuss in more detail.

From a personal level, I was renting a 1 bed flat for £340 per month when I bought a two bed self contained flat with front and rear gardens.
The mortgage on the two bed flat was £300 per month capital and interest.

Going by todays rates, the rent would be around £800, so certainly the renters costs have more than doubled as opposed to the buyers mortgage costs. Even if they were taking out a new mortgage, the C&I payment would be less than the rent on a 5% mortgage rate.

chucky

Idiophreak wrote: »

Personally, I'm one of the 75% who find it cheaper to buy than rent - makes saving for a deposit even easier

another thing to think about is inflation.

rents are subject to inflation.
your wages and deposit are subject to inflation - their purchasing power can be eroded.

chucknorris

chucky wrote: »

another thing to think about is inflation.

rents are subject to inflation.
your wages and deposit are subject to inflation - their purchasing power can be eroded.

Whereas mortgage payments merely fluctuate rather than inflate (yes of course we had some rent deflation last year, but that was very unusual)

IveSeenTheLight

Idiophreak wrote: »

Personally, I'm one of the 75% who find it cheaper to buy than rent - makes saving for a deposit even easier

Is this correct.
You find it cheaper to buy than rent.
How does that make it easier to save a deposit?