Renting v Mortgage

smcqis

Hi, a mate of mine commented the other day on renting v mortgage and got me thinking on it as I have always been of the opinion that renting is wasted money as better to pay similar (or a little more) on a mortgage and eventually own your house, however is this solely the case? Im not too clued on about this, hence why I am asking you guys to see if you understand what im saying.

For example, if I was to buy a 200k house (approx deposit of 50k) then my repayments would approximately be around 750 - 850ish (including insurances) over 25 years with most of this interest. But lets say in theory my job isn’t safe and I wouldn’t want to buy with job uncertainty.

So if I was to rent a property for approx 500pm, does this not approximately equal the interest I would pay on my mortgage then technically its not wasted money if I could save in the meantime (while renting) to add to a deposit and thus reducing interest I would have to pay in future? If I couldn’t save and add to a deposit then technically it would be wasted as I would only have to pay the interest in the future anyway.

This is obviously based on interest rates staying the same over lifespan which is obviously not going to be the case. Interest rates will rise and obviously to rent now would miss out on low interest rates but hopefully in general this makes sense.

Whats your thoughts on this, in that do you agree, disagree or have anything to add? Or is renting solely wasted money to those who have options such as buying?

CloudCuckooLand

Renting is not solely wasted money. It puts a roof over the head of the person who, for whatever reason, is not at the stage where they wish/want to buy.

The maths has been done to death over the years. But there are so many variables that it should not be reduced to a simple mathematical decision.

Some people who bought now regret the property location/cost/mortgage/negative equity etc. Some who rented regret it.

There is no one-size-fits-all answer.

I'm sure 'search' will find you plenty of old debates about it, while waiting for more recent opinions.

Thrugelmir

If you wish to purchase a property. Buy what you can afford, i.e. your starter home. Then at least your on the ladder. At a later date you can buy your dream home.

Yes, you can rent a 3 bed semi cheaper than buying in many areas. But why outlay on rent or interest on a property thats too big and high expense for instance. Take the slow easy route and build your equity up.

Gorgeous_George

If I could rent a £200k house for £500 per month, I'd do it. I wouldn't have security of tenure and the rent would probably rise year on year but I'd have someone to call when things went wrong (boiler, dippy tap, there is a long list) and they would pick up the bill. Lose my job and I don't fear repossession but could be evicted if the rent couldn't be paid. I'd rather be evicted than repossessed. I'd be able to move at minimal cost if I rented and found a new job in a different area.

There are pro's and con's for both renting and buying but long term, if you plan to stay in a particular house, buying should be best.

GG

DVardysShadow

smcqis wrote: »

... Whats your thoughts on this, in that do you agree, disagree or have anything to add? Or is renting solely wasted money to those who have options such as buying?

As the others have said, it is not always clear cut. The thing you have missed out in your analysis is the change in house values over time. It does not affect renters, but it affects buyers.

For buyers, if you argue that a mortgage is cheaper than renting, you need to factor in the fact that you are also losing a % of the whole value of the house over time in a falling market and gaining a % over time in a rising market. This factor is often far more significant than the difference between rent and mortgage, in either direction.

dippy

Thrugelmir wrote: »

If you wish to purchase a property. Buy what you can afford, i.e. your starter home. Then at least your on the ladder. At a later date you can buy your dream home.

Yes, you can rent a 3 bed semi cheaper than buying in many areas. But why outlay on rent or interest on a property thats too big and high expense for instance. Take the slow easy route and build your equity up.

Being able to rent a 3 bed semi for cheaper than a starter home is an indication that house prices are way out of line with regards to rent.

By renting an equivalent place for a lot cheaper than the mortgage interest, you are actually saving a lot more money than the equity you'd be building by buying (assuming no house price increase in current climate). If you buy in a couple of years, you'd be in a much better position equity-wise than somebody who's bought.