Cost of Owning vs Renting

Gigglepig

We are renting at the moment and consider buying. I'm trying to compare the "real cost" of owning vs. renting, since it obviously does not just depend on the rent vs mortgage payment.

Renting
- monthly rent
- utilities
- council tax
- contents insurance

Owning

Monthly costs
- mortgage
- utilities +
- council tax +
- wear and tear/maintenance/saving towards repairs
- buildings insurance & contents insurance

One-off costs
- need to buy own appliances
- may need to buy additional furniture
- removals
- potential overlap/having to pay out notice period on the rental flat
- potential cosmetic redecorating to suit

Have I forgotten anything?

How much would you set aside for maintenance/repairs/wear and tear for a "normal" 3 bed semi type of family house?

What is "normal" to pay for building insurance annually?

kford224

I think we are going to be paying £34 a month for buildings and contents insurance.

I would always choose owning over renting. More security and freedom with the property

Gigglepig

thank you kford. How much would you set aside monthly to cover the costs of maintenance/repairs/wear and tear?

kford224

Gigglepig wrote: »

thank you kford. How much would you set aside monthly to cover the costs of maintenance/repairs/wear and tear?

Hrm, I suppose it depends on the house...

When we applied for our mortgage they said that the average 'day to day' expenditure in the UK was £1400 a month. This is everything apart from mortgage and debt repayments and includes everything else from utility bills through to buying birthday presents and putting petrol in the car.

That might be a good guide. We are doing a lot of work on our house so I couldn't say what the 'norm' would be :think:

Rebob

Maintenance etc varies a lot. It depends on the condition and age of the house. We did a lot of modernisation work when we bought our home 9 years ago and it is starting to need money spending again. It is over 100 years old and works we have had done and need doing in the next few years include pointing, central heating, rewire, damproof course, new kitchen, new bathroom .........

poppy_f1

i paid 300 for the year for my buildings and contents

wear and tear, well the majority of stuff is brand new when i moved last year only thing i may need to buy is a washing machine which was left by previous owner which i can easily cover via savings if needed - i dont specifically put money away from maintenece etc but just into general savings

i made the mistake early on of not carrying the BG cover the previous owner had, tbh it was something i never got round to....until one night i noticed the boiler was leaking so had to pay to get BG to come out then a monthly cost, maybe if i had taken the cover out straight away i wouldnt have had the extra cost or knowing my luck nothing wuold have went wrong with the boiler

a lot of the costs you have listed like decorating and buying new furniture wont be something you have to do straight away and not every year

i moved into my house in July, concentrtated on getting all furniture etc for the rooms that would be used the most ie living room and my bedroom so now i am actually getting round to getting stuff like a wardrobe and drawers for my spare room

you dont have to do everyting straight away, i havent even started decorating my bedroom, luckily tho for me the colour scheme that was there suited me in terms of bed linen but will be giving it a lick of paint and a feature wall papered at some point in the next few months

Kingb4

Gigglepig,
A couple of years ago I did a similar calculation. We sold up several properties (at the peak of the market) and went into rented (to wait for the market to drop).

I found a couple of points in the comparison interesting
1) We ended up paying for a storage unit, as we had lots of stuff and most rented places didnt offer that much storage (garages, sheds etc). We had always fully boarded lofts in houses we owned and added sheds. We paid £70 pcm for a locker the size of a single garage. (This might not be an issue for you, my wide says I am a hoarder!).
2) We could rent a much more expensive house than we could buy for the sam pcm costs. We ended up renting a place worth £300k (it sold just after we moved out) for £850 pcm. The cost of borrowing £300k over 25 years comes out at approx £1600 per month.

Cheers

Gigglepig

thank you for the useful posts.

I am thinking that if we buy, we should set aside some money every month to pay for maintenance/repairs which may crop up down the line... but I haven't got a clue how much we would need to save in order to have a reasonable amount available for bigger repairs.

LittleMissAspie

Gigglepig wrote: »

- need to buy own appliances
- may need to buy additional furniture
- removals
- potential overlap/having to pay out notice period on the rental flat

These are things you might need to pay while renting too. Not all rentals come with white goods (majority do in my experience but not all), a lot of rentals are unfurnished and you would have to pay removals if you move rental, plus have an overlapping period of rent.

I'm making spreadsheet comparing renting vs buying with my own real life costs. It won't come to a conclusion for at least 5 years though.

As for maintenance well we have nearly finished saving a lump sum of £3000 for emergencies, then we also budget £200 a month for decorating, furniture, "nice things" etc. We want to decorate the whole house including replacing the carpets and bathroom (kitchen is already modern) and we need new furniture for every room as we spent as little as possible while renting.

dkmax_2

Gigglepig wrote: »

We are renting at the moment and consider buying. I'm trying to compare the "real cost" of owning vs. renting, since it obviously does not just depend on the rent vs mortgage payment.

It isn't quite as straight-forward a calculation as you might think. There are risk/reward factors associated with an asset that can vary in value especially when the timing of any future sale may be out of your control. There's also the opportunity cost of the deposit which gets soaked up into the property - although it is likely you would be saving a deposit anyway while renting.

You might also like to attach financial value to having more control over your property - not just in terms of hammering nails into walls and having as many pets as you can bear - but also the fact that you don't have to worry about whether the LL is going to give you notice (with a potentially disastrous move-out date) or increase the rent by 20%.
Stability (or at least more stability) can have a high value.

As for your once-off removal costs, I would think it more likely that in the long-run you would have to move more often as a tenant than you would as an owner, although you may own less furniture.

It's a tough call. Lot's of factors to measure, some dependant on future uncertainties. I know given my own present circumstances I feel significantly better about being a mortgagor rather than a tenant.

wotsthat

If you are looking at long term cost of ownership then it's highly unlikely (I think near impossible) that renting will be cheaper than buying. Once the house is paid for then you will be mortgage free but the renter will still be paying rent for the rest of their lives.

Don't forget that as a tenant you are likely paying a mortgage already - your landlord's. Why not make capital repayments on your own rather than somebody else's house?