Cost of Owning vs Renting

franklee

HAMISH_MCTAVISH wrote: »

This handy rent versus buy calculator may help as well.

http://www.greengem.co.uk/Rent_V_Buy/rent_v_buy.php

That calculator totally ignores the income a tenant receives on their deposit whist renting. My deposit is spread about various accounts fixed for between 4 and 5% and a chunk in national savings at RPI + 1% tax free. That gives a significant income that ought to be included. Even ignoring that income, put in house price inflation at nowt and a substantial deposit and renting pulls ahead over the short term. The calculator figures are deceptive as the total spend of the deposit is treated in a totally confusing way, OK you spend the deposit upfront but unless there are large house price falls it's still there if you sell. Overall that calculator is very flawed.

Over the long term I'd buy but not yet if there are going to be house price falls short term.

Your rental yield in the example is way higher than my real life example which is house "value" 250K, rent 800pcm, almost the default figures for the calculator.

HAMISH_MCTAVISH

. Over the long term I'd buy but not yet if there are going to be house price falls short term.

Some of the web sites advocating that approach have been saying that since 2002.....

Your rental yield in the example is way higher than my real life example which is house "value" 250K, rent 800pcm, almost the default figures for the calculator.

The current average house price is £162,000

The current average rent is £690

Those were the figures I used. Obviously individual circumstances may vary.

HAMISH_MCTAVISH

franklee wrote: »

That calculator totally ignores the income a tenant receives on their deposit whist renting. My deposit is spread about various accounts fixed for between 4 and 5% and a chunk in national savings at RPI + 1% tax free. .

For most FTB-s it's marginal at best.

2% net return after tax on a 20K deposit is just £400 a year.

[Deleted User]

kford224 wrote: »

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

Security - as long as you don't lose your job at any point or else the bank will be banging on your door of your 'own' home.

Freedom - as long as you will not have to urgently move for employment or any other reasons.

Mojisola

Once you pay your mortgage off, there's no more monthly payments. Rent will still have to paid until you die.

HAMISH_MCTAVISH

[Deleted User] wrote:

Security - as long as you don't lose your job at any point or else the bank will be banging on your door of your 'own' home.

SMI scheme. Buyers get benefits just as renters do.

And banks are a lot more willing to work with you than landlords.

Don't pay mortgage for 3 months = bank willing to negotiate.

Don't pay rent for 3 months = homeless.

Freedom - as long as you will not have to urgently move for employment or any other reasons.

So nobody should ever buy a house in case they have to "urgently move".....

Bonkers.:eek:

Londonsu

Mojisola wrote: »

Once you pay your mortgage off, there's no more monthly payments. Rent will still have to paid until you die.

That is so true - I paid of my mortgage in 2008 and now live rent and mortgage free.

But the problem is it takes 25 years or so to get into that situation and a lot of young people cant envisage having to wait for such a long time to reap the financial benefits - they want it all and they want it now.

I have lost count of the posts I have read on this board and others like pricedout and housepricecrash from whinging FTBs who state 'why should I pay a mortgage for 25 years to own a !!!!!! home in the Qrse end of town when I can pay the same amount in rent and live in a better property than I can ever hope to buy'.

The shortsightedness (sp?) staggers me at times.

Speaking as someone who did indeed pay a mortage for 25 years for a flat in a rough part of London, only for the area to become trendy and desirable when I came to sell, so I was able to sell for a lot more than what I paid for it (including interest) I cant understand the logic.

As for moving for new job etc, I have also just done that, the equity I got from my flat sale enabled me to move to the Isle of Wight and buy a property for cash and still have some left over.

System

It depends on the circumstances and area. There is no real general answer to that question.

Procrastinator333

HAMISH_MCTAVISH wrote: »

For most FTB-s it's marginal at best.

2% net return after tax on a 20K deposit is just £400 a year.

Anybody stupid enough to be getting such meagre returns is irrelevant anyway.

The_Blue_Hatter

HAMISH_MCTAVISH wrote: »

And you're one of the most notorious crash rampers on the site, so they'll not get an impartial opinion from you either.

Besides, the figures are what they are.

It is VASTLY cheaper to buy than rent over any decent length of time. And that's beyond dispute.

A good example is my wife's Nan. She rented the same house for over 40 years until she died!! If she had bought it the mortgage would have been paid in 20 years (easily) and she wouldnt have had to fork out 20 years in rent. I would roughly say she spent £120k on rent when she could have been mortgage free.

My Nan on the otherhand bought her house in 1959 (and still lives there) and has been mortgage free since the mid seventies and now has a home worth roughly £190k to call her own.