Maths of Renting vs Buying

StevieJ

michaels wrote: »

Next the tax/benefits system needs to be considered, pensions are already mentioned (tax advantages but loss of flexibility) but other benefits/costs may also impact (eg those who are retired without assets will be housed by the state, those with assets will have to pay for residential care).

This really is a key consideration for the lowly waged.

StevieJ

Joe_Bloggs wrote: »

Hamish have you considered these cleaning slippers. They are a boon for those with wooden floors. They also do a dark blue colour. If you can manage a chasse between rooms then they are a bargain.
J_B.
Even more appropriate.

Great idea for a present

nickmason

wastedtalent wrote: »

But you also own 500k worth of property?

There's definitely something missing in the calculations.

As others have mentioned, it's not obvious how best to account for that property, as you can't sell it without needing another home!
Excluding assuming (real) hpi - which I've explicitly recognised as a different decision/educated gamble - and ignoring any IHT implications, it can be considered at 100% of today's value.

So yes, the £500k is relevant at the end of the 58 years that (arbitrarily) Loughton chose for the term under consideration, just as Loughton knocked £175k off the cost of buying. My point is that the (compounded) aggregate of savings from renting, minus dissavings of renting once mortgage is paid off, still seem to point towards buying (in the case of these figures, which others have noted are more favourable to renting than might be the UK norm).

nickmason

Engeroosi wrote: »

At the end of the day if the monthly cost of a mortgage is less than the cost to rent the same house then I would always rather pay the mortgage, at least after 25 years then you will own it and have no mortgage or rent to pay!!!

Oh - absolutely! In my experience (where I've been able to rent at low yields), however, the equivalent mortgage is more than twice the cost of renting.

And rent is only going to increase where the mortgage payment will remain roughly the same depending on interest rates. As a renter you still have the same bills to pay with regards to council tax, energy bills and you still have to look after the property, ie maintain the garden.

nickmason

geneer wrote: »

In the long run buying is less expensive than renting? Not really earthshattering news.

Actually, not always true. Exactly what this is showing.

Of course buying after a crash rather than at peak is less expensive than renting too.
Oh, and buying at peak.

A no less approximate calculation was done recently.
It was demonstrate that a 20% reduction in your average house price roughly pays for at least a decade of rental costs.

I've deliberately tried to keep the calculations neutral on house price variations.

nickmason

Joe_Bloggs wrote: »

Hamish have you considered these cleaning slippers. They are a boon for those with wooden floors. They also do a dark blue colour. If you can manage a chasse between rooms then they are a bargain.
J_B.
Even more appropriate.

I'm sure that I saw this in Viz a few years back..... Fact is stranger than fiction....

wastedtalent

Another couple of thoughts, buying means building up equity, which means you can move up the ladder with a bigger deposit and then a mortgage payments well below rental value, which will then work out cheaper than renting a house of similar size.

Also, when you want to downsize, later in life, you will release some of that equity in cash, and still have enough to buy a house outright.

HAMISH_MCTAVISH

Nick, did you adjust for inflation on rent but locking in a house price at today's level?

Or did you just assume constant rent and house prices at today's levels to simplify the calculation?

As rent will increase with inflation whereas the value of a mortgage will be eroded by inflation.

heathcote123

Kennyboy66 wrote: »

Utterly delusional, and it makes me wonder if you own a house at all, however a rough list just from the last few years.

Guttering repairs (original cast iron).
Window repairs (original lead lights).
replace lead water pipes inside & out.
New boiler.
New roof on garage
Paint exterior house
Replace fence rear and side garden
Decorating.
New fuseboard & minor electrial upgrades.
Replaced windows at rear of house.
Replaced window sills on original windows at front.
Get tree surgeon out to sort very old trees out.
Blocked drain call out & minor repairs.
Replace drain section.
Decorating inside
Replace pebble dash rendering (falling off).

Not including major stuff done 5 years ago (new kitchen, bathroom, some structural repairs)

And got a list as long as my arm of stuff to do over next few years.

And our house looks "well lived in".


£1000 a year would barely cover window cleaner, annual boiler service, ground rent (leasehold), removing debris from gutters each autumn & minor bits and bobs.[/QUOTE]

Well i've owned for the last 4 years and have spent approximately £0 on those bits. I don't think either of us are exactly typical examples though...

Niv

nickmason wrote: »

Oh - absolutely! In my experience (where I've been able to rent at low yields), however, the equivalent mortgage is more than twice the cost of renting.

IMO, the area you live in and when you buy/bought really makes a massive differance.

I purchased my first house in ~2000 with a 105% mortgage. The cost of the mortgage was ~£400. The same house would cost the same in rent.

I have now sold that house (for double what I paid for it) and have a 15year mortgage at ~£600. To rent that same house is £600pm.

Even now (after a casual look at current 'for sale' process) I cannot forsee a time in the near future where it would be cheaper to rent rather than buy. Ofcourse house prices 'could' crash and rents 'could' dive, but trying to remain realistic here by using factual evidence rather than spnning any agenda.

Did a quick calculation on maintainance over the last six years and it comes to just under £3k with some of that being choice rather than essentail maintainance (e.g. insulating the garage ceiling to reduce drafts).

Niv