BUYING* BEATS RENTING terms and conditions apply

SecondLegDownIsTheBigOne

Zoopla fiddles the figures to make buying* appear to be cheaper than renting. They conveniently base their figures on an interest only mortgage which would be fine if only they were still available. Their headling should be:

RENTING FROM THE BANK used to be CHEAPER THAN RENTING FROM SLUMLORDS

http://www.zoopla.co.uk/press/releases/buying-beats-renting-in-of-uk-towns/

*You won't actually own your house at the end of the term of your IO mortgage as you are renting from the bank, not buying.

IveSeenTheLight

I don;t generally like the zoopla stats as I've found them to be grossly wrong.
They have in this instance showed areas where renting is better than buying as well as where buying is better than renting.

However if you are looking to make a direct comparison between renting and buying, of course you should consider the mortgage interest vs the rent, regardless if it does not pay off the mortgage.

Take the scenario where a buyer (on interest only), pays the mortgage for 25 years (without paying down the capital) at a lower rate than renting (also will not increase in rent over those 25 year) and then sells the house (let's not consider HPI over those 25 years), they have still saved a substantial amount versus renting.

HAMISH_MCTAVISH

SecondLegDownIsTheBigOne wrote: »

Zoopla fiddles the figures

They do indeed.

They use a mortgage rate of 5% instead of the actual current average of 3.5%, and even then it averages out at 15% cheaper to buy now than to rent.

If you used current actual average rates it would be more like 30% cheaper.

nembot

It would also be wise to factor in around 7-9% would it not? (although unlikely)

Even though this maybe years away, a typical mortgage is over a longer term.

IveSeenTheLight

nembot wrote: »

It would also be wise to factor in around 7-9% would it not? (although unlikely)

Even though this maybe years away, a typical mortgage is over a longer term.

would you also factor in rent increases over the 25 years?

wotsthat

SecondLegDownIsTheBigOne wrote: »

Zoopla fiddles the figures to make buying* appear to be cheaper than renting. They conveniently base their figures on an interest only mortgage which would be fine if only they were still available

It's all well and good finding something you don't like in the calculations and dismissing them as flawed but have you worked out the sums for yourself?

Have a go - you might be surprised.

benb76

When making a fair comparison with cost of renting v buying, you should always disregard the capital repayment section of the mortgage and only compare the interest on the loan with the rent.

SecondLegDownIsTheBigOne

wotsthat wrote: »

It's all well and good finding something you don't like in the calculations and dismissing them as flawed but have you worked out the sums for yourself?

Have a go - you might be surprised.

It is £4.17 per month cheaper than my rent to buy the house I'm living in on an IO mortgage. Fark! I must buy now! It is £200 more per month to buy it on a repayment mortgage. I haven't paid a repair bill in the 3 years I've been renting nor building insurance. Repairs that the landlord has paid for are replacement taps in the kitchen and bathroom, leaking seals underneath the bath leading to a leak through the ceiling to the living room below. All nicely repaired by my top landlord. He asked me last year if I wanted to have the hard floor replaced with carpet, good job I didn't considering the ceiling leak. I might have it done this year though, he's a top bloke. My rent hasn't increased in 2 years. On top of this the net interest on my savings would contribute 24% of my rent, if I chose to do so. My monthly cost of living is way cheaper than before I sold my house.

Nice to be mobile too, I rented a place near to the best performing senior school in the city and that's where my child now goes. Now I just watch the house prices fall and bide my time. In fact the wife and I are currently discussing whether or not to put off buying for another 4 years until the offspring is off at university. Both of our jobs exist in or close to nearly every town in the country, my wife's skills are in very particular demand. Yes, in these times, it is good to be mobile, especially when one has been too prudent to be entitled to benefits if one loses ones job.

Doing the calculations has convinced me that I've made the right choice.

wotsthat

SecondLegDownIsTheBigOne wrote: »

It is £4.17 per month cheaper than my rent to buy the house I'm living in on an IO mortgage. Fark! I must buy now! It is £200 more per month to buy it on a repayment mortgage. I haven't paid a repair bill in the 3 years I've been renting nor building insurance. Repairs that the landlord has paid for are replacement taps in the kitchen and bathroom, leaking seals underneath the bath leading to a leak through the ceiling to the living room below. All nicely repaired by my top landlord. He asked me last year if I wanted to have the hard floor replaced with carpet, good job I didn't considering the ceiling leak. I might have it done this year though, he's a top bloke. My rent hasn't increased in 2 years. On top of this the interest on my savings contributes 24% of my rent. My monthly cost of living is way cheaper than before I sold my house.

Nice to be mobile too, I rented a place near to the best performing senior school in the city and that's where my child now goes. Now I just watch the house prices fall and bide my time. In fact the wife and I are currently discussing whether or not to put off buying for another 4 years until the offspring is off at university. Both of our jobs exist in or close to nearly every town in the country, my wife's skills are in very particular demand. Yes, in these times, it is good to be mobile.

Doing the calculations has convinced me that I've made the right choice.

It sounds like a win win. You are delighted to be renting and your landlord sounds like he's happy with his tenants. You also value the mobility.

Don't forget that you've taken a single month in isolation. To end up with a longer term view you need to consider, say, where rents might be in 10 years as well as house prices.

Any chance that you'd share your sums?

SecondLegDownIsTheBigOne

wotsthat wrote: »

It sounds like a win win. You are delighted to be renting and your landlord sounds like he's happy with his tenants. You also value the mobility.

Don't forget that you've taken a single month in isolation. To end up with a longer term view you need to consider, say, where rents might be in 10 years as well as house prices.

Actually, I have been a little disingenous - if *I* (rather than a fictional cookie-cutter buyer) were to buy the house I'm living in then it would be £100 cheaper than my rent. But I'm still better of in terms of what I get back in interest and this isn't the house I want to buy.

Any chance that you'd share your sums?

Nope.

nollag2006

IveSeenTheLight wrote: »

would you also factor in rent increases over the 25 years?

Don't forget HPI over the 25 year period.