Actually cheaper to keep renting??!

ukcarper

Reue wrote: »

Thank you for all your comments guys. Some really good points I hadnt considered (Especially the bit about owning a house in 25years + 5 years saving afterwards compared to owning in 30 years with 0 years saving after).

I think most people have agreed that it would be best to go for a 10% deposit rather then wait and get a 25% deposit.

You also have to consider how long you are likely to stay in house because if you move after a few years it will alter calculations considerably.

dtsazza

Rich__101 wrote: »

I'd say the calculation is more simple than that. The two important figures are:

1. Your monthly Rent at £695.
2. The monthly interest payable on the mortgage (effectively the rent you pay the bank to live in your own home).

At the point where 2 is less then 1 then it is worth buying the house before that you are better of renting.

In a simplistic sense, this is exactly how to go about the comparison. If the interest on the borrowed money is less than comparable rent, then in the immediate term it is cheaper to mortgage than to rent.

The actual monthly payments on a mortgage will be higher, but everything that's not interest isn't really an expense, it's "enforced savings". Additionally, as you make these payments you reduce the capital borrowed, which reduces the amount you must pay in interest. (The equivalent in a rent situation would be to put money into savings, and offset some of your rent with the interest. It's likely that the mortgage interest will be higher than net cash savings interest, so your mortgage is likely to decrease more quickly with overpayments.)

There are some non-financial things to consider as well - how you feel about the "security" of owning your own home, how much it will cost to repair boilers/take out building insurance/etc, what capital gains (or losses) you might experience through ownership.

But as a simple "is a mortgage cheaper than renting" calculation, comparing the rent against the mortgage interest is a reasonable way to do it.

Tixy

Reue wrote: »

I think most people have agreed that it would be best to go for a 10% deposit rather then wait and get a 25% deposit.

Like someone else has said - it doesn't just come down to the maths calculations.

Personally if I was buying for the first time now I would be trying my hardest to get a 15% deposit first. Having seen so many people slip in to negative equity and get stuck with houses they can't afford to keep and can't afford to sell I'd personally feel more comfortable with a 15% buffer than 10%.

Reue

Tixy wrote: »

Personally if I was buying for the first time now I would be trying my hardest to get a 15% deposit first. Having seen so many people slip in to negative equity and get stuck with houses they can't afford to keep and can't afford to sell I'd personally feel more comfortable with a 15% buffer than 10%.

What situation does that happen in? Were these people made redundant etc or do mortgage interest rates have a tendency to suddenly soar?

DRP

ukcarper wrote: »

You also have to consider how long you are likely to stay in house because if you move after a few years it will alter calculations considerably.

yes this is huge, especially if your next house is taxed at 3% stamp duty - the move could cost you 12 grand in tax and fees alone

Tixy

Reue wrote: »

What situation does that happen in? Were these people made redundant etc or do mortgage interest rates have a tendency to suddenly soar?

I meant due to all sorts of changes in circumstances, e.g a couple splitting up, a new baby, a reduction in hours, redundancy, illness etc etc.

I'm not sure mortgage interest rates have a tendency to do any one thing. Though at the moment they can obviously only really go up from where they are.

StuC75

Tixy wrote: »

Like someone else has said - it doesn't just come down to the maths calculations.

Personally if I was buying for the first time now I would be trying my hardest to get a 15% deposit first. Having seen so many people slip in to negative equity and get stuck with houses they can't afford to keep and can't afford to sell I'd personally feel more comfortable with a 15% buffer than 10%.

Negative equity only comes into affect when needing to sell. Heck that much of a drop and buyers market could easily swallow up the extra 5% anyway, then where do you draw the line..

The OP seems to have most of the "fuzzy" aspects (surprised no ones mentioned the impact of having kids too) to mind and was looking for thoughts on the 'cold hard cash' side of things. to check the logic planning it over the next 5 years. Since there essentially putting more aside anyway; they should have a comfortable savings pot alongside \ capability to over pay..

The next dilemma being what are the best mortgages fixed \ trackers & length of fix period.. deciding to buy just being the tip of the iceberg...

Mortgate

nakiwala123

martinsurrey wrote: »

But home ownership is about more than money, its about a home, its about being able to paint the walls, and no fear of a S21 dropping through the letter box, and its about never having to speak to a letting agent ever again (wihc is worth more than you think!

Ditto this completely!

This is why buying will always win in my opinion. Depending on your current rental place, I dread receiving the s21 before I'm ready to buy. The whole process of moving to another rental is an unpleasant thought! I want to buy and stay put for while. Security of tenure is nirvana for me.

Cornucopia

andy.m wrote: »

We are surely at a tipping point whereby it is close to being to cheaper to rent rather than buy when you consider the 25 years of interest paid out to own the asset outright...

Except that when you buy a house, you buy it "forever", not just for 25 years.

I know there's a tendency not to think about retirement at all (or to view it solely in pension terms). But actually, whether you own a house at retirement or not is an important factor in your then lifestyle.

edit: the other issue, of course, is that rent will keep pace with inflation, whereas mortgage payments are (usually) eroded by inflation.

Reue

It is possible to get a 3 bedroomed house around here for £200-220k so I would go for that with the knowledge that we wouldnt need to move should we have kids.

With 10% as a deposit amount, Im guessing we would still need another £10k for fees etc just to be safe so at a minimum a move is a year away.

All these calculations were done on my own financing assuming no input from my partner. Hopefully her contribution would cover any children's cost.