when does renting become cheaper?

Cornucopia

Is there an easy comparison between Buying & Renting, where the mortgage payments go up with inflation?

HAMISH_MCTAVISH

Cornucopia wrote: »

Is there an easy comparison between Buying & Renting, where the mortgage payments go up with inflation?

Not really, as of course the mortgage payments don't go up with inflation.

Which is why people have taken on mortgages through most of recorded history, because even though renting can be slightly cheaper in the very short term, it's a false economy and ends up horrifically more expensive in the medium to long term.

Cornucopia

HAMISH_MCTAVISH wrote: »

Not really, as of course the mortgage payments don't go up with inflation.

What I meant was to have overpayments set so that the overall payment increases with inflation (therefore directly comparable with renting).

HAMISH_MCTAVISH

Cornucopia wrote: »

What I meant was to have overpayments set so that the overall payment increases with inflation (therefore directly comparable with renting).

You'd have to build a spreadsheet manually, I've never seen one online, but the results would be pretty spectacularly skewed towards buying.

Take the overpayments of just £200 in the second example above, look at what that does for the first 5 years, then imagine what the second 5 years would look like if you increased the overpayments to £300, or £350, or £400 to keep up with rent rises......

At a guess I'd say you'd clear your mortgage in around a decade and pay less than half the interest you would otherwise.

jaybeetoo

My uncle rented all his life and my father bought. My father and uncle had a similar retirement income. When it came to needing a nursing home, my father was able to afford a much nicer one funded by his house sale. If nothing else, buying a house was a good savings scheme for my father.

wabbitpoo

I shudder to think what we have spent on DIY over the years, something that renters don't have to. eg new windows, roof repairs, deco, new boilers, new kitchen, yada yada.

Just something to keep in mind!

Callie22

wabbitpoo wrote: »

I shudder to think what we have spent on DIY over the years, something that renters don't have to. eg new windows, roof repairs, deco, new boilers, new kitchen, yada yada.

Just something to keep in mind!

I've been renting for about ten years, and I think I've moved seven (it may be eight!) times in that period. I'd estimate that each move has cost us well over £1500, when you take into account agency fees, days off work, petrol, removal costs, broken items, etc etc. So if we have moved eight times then that's about £12,000 that we've spent just on moving. I'd imagine that's roughly comparable to what many homeowners would spend on maintenance in the same period.

wabbitpoo

good point

buglawton

Cornucopia wrote: »

This is a common misconception.

There are two reasons why rent and mortgage interest are not the same:-

1. Because as Hamish points out, mortgage payments are locked in at the outset (subject to interest rate changes, which can be hedged against). Rent is free to rise with inflation.

2. Mortgage interest is a necessary commitment to enable home ownership. It's an expense incurred to achieve something beyond just a roof over one's head. Rent is an expense solely to achieve a roof over one's head.

edit: In answer to the OP's question, the "London" effect is very centralised. I own a property in Zone 2, which has "normal" rental yield (about 5%).

How would the average Joe hedge against rising interest rates?
So many deals are a tempting 2-3 year fixed then the field is open...

Anyway, interest may be less dead money than rent, but it's still dead.

Old_Git

with a mortgage you also have repairs and upgrades .