Renting vs Buying

Cakeguts

Some people really don't seem to want to do the saving bit of owning a house. I think they find it easier not to have to think about what might happen to need repairing so they can spend their whole income because the landlord will mend the fence.

ErasmusOzzy

Better to rent a house. why?
*you can earn more interest income.
*There is a lot of tax to buy home.

Fireflyaway

It could be either depending on the circumstances.
Ultimately I want to own because rent obviously doesn't stop just because you are old. I don't want to carry on working until I'm very old just to pay rent and then potentially be placed in social housing that is in a bad area / not to the standard I'd like.
The UK is a bit odd. We are obsessed by home ownership and I'd say a lot of people measure their own and others success on whether they own a home or not. In other countries rent is much cheaper, tenancy agreements longer and more flexible so it's not such an issue.
Currently in renting having sold my flat. We applied for schools in various locations and wanted to be able to move quickly once we knew which school we were offered.
I feel vulnerable now as we could obviously be asked to leave. However most home owners are not home owners at all. They are technically renting from the bank for 25 or 30 years!

Ozzuk

First up, nothing wrong with renting (just before Crashy gets here). For me I'll always choose buying over renting.

Financial reasons - simplistically, compare renting for average 40 year old versus buying, on a typical 25 year mortgage. after 25 years you own the house, no mortgage payments to make. Renting though...you are facing 40 years + of increasing costs.

Non-financial reasons - I like to develop houses, its my hobby. I rented for a year (no choice) and I didn't know what to do with my time. I could see jobs that needed doing, improvements I could make but it wasn't my house. Add in the risk of not having a choice if the LL wants me to get out, it just isn't something I'd consider.

Now when I retire and sell up, sure I might consider renting then.

lookstraightahead

Life also throws a curveball sometimes. I worked my way up the housing ladder only to go through a horrible divorce which meant selling a house and starting again.

I too think there are pros and cons. There's no profit in renting, yet it is expensive to keep moving.

My folks spent their life buying a house and have now sold it and rent for flexibility, ie they can move any time if needs must.

I do think the UK have a thing about house ownership which puts them in a certain 'class'. But as another poster said, you don't own until you have the deeds.

getmore4less

Ask crashy they know everything about why renting is always best.

madvicker

If you ignore the opportunity to benefit from rising house prices and just look solely at the money it costs to rent vs pay a mortgage - buying wins out in every situation bar those where you need to move a lot. But in this scenario, it would make sense to buy and then rent it out.

The simple reason why, a proportion of the monthly payments for your mortgage is a capital payment - I would view this as saving that portion in the equity of the house. With renting, no portion of the money you pay is going toward any capital.

An argument put forward by many people is you can earn more by putting that money into investments with better upside - ie the stock market.

Lets take a simple example, comparing 2 people over 10 years. One rents (family pays for deposit and moving fees), the other buys (100% mortgage, no Stamp duty as first time buyer and family pay for other fees). Assuming 2% growth in house prices and 5% growth in stocks. Earning a real wage of £1500. Mortgage payments of £1000 (£500 capital, £500 interest), rent of £1000. Neither of them move for the ten years and they don't need to pay for anything else so disposable income all goes into the stock market.

Renter - £79240 investments after 10 years

Buyer - same investments, but additional £67012 in capital.

Now obviously, frequency of moves will eat into the investments/capital for the buyer, but they would need to move a lot to equal the financial status of the renter.....

Cakeguts

A lot of the people in my age bracket had to buy a house. We earned too much to get a council house and there was a shortage of rented property due to the rent acts. So if you wanted to move out of your parents' house when you got married you had not choice except to buy a house. That is why so many people of my age own a house. We had no choice. People have more choice now and more people are choosing to rent.

TamsinC

All depends on circumstances - we rented for years - HOWEVER, this is supplied with the job, blooming good job too with moving every 18-24 months. Would have hated to have to go through private renting process that often though it would be preferable (cheaper) to buying and selling that often. We are now buying as we intend to stay put. We have bought previously for various reasons; to live somewhere, to keep a foot on the ladder, and to have a home to move into when we stopped moving. I prefer to pay my mortgage than someone elses, and the uncertainty of renting in old age really doesn't appeal to me at all.

lookstraightahead

madvicker wrote: »

If you ignore the opportunity to benefit from rising house prices and just look solely at the money it costs to rent vs pay a mortgage - buying wins out in every situation bar those where you need to move a lot. But in this scenario, it would make sense to buy and then rent it out.

The simple reason why, a proportion of the monthly payments for your mortgage is a capital payment - I would view this as saving that portion in the equity of the house. With renting, no portion of the money you pay is going toward any capital.

An argument put forward by many people is you can earn more by putting that money into investments with better upside - ie the stock market.

Lets take a simple example, comparing 2 people over 10 years. One rents (family pays for deposit and moving fees), the other buys (100% mortgage, no Stamp duty as first time buyer and family pay for other fees). Assuming 2% growth in house prices and 5% growth in stocks. Earning a real wage of £1500. Mortgage payments of £1000 (£500 capital, £500 interest), rent of £1000. Neither of them move for the ten years and they don't need to pay for anything else so disposable income all goes into the stock market.

Renter - £79240 investments after 10 years

Buyer - same investments, but additional £67012 in capital.

Now obviously, frequency of moves will eat into the investments/capital for the buyer, but they would need to move a lot to equal the financial status of the renter.....

I agree with this however there is a lot of luck, savvy planning, and perhaps feeling stuck when needing to stay put for so long. You also have house maintenance. If you move you also have lots of costs (which I know you suggested).

I'm not sure folk stay in the same place for so long nowadays