Rental: Help Me Understand The Advantages

[RentaChemist]

Hi Folks,

I would appreciate some advice and insight on the topic of renting a property as opposed to purchasing a property via a mortgage. I always assumed that it is better to purchase rather than rent a property, because after (say 25 years), then you own something. However, I get the feeling from reading many of the posts on this site that it is often 'better' to rent rather than purchase a property.

Is there a 'financial' (as opposed to 'emotional' or 'practical') answer to this question? Are there simple 'rules' that determine if renting is more 'sensible' than purchasing? Is it simply the current state of the housing market (falling prices, lack of capital to borrow etc) that makes rental a more 'sensible' option at the moment?

Thanks in anticipation for any insight on this topic

[yadayada]

Hi Folks,

I would appreciate some advice and insight on the topic of renting a property as opposed to purchasing a property via a mortgage. I always assumed that it is better to purchase rather than rent a property, because after (say 25 years), then you own something. However, I get the feeling from reading many of the posts on this site that it is often 'better' to rent rather than purchase a property.

Is there a 'financial' (as opposed to 'emotional' or 'practical') answer to this question? Are there simple 'rules' that determine if renting is more 'sensible' than purchasing? Is it simply the current state of the housing market (falling prices, lack of capital to borrow etc) that makes rental a more 'sensible' option at the moment?

Thanks in anticipation for any insight on this topic

In purely financial terms, it depends on the relationship between cost of rent, interest charges, maintenance and changes in prices.

If prices are static, you're winning by renting if rent is less than the supposed cost of interest and maintenance.

In a falling market, capital losses are avoided by renting, making it very much more likely to be the better option.

If house prices are going up, you'll miss the capital gains if you rent, so you might consider a percentage gain in price as a percentage cut on your possible mortgage rate. Which is the better option depends on the rate of increase - don't expect to see 2007's rates for a while.

I heard one of the more loud-mouthed girls at work bragging in the canteen this week that she'd bought a house 2 years ago and now had 2 years of her mortgage paid off. Her friends had dithered and had been wasting their money renting for the last 2 years - nothing to show for all that money, you know.

Wow.

[d2thdr]

Depends on how you look at the scenario. Are you buying as a investment or are you renting as you cannot afford an investment. Putting emotions aside, decide if buying or renting is suitable for you. Do not listen to anyone, everybody has a different circumstance.

In the present climate, it makes sense to rent than buy as you know the price is going to be down next year than now.

[Ride_on]

For a 3 bed detached house renting is around 1/3 per month of a mortgage and doesn't need any investment from the renter. Also a typical house will lose value monthly which is 2 to 3 time the monthly rent.

There are may other threads about people considering buying that have been advised to rent. You have to do you own sums but renting is advised at the moment in most cases.

eg;

http://www.housepricecrash.co.uk/forum/ind...p;#entry1963500

[mr slump]

we've bought a house and I still advise people to rent

unless you can get it for enough under peak for cash that a couple of years rental cost will even out against further falls

(ie - be ahead of the curve) then youre going to be saving a lot by renting for a couple of years

don't be fooled by current interest rates they will be going up