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Bob Loblaw

Buying Is Now Cheaper Than Renting!

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Apparently 'buying' a house with an interest only mortgage is cheaper than renting.

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/8356972/Buying-a-house-is-cheaper-than-renting.html

Renting a home now costs an average of 10.5pc more than paying interest on a mortgage for a comparable property, up from a premium of 8.7pc in the middle of last year, according to property website Zoopla.co.uk.

The group said as a result of low interest rates and falling house prices, people were better off buying a two-bedroom flat than renting one in 80pc of towns and cities in Great Britain.

The difference was greatest in Milton Keynes, where it cost 42pc more to rent a home rather than buy one, with rents on a two-bedroom flat averaging £785 a month, while an interest-only mortgage on a similar property would be £554.

It was 38pc cheaper to buy a typically first-time buyer home than to rent one in Walsall, while typical rents were 35pc higher than mortgage payments on a two-bedroom home in Birmingham, based on an interest rate of 5pc.

Reading and Derby completed the top five places where it was cheaper to buy than to rent, with people paying premiums of 34pc and 27pc respectively to be a tenant.

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They had an article like this a few months ago and we complained to the press complaints comission. It was upheld and they printed a clarification. Now they have done exactly the same again!

I can't log in to the telegraph stie for some reason but here is the PCC link. Feel free to post it in the comments.

PCC Clarification

S

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Well I don't know what LTV they are using for their interest only calcs, but I would have to wave goodbye to nearly £120k (25% deposit on current average asking prices) for the privilege of paying the same in interest as my current rent. Plus I'd have to endure a decade or two of negative equity and face a nasty bill for £355k at the end.

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If you "buy" a house with an interest only mortgage, you are in debt. If you rent, you are not.

When you buy you are fixed when you rent you are flexible.

Just ask a few property lien holders round and about if in hindsight they wished they had rented rather than bought. ;)

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when I buy I owe £169000 for the average property.

when I rent I owe nothing as I have paid up front...I keep my cash and my options open.

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They had an article like this a few months ago and we complained to the press complaints comission. It was upheld and they printed a clarification. Now they have done exactly the same again!

I can't log in to the telegraph stie for some reason but here is the PCC link. Feel free to post it in the comments.

PCC Clarification

S

Done!

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It should say it cost`s 42% less to rent from the bank`s, compared to the private rental sector

not forgetting the bill at the end of 25 years...the capital repayment.

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Apparently 'buying' a house with an interest only mortgage is cheaper than renting.

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/8356972/Buying-a-house-is-cheaper-than-renting.html

Vested interest I assume.

Had we not sold 3+ years ago, our house would now be worth a min of £50K less.

It's a no brainer, renting is the ONLY ROUTE at the moment, with the lump sum earning some interest.

But buying will be the correct choice in another 2-3 years time, and we'll be doing just that.

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Apparently 'buying' a house with an interest only mortgage is cheaper than renting.

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/8356972/Buying-a-house-is-cheaper-than-renting.html

For flats this may well be true as rents seem disproportionately high compared to houses.

I'm renting a 3-bed detached house for £675/month. There is an identical house over the road for sale at 190k so given that the one I'm in is not in such good condition and assuming I would need to replace kitchen and bathroom to make it comparable I rekon its worth around 170k. a 100% IO morgtgage @ 5% on this would be £708.

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For flats this may well be true as rents seem disproportionately high compared to houses.

I'm renting a 3-bed detached house for £675/month. There is an identical house over the road for sale at 190k so given that the one I'm in is not in such good condition and assuming I would need to replace kitchen and bathroom to make it comparable I rekon its worth around 170k. a 100% IO morgtgage @ 5% on this would be £708.

yeah, but you havent factored in that our intrepid reporter has calculated using a 50 year IO mortgage.

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They're back again.

Got a call from an Estate Agent yesterday, out of the blue, asking me about a property I went to view, in 2007 In Easby.

Her records told her that I had rented it.

I informed her the records were innacurate, and told her I was waiting for house prices to crash by over 50% so I could buy my first home.

She completely agreed with me. :D

Edited by Dan1

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It all depends on the interest rate applied to the mortgage and is only a snap shot in time.

Eg. my mortgage is currently approx 50% what the equivalent rents for in this area.

Not saying its gonna last for ever but thems the facts for certain home owners - currently.

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yeah, but you havent factored in that our intrepid reporter has calculated using a 50 year IO mortgage.

Don't think the cost of a IO mortgage is affected by the length of the term is it?

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It all depends on the interest rate applied to the mortgage and is only a snap shot in time.

+1.

With the way mortgages are at the moment you need 15% deposit to get a 4.5% rate, which is less than the net yield on most places, so buying is cheaper if you are in the fortunate position to be able to do this. With 20% you can get 4%-4.5% and with 30% or 40% you can get 3% or less, so buying works out much cheaper.

But there is upward pressure on rates, so the margins are moving around constantly and maybe after a rate hike or two then renting will become comparatively cheaper again. You have to make the sums work to your advantage.

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+1.

With the way mortgages are at the moment you need 15% deposit to get a 4.5% rate, which is less than the net yield on most places, so buying is cheaper if you are in the fortunate position to be able to do this. With 20% you can get 4%-4.5% and with 30% or 40% you can get 3% or less, so buying works out much cheaper.

But there is upward pressure on rates, so the margins are moving around constantly and maybe after a rate hike or two then renting will become comparatively cheaper again. You have to make the sums work to your advantage.

Except you ignore that even now, the opportunity cost of using your 40% deposit is actually quite high.

See my post on the other thread. House over the road, buy at 335k, rent at 995pm. I can't afford to buy here however much I want to.

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  • 277 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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