Jump to content
House Price Crash Forum
iamnumerate

Cheaper To Rent Or Buy

Recommended Posts

A friend is thinking of buying which I am not 100% sure is a good idea.

Are there any good spreadsheets/calculators where you can put in all your costs of both to see which is cheaper?

IMHO buying is a good idea if cheaper than renting but there are lot of hidden costs.

BTW I know prices might fall but that is not an argument that will convince him.

Share this post


Link to post
Share on other sites

I think that might be difficult, due to the number of variables.

Take fees. Rental - the amount you would pay out in any year would depend on whether you had to use agencies, what fees they charge and how often you move. Purchase - legal / survey / lender's fees - non-recurring, so over what period would you account for these - just the first year, or a longer period?

Or condition - a property with single glazing, for instance. The heating costs would be the same whether you rented or bought, but if you bought you might install double glazing and have to compare capital expenditure with savings on heating bills over a period.

Share this post


Link to post
Share on other sites

You could probably work it out on a fag packet.

For the terrace house i live in the sums are:

Rent = 2,900 per month = £34,800 per year.

Buy = £400k deposit + (assuming 4% SVR interest only mortgage repayments) £3333 per month or £40,000 a year + any money spent on upkeep + £1m life insurance to cover loan

Share this post


Link to post
Share on other sites

You could probably work it out on a fag packet.

For the terrace house i live in the sums are:

Rent = 2,900 per month = £34,800 per year.

Buy = £400k deposit + (assuming 4% SVR interest only mortgage repayments) £3333 per month or £40,000 a year + any money spent on upkeep + £1m life insurance to cover loan

Those are both very large figures - where do you live?

Share this post


Link to post
Share on other sites

There are loads of calculators out there of varying complexity. The thing for me is that you can't put a fixed value on opportunity cost, so whichever calculation you use, the outcome is totally subjective and will still be entirely dependent on the individual. In my experience, if someone wants to buy, the best thing you can do is point out the potential risks of both buying and of continuing to rent, then let them make their own minds up and leave them to it.

Share this post


Link to post
Share on other sites

The middle column is the Capital Repayment Mortgage,

also this might be useful:

http://www.telegraph.co.uk/finance/property/house-prices/10373797/Should-you-rent-or-buy.html

What I meant was that you could take the view that you have paid £x for the capital repayment mortgage but as your debt has gone down by y you have really paid £x-£y. Does that make sense?

Share this post


Link to post
Share on other sites

there is an excel sheet on the financialfundi website ,

This may at first glance appear a touch academic as most of us would, I am sure, rather be owners than tenants. However, for those who are spoilt for choice this could provide some interesting answers. In addition, this calculator may be of some comfort for those of us who have no choice but to rent.

Uploaded 31st Dec 2015

Rent or buy

Share this post


Link to post
Share on other sites

There are loads of calculators out there of varying complexity. The thing for me is that you can't put a fixed value on opportunity cost, so whichever calculation you use, the outcome is totally subjective and will still be entirely dependent on the individual. In my experience, if someone wants to buy, the best thing you can do is point out the potential risks of both buying and of continuing to rent, then let them make their own minds up and leave them to it.

I was planning to let them do the sums and then decide. A good tool (and maybe one doesn't exist) would allow you to factor in the interest rate you are getting on your money.

Share this post


Link to post
Share on other sites

I was planning to let them do the sums and then decide. A good tool (and maybe one doesn't exist) would allow you to factor in the interest rate you are getting on your money.

I think the Times had one that did all that going back 3-4 years, might be worth a look.

Share this post


Link to post
Share on other sites

Taking a long-term view, with a capital repayment mortgage you also need to factor in a major reduction in housing costs once the mortgage is cleared.

Absolutely and often missed from many buy/rent arguments; look at what you have at the end of it. Any spreadsheet worth its salt will sum up the savings made on renting and calculate investment return against that over the years. Compare the pot you've saved with the value of the property at the end of the mortgage term.

Share this post


Link to post
Share on other sites

And the reversion to a non-emergency IR allowing the BoE to stand down.

Any good tool would allow you to factor in increases in interest rates, I am surprised that no one has created one.

Share this post


Link to post
Share on other sites

Those are both very large figures - where do you live?

Holloway in North London.

Planet made up land ?

Sadly not. Although we are moving out as it's just no longer affordable.

It's not far from this but is 1200 sq ft rather than this which is 1800 sq ft and has more bedrooms.

http://www.rightmove.co.uk/property-for-sale/property-57797183.html

Edited by repetitive bleats

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   62 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.