is it better to have mortgage or rent your house?

Answer 1

Pay to own, why pay the same for rent if you could just buy and pay LESS?

Answer 2

People say a mortgage because they want to own their own home.

But really you don't own it - the bank does. Until you make that final payment in 30 or 40 years time it is not your home.

If you bought a house for £125,000 and got a mortgage @ 6% per annum repayable over 30 years, you would have to:

+ pay £744 per month for 30 years

+ repay £267,840 in total

+ pay £142,840 in interest alone


So you end up paying the bank not only what you borrowed but also more in interest than the actual value of the house.

If instead you paid £500 a month rent and invested the other £244 you save on not having a mortgage, and instead invest £244 a month into a saving account for 30 years paying 5% per annum. At the end of that 30 years:

+ you would have no house

+ have savings of £199,762

If house prices on average over those 30 years grew by less than 1.6% a year, that £199,762 could buy you the same house in 30 years time!

But this way you don't have to worry about your mortgage, you are not a slave to a bank, ...and generally speaking, you can rent a better property for the same amount of money that you'd repay monthly on a mortgage.

E.g. I can rent a luxury flat in Northern England for £500 a month, but to buy it I would have to servive a mortgage of perhaps £800 a month.

So lots to consider!

Answer 3

2

Answer 4

If you are happy in the area you are currently living in and plan on being there for a few years, it is probably better to own. Your mortgage payment might be the same or less then rent after figuring the tax benefits! Plus if the property goes up in value you gain in that and not your landlord.

Good luck!

Answer 5

Buy vs. Rent.

As housing market slump, it is easier to calculate "Rent vs. Buy" scenario. Because "appreciation" is no longer a factor.

Mortgage payment consists of two parts: interests and principal. Interests are like rent, which doesn't add to the equity to your house. It simply disappear as your pay it.

If interests portion of the mortgage payment is roughly equal to rent of equivalent property, then it is a decent buy.

For example, let's buy a $500,000 condo with 0% down and apply interests only loan (just like renting a place). Mortgage payment would be $3250/month. It is a bad buy, because you can enjoy same property for $2000/month.

Please note that I assume the tax benefits from home cancel out fees from home association and property tax. For more accurate calculation, consult with your CPA or accountant. But NOT your realtor, whom will say anything to get the deal to go through.

And again, if you like a particular property, then paying more may be reasonable. You are the only person who can decide how much more premium you are willing to pay.

Answer 6

if u are paying rent it never goes anywhere, if you pay a mortgage, you are buying a house. if you have a mortgage you can have certain pluses, like loans may be more avaliable to you, and you can do what you want with decor. if you rent you need permission for everything. But if you are only living somewhere for a few months, rent would probably be cheaper!

Answer 7

It depends on how good your crystal ball is. If property prices in your area spiral upwards you will always gain with one ( my property has risen more in value than my mortgage payments ). However if you are on a low income ( you will have more to spend each week) or move regularly rent.
The other thing to consider is renting if you are likely to move often and have a seperate investment property.

Answer 8

Defo mortgage, why pay someone else's mortgage? And the rent payments will probably be more than the actual mortgage payments!

Answer 9

its better to have a mortgage coz even though it takes years to pay off at the end of it all the house is yours renting is just dead money burning a hole in your pocket.

Answer 10

Please read this article from The Economist, May 2005

To buy or not to buy? That is the question

Today it is often much cheaper to rent than to buy a house

“IT IS always better to buy a house; paying rent is like pouring money down the drain.” For years, such advice has encouraged people to borrow heavily to get on the property ladder as soon as possible. But is it still sound advice? House prices are currently at record levels in relation to rents in many parts of the world and it now often makes more financial sense—especially for first-time buyers—to rent instead.

Homebuyers tend to underestimate their costs. Once maintenance costs, insurance and property taxes are added to mortgage payments, total annual outgoings now easily exceed the cost of renting an equivalent property, even after taking account of tax breaks. Ah, but capital gains will more than make up for that, it is popularly argued. Over the past seven years, average house prices in America have risen by 65%, those in Britain, Spain, Australia and Ireland have more than doubled. But it is unrealistic to expect such gains to continue. Making the (optimistic) assumption that house prices instead rise in line with inflation, and including buying and selling costs, then over a period of seven years—the average time American owners stay in one house—our calculations show that you would generally be better off renting.

Be warned, if you make such a bold claim at a dinner party, you will immediately be set upon. Paying rent is throwing money away, it will be argued. Much better to spend the money on a mortgage, and by so doing build up equity. The snag is that the typical first-time buyer keeps a house for less than five years, and during that time most mortgage payments go on interest, not on repaying the loan. And if prices fall, it could wipe out your equity. In any case, a renter can accumulate wealth by putting the money saved each year from the lower cost of renting into shares. These have, historically, yielded a higher return than housing. Putting all your money into a house also breaks the basic rule of prudent investing: diversify. And yes, it is true that a mortgage leverages the gains on your initial deposit on a house, but it also amplifies your losses if house prices fall.

“I want to have a place to call home,” is a popular retort. Renting provides less long-term security and you cannot paint all the walls orange if you want to. Home ownership is an excellent personal goal, but it may not always make financial sense. The pride of “owning” your own home may quickly fade if you are saddled with a mortgage that costs much more than renting. Also, renting does have some advantages. Renters find it easier to move for job or family reasons.

“If I don't buy now, I'll never get on the property ladder” is a common cry from first-time buyers. If house prices continue to outpace wages, that is true. But it now looks unlikely. When prices get out of line with what first-timers can afford, as they are today, they always eventually fall in real terms. The myth that buying is always better than renting grew out of the high inflation era of the 1970s and 1980s. First-time buyers then always ended up better off than renters, because inflation eroded the real value of mortgages even while it pushed up rents. Mortgage-interest tax relief was also worth more when inflation, and hence nominal interest rates, was high. With inflation now tamed, home ownership is far less attractive.

The divergence between rents and house prices is, of course, evidence of a housing bubble. Someday prices will fall relative to rents and wages. After they do, it will make sense to buy a home. Until they do, the smart money is on renting.

Answer 11

It just depends on your financial ability and commitments.

Seeking help from a financial advisor is mandatory in the UK, before you make such an important, lifelong commitment for a mortgage.
He is required to give his unbiased professional opinion as to if you can afford one, the terms of the agreement etc. all of which would have an effect on your life.
Property can be used as wealt creation; therefore it should be seen as an investment.

Renting a property can be easy and tress free, but there is no investment and therefore no future gains.

You can get sound professional advice from a financial advisor
http://www.jipfinancial.co.uk/, and for property advice you can go to http://www1sthomeuk.com .