Buying vs renting is a debate many people will start to have in their twenties. Should you scrimp and save to be able to afford a home of your own as soon as possible? Or would you be just as well-off continuing to put aside just enough for your rent?
According to research by the Intermediary Mortgage Lenders Association, you could be £352,500 better off buying a home than renting.
Buying vs renting
The research calculated that monthly mortgage repayments on the average house price of £230,000 home would be £133,700 cheaper than paying rent over 30 years in the same property.
That is not to mention that at the end of the period, homeowners would also have £218,800 in equity from paying off their initial 95 per cent loan-to-value mortgage of that amount.
The research didn’t factor in house price rises, nor did it factor in a fall in property values. It based its claim on interest rates on home loans remaining at the low-level that they are now.
Researchers found that if interest rates stayed at these levels a homeowner could pay £317,900, while private tenants might pay out £451,600 in rent over the next three decades.
Rent was worked out as starting at the national average of £11,292 a year as worked out by Homelet, and rising by 2 per cent each year.
The report claimed that even if mortgage rates did rise, they’d have to be higher than 11.5 per cent throughout the life of a loan before buying and renting had the same financial returns.
The current historically low mortgage rates sit around 2.45 per cent for a two-year fix. This means that monthly mortgage repayments are low in comparison to rents that have continued to rise over the same period.
‘The long-term benefits of being a homeowner are not just confined to the property value and the potential for house prices to increase,’ Kate Davies from The Intermediary Mortgage Lenders Association told the Mailonline.
‘Homeowners also potentially save hundreds of thousands of pounds compared to their private renter counterparts,’ she adds.
If you needed an incentive to start saving for a deposit there it is – a strong case for buying in the buying vs renting debate. Just think how many more Pret sandwiches you’ll be able to afford when you finally get on that property ladder.