This isn’t usually the case in the UK. Rent is generally much, much higher than mortgage payments.
Comment on A conundrum
devedeset@lemmy.zip 3 weeks agoThe bad take I was referring to was OP claiming the mortgage payment would be lower than the rent payment. In the US this is almost never the case.
Lazylazycat@lemmy.world 3 weeks ago
grrgyle@slrpnk.net 3 weeks ago
All rents cover mortgage, taxes, insurance, upkeep, and usually a percentage profit on top of it all. Unless your lord is renting to you at cost or below (in which case they’re losing money (not counting equity)), then there is no way the cost to rent would be higher on an equivalent property.
Like just imagine if you wanted to rent out your property for $1900/mo - you couldn’t do it.
jj4211@lemmy.world 3 weeks ago
Actually, not necessarily.
In my local market, a house that would be about $2700/month in mortgage/insurance/taxes on a 30 year term after a huge downpayment would rent for about $2400/month right now.
There are some owners that in fact do count the equity, so they are willing to buy higher and be upside down compared to what a mortgage could be. The recognize the rent is only part of the income, that the property value going up is a potential gain to cash in that’s worth a few hundred a month to ‘deposit’.
Especially if the owners can pay cash and not incur the interest associated with a mortgage. It’s a bit of an odd choice right now as just letting the cash sit in a savings account offers competitive ROI with the current interest rates, but you’ve got a lot of property bought under previous conditions.
This only holds for relatively short term though, you’d expect rent hikes to go to $3000/month within a time period where that ownership monthly payment might only go up to $2800/month due to taxes and insurance rates. So 10 years into living somewhere you are now paying more to rent it than you would be if you had purchased comparable, even ignoring the equity part of the equation. If you include equity, then you better be planning to get out in 2 or 3 years at the most if you are embarking on renting, otherwise it’s much much better to buy even with higher mortgage payment, since you can cash in on the equity if you need to, eventually.
I’d say this is a relatively sane fiscal model of renting, that you need to give the renters a discount reflecting their lack of equity. I’m kind of glad to see rental rates being below mortgage rates in my area right now. That said, it wasn’t too long ago that rental rates in my area were higher than what mortgage could be, but large companies bought up housing stock and made it supremely difficult to actually buy as a private party. With the interest rates jacked up, those companies are cooling it a bit since they don’t have access to ‘free money’ anymore.
npcknapsack@lemmy.ca 3 weeks ago
My old house went up over 400k between 2019-2025. So, if I’d sold it in 2019, they could absolutely afford to rent to me at a lower price than if I tried buying it again.
grrgyle@slrpnk.net 3 weeks ago
Yeah that’s the vagaries of the housing market and valuation, which is why I said equivalent property.
There’s also no reason you couldn’t sell that house for 400k less. The value is just the value. It’s going to be the same whether you’re renting or paying the bank for the same property.
I also won big by buying prepan, but who’s up or down in the Canadian housing lotto doesn’t change the physics of paying a lord’s mortgage costing more than if you were paying the bank’s mortgage directly.
Nevermind that whoever gets to be lord keeps the equity.
jj4211@lemmy.world 3 weeks ago
I think the point is that properties on market are, as a rule, not very recently purchased with a 30-year mortgage. So the monthly cost now required to cover the owners costs may be based on financial conditions from 6 years ago. If the rental market has a lot of properties that have been held a while but house values have rocketed, then you have a critical mass of owners willing and ready to out-compete brand new mortgage rates even if they ignore their equity advantage.
In my area, that’s what we see, real estate prices are dramatically up as are interest rates, so mortgage cost to acquire is a fair amount above the going rate to rent comparable properties. Someone getting a 30 year mortgage to rent out a property would be underwater for very many years in the current market conditions around my area, as they have to compete with more aggressive owners that have had their properties for many years.
rmuk@feddit.uk 3 weeks ago
Most countries have fixed-rate mortgages. Most rental properties are also mortgaged. So a renter is paying for maintenance/insurance/tax costs, the landlord’s profits margin and the landlord’s mortgage.
jj4211@lemmy.world 3 weeks ago
If the landlord has a 10-year mortgage they just took out, the rental market wouldn’t cover that, because that landlord is competing with comparable properties that didn’t choose that amount. They are also competing with people that bought the property a decade ago and don’t have the same mortgage burden. They are also competing with some that even considers their accumulation of equity a component of their wealth and wouldn’t mind being mildly underwater early in their loan for the long term advantage.
At least in my area, the way the real estate market has worked out is that renting is about 10-15% lower than monthly expense for a 30-year purchase after 20% downpayment. If the real estate bubble pops, that will probably flip back around, but for now, the renters are getting a discount for short term, which in my opinion is the way it should be, renters getting a bit of a break for their equity disadvantage. In a sane market, the renter gets a cheaper payment that makes financial sense for 2-3 years in a property rather than being forced to rent by an owner class making new ownership impossible.