If you’ve always dreamt of owning your own home, you could find that the cost of being on the property ladder is more affordable than you think.
New figures compiled by Strata compare the cost of owning a home to average rental payments over a 60-year period, prove that buying a home is often significantly cheaper over the course of a lifetime than renting - even more so with the government’s Help to Buy
scheme which is available until 2020.*
The results might surprise you, as buying is more affordable than renting across the whole of the UK – with the biggest savers living in the North of England and Northern Ireland.
A closer look at the figures
According the Land Registry, the average first time buyer house costs £212,079, with a 16% deposit. With an estimated £4,800 of purchase fees and assuming buyers rent for an initial nine-year period -between graduating university and purchasing their first home aged 30 – buyers will spend around £430,000 (£427,363).
Meanwhile, lifetime renters will spend £909 a month on average on a lifetime home, which when adjusted for inflation, would reach a total of £1.6 million (£1,624,980) over a 60-year period.
That equates to a substantial difference of over £1.1 million (£1,197,616) with lifetime renters spending 280% more.
Figures across the UK vary dramatically, with differences in London reaching almost £2 million (£1,956,566) whilst the North East is at the lowest end of the scale with a variance of just over £720,000 (£721,095).
Lifetime renters in the North West will suffer the greatest indifference, spending 314% more than buyers in the same region. Take buying a new home in the North West as an example. Our research shows the average cost of renting is around £683, but you’d typically pay £440 a month towards paying off a mortgage (15% buyer deposit).
Over the course of home ownership lifetime renting in the region works out significantly more expensive; £1.2 million compared to just less than £300,000 spent by buyers in the same area.
Our research supports the argument that living in the North is definitely cheaper than the South but also shows that buyers in the North have higher savings potential against lifetime renters; 312% in the North East and 304% in the North West versus 261% in the South East and 266% in the South West.
The research was conducted based on the assumptions that rental costs begin post university at the age of 21 and continue until the age of 81 – the average life expectancy for the UK.
Buyer figures are based on renting from the age of 21 until 30 – the average age of someone in the UK buying their first home according to the Halifax First Time Buyer Index, and then obtaining a 25-year mortgage on a property worth just over £200,000.
The purchase figures also take into account the outright costs incurred when buying, such as lender’s valuations, structural surveys and solicitor’s fees.
The benefits of owning your home
Many people choose to buy their own home because it offers financial security. The value of your home should increase over time, building up equity you can use later in life. The only expenses once you’ve paid off your mortgage will be insurance, utilities and general maintenance. There’s also the added benefit of being able to personalise your home without having to ask permission from your landlord. This is particularly the case in new homes, which are a blank canvas that you can really make your own.
If you’re considering moving home to Yorkshire and the Humber, take a virtual tour of our new homes in Yorkshire
– and find out more about the vibrant cities of Leeds
*Strata Homes does not offer mortgage advice and all figures are for illustrative purposes only. Monthly mortgage payments have been calculated based on a new build, 10% buyer deposit, 25 year term, 2 year fixed rate mortgage with an interest rate of 2.35% for guide purposes only.
Help to Buy mortgage figures are based on a 5% buyer deposit and 20% Help to Buy loan with a Help to Buy mortgage over 25 years and an interest rate of 1.69%. Costs have not been included for any fees which may be payable to your lender such as arrangement fees, valuation fees, early repayment charges, insurance and stamp duty etc. You should take advice from an IFA or preferred lender before agreeing to a mortgage. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP YOUR REPAYMENTS ON YOUR MORTGAGE.