Monday, 18 June 2012 9:14 AM
The extra cost over a lifetime of renting a home rather than buying adds up to almost £200,000, according to research by Barclays, and that does not even include the eventual value of the home.
The bank looked at the total costs of mortgage repayments, maintenance and other costs associated with owning compared to the rent on a similar home over a 50-year period. It estimates the total costs of owning at £429,000 and the total cost of renting at £623,000, a difference of £194,000.
Over those 50 years about half the cost (£210,000) of owning a home comes in mortgage payments, with about 40 per cent of that made up of interest payments and the rest repaying the capital sum.
The next largest outlay is maintenance (£170,000), followed by the initial purchase deposit, insurance, stamp duty and other costs associated with buying.
The rental costs assume the typical rental yield for a property with rents assumed to rise with inflation over the 50 years.
There are big variations in the difference between buying and renting around the country due to differences in rents and house prices between regions.
The lifetime saving from owning is biggest in London (£396,049) followed by the North West (£300,049) and Yorkshire and the Humber (£280,125).
The gap is said to be smallest in the South West (£33,863) because rents are unusually cheap relative to house prices.
However, none of that takes any account of the fact that someone buying a home with a mortgage will usually own it outright after 25 years. Barclays says this increases the average advantage of owning over renting to £595,000.
Barclays is using the research to promote a new mortgage scheme called Helpful Start that enables parents to help their children on to the housing ladder through a Family Affordability Plan.
Andy Gray, head of mortgages at Barclays said: "The cost of stepping on or moving up the housing ladder can be a big barrier for many, but the long term benefits hugely exceed the initial expense. Not only will you save money by becoming an owner occupier, but you will also own a substantial asset once your mortgage is paid off, providing financial security for your old age.
"Those who choose to rent permanently will have to pay their landlord out of their pension income, while owner-occupiers will enjoy minimal housing costs.”