Owning beats renting by £14k in just seven years
It costs £316 more a month to buy a typical property but homeowners are better off by almost £14,000 then renters after seven years.
The average monthly mortgage repayment across the UK stands at £1,181 (based on a typical 90% loan to value deal at a rate of 4.8%) a month, while the average rent is £865.
While renters enjoy a monthly saving, analysis from property website Zoopla shows that within five years "owners recoup their initial costs and become better off than renters". That's how long it takes for the value of equity to outstrip the value of savings.
Fast forward another two years and the average owner will be £13,850 better off than a tenant living in an equivalent rental property.
Aberdeen, Dundee and Glasgow are the "most cost-effective towns for buying versus renting", added Zoopla's research, with average mortgage repayments less than average rents.
In Aberdeen, a typical property with an asking price of £215,000 would have a mortgage repayment of £1,099 a month but the rent would be £1,318.
It would take just one year for owners to be better off than tenants, thanks to rising house values and equity growth and after seven years, buyers in Aberdeen stand to be a massive £103,258 better off the tenants in equivalent properties.
Meanwhile, Bournemouth, London and Huddersfield are the most cost-effective places for renters because of significantly higher property prices relative to rents.
In Bournemouth, a typical home worth £389,964 has a monthly mortgage repayment of £1,990 but rent of just £1,103. It would take 18 years for buyers to be better off than tenants, and after seven years renters are actually better off by £39,473.
Lawrence Hall of Zoopla said: "People who invest in property are playing the long game. While buyers have to swallow the initial upfront costs of purchasing a property, they ultimately reap the benefits over renters down the line from building up equity in an asset that they will own by the end of the mortgage term."
Loan to value
The LTV shows how much of a property is being financed and is also a way to tell how much equity you have in a property. The higher the LTV ratio the greater the risk for the lender, so borrowers with small deposits or not much equity in the property will be charged higher interest rates than borrowers with large deposits. The LTV ratio is calculated by dividing the loan value by the property value and then multiplying by 100. For example, a £140,000 loan on a £200,000 property is a LTV of 70%.