Rent/mortgage conundrum
Discussion
One difference of renting vs buying is that in the latter case, after 25 years you own a house.
What the housing market does after you buy is of little importance - if it goes up you put the gain towards the next (more expensive) house. If it goes down, well, the house you wanted is also cheaper. The ships go up and down on the same tide.
What the housing market does after you buy is of little importance - if it goes up you put the gain towards the next (more expensive) house. If it goes down, well, the house you wanted is also cheaper. The ships go up and down on the same tide.
z4RRSchris99 said:
cossy400 said:
30k off is just the fact that its over priced due to bein in the smoke IMO.
And people are saying renting is dead money as all you are doing is payin someone elses mortgage off for them, and at the end of it you have zero assets whilst the landlord has an asset.
I know which id rather be paying.
you're an idiot And people are saying renting is dead money as all you are doing is payin someone elses mortgage off for them, and at the end of it you have zero assets whilst the landlord has an asset.
I know which id rather be paying.
So just whose the idiot??
And the post above this says pretty much the same is he an idiot too,,??
cossy400 said:
And people are saying renting is dead money as all you are doing is payin someone elses mortgage off for them, and at the end of it you have zero assets whilst the landlord has an asset.
Simpo Two said:
One difference of renting vs buying is that in the latter case, after 25 years you own a house.
No. This is 100% wrong.My simple point is that you should compare RENT vs. INTEREST ONLY mortgage rates. (i.e. NOT the principal repayments.)
So, let's say rent is around 5% of the price of the house. And BTL interest rates are 5%, then it is a wash.
i.e. your rent covers his interest AND NO MORE.
He has to put his hand in his own pocket to cover the principal repayments.
This is FAR MORE COMMON than the rent being sufficient to cover BOTH.
So in the example, rent is £1,040 a month on a £250k house.
Obviously a 100% mortgage at 5% would have the same interest cost.
But in a 25 year mortgage the actual monthly payment including BOTH interest and principal is £1,478 a month.
If rent was covering that, it would be the equivalent to a 7% rental yield.
Which would be an utter anomaly. There is almost nothing out there that high.
More often people don't have a 100% mortgage - they use a deposit, which indeed can let the rent cover the full interest + principal payments.
In the above example, if there was a £75k deposit, then the rent would cover both.
But again, people who struggle with finance miss an important point here.
That deposit has a significant opportunity cost.
If you are renting and thinking of buying and you have a £75k deposit, that deposit will earn you a good chunk of interest every year.
So you need to take account of the fact that you lose that if you buy a house.
People also seem to conveniently forget all the maintenance, fees and transaction costs that come with buying or BTLing.
So if someone has a 5% BTL mortgage and you pay 5% (gross) rental yield, then I can guarantee the landlord will be massively out of pocket without any house price inflation, let alone paying his mortgage down.
z4RRSchris99 said:
Froomee said:
Buy as soon as possible. House prices generally go up and renting is dead money.
Lots of factors like the stamp duty change, low interest rates, etc mean this is unlikely to change anytime soon in my opinion.
and this is why the government has to prop up the property market because we have such deep routed stupid ideas about propertyLots of factors like the stamp duty change, low interest rates, etc mean this is unlikely to change anytime soon in my opinion.
house prices generally go up: it's a cycle. not an upward trend
renting is dead money: as supposed to an interest only mortgage which exposes you to a variable asset?
If a house worth £250k increases by 3% over a year that is £7500 that you have to save just to keep up with the capital appreciation. Then the rent you would have paid out which would be approx £1100 a month so £20k. If you purchased the house you would have lost say £6k in interest and £4k in fees.
This is all very simplistic and relies on lots of variables i.e deposit and doesn't consider opportunity cost,etc.
Whilst house prices in London have started to drop its only because they were overpriced due to recent increases and good properties are still selling as there is a shortage (esepcially houses as opposed to flats, rightmove or any property site will show you this).
There are lots of variables and each situation requires you to DOYR, etc, etc but i stand by my initial comment despite what z4RRSchris99 has said. If you ring around your area and get a feel for the market its fairly easy to see what is selling/what isn't and recent price trends and sold prices are accessable on any decent website
I saved, waited for the market to drop, purchased a flat in London and it increased in value by two thirds in under 4 years despite my "stupid ideas"
Edited by Froomee on Tuesday 16th December 16:39
cossy400 said:
So basically everyone who has a buy to let is not making any money........
Im not so sure.
Bit late to reply to this, sorry.Im not so sure.
For relatively "normal" property, say non repossessions and in the >£100k range - I simply don't see ANY that yield much more than the 4-5% range.
Mortgage rates for BTL at 60% LTV seem to be about 3.7%.
So after maintenance, insurance, voids, agency fees and transaction costs of actually buying the thing...
On rent - TODAY - buying a BTL makes you very little money, if any, yes.
However - the landlords are still making out like bandits because IF YOU ALREADY OWN A BTL - you are very likely to be sitting on some substantial price appreciation in the property.
(Also, some may have very low mortgage rates having put in place some super low tracker at say BOEBR+150bps or something back in the good old days - they are making money.)
The question is whether further price appreciation is a reasonable assumption from here.
walm said:
cossy400 said:
So basically everyone who has a buy to let is not making any money........
Im not so sure.
Bit late to reply to this, sorry.Im not so sure.
For relatively "normal" property, say non repossessions and in the >£100k range - I simply don't see ANY that yield much more than the 4-5% range.
Mortgage rates for BTL at 60% LTV seem to be about 3.7%.
So after maintenance, insurance, voids, agency fees and transaction costs of actually buying the thing...
On rent - TODAY - buying a BTL makes you very little money, if any, yes.
However - the landlords are still making out like bandits because IF YOU ALREADY OWN A BTL - you are very likely to be sitting on some substantial price appreciation in the property.
(Also, some may have very low mortgage rates having put in place some super low tracker at say BOEBR+150bps or something back in the good old days - they are making money.)
The question is whether further price appreciation is a reasonable assumption from here.
I couldn't do with the hassles of it all.
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