How far to stretch for First Home?
Discussion
z4RRSchris said:
could be at the money or out of the money, but you have the underlying risk rather than the rental option which is no risk.
It's somewhat asymmetric though - given UK law and consumer protection compared to other countries. If the property goes down in value by a certain amount (i.e. your deposit) then you can just post the keys back to the bank and it's their problem. I suppose it's harder than that in real life but the principle stands.z4RRSchris said:
NickCQ said:
RWD cossie wil said:
Your home is NOT an investment, as you don't get paid to live there!
But you DO get paid. You get paid the rent that you'd otherwise be paying someone else!
... It is a liability, even when paid off it still incurs running costs every month.A BTL at say £125k will require a deposit of 25%, £31,520. Mortgage will be about £555 @5% for 25 years, your rent income will probably be in the region of £650-£850 (very broad figures just for illustration purposes)... this means you cash flow approx £100-£200 PCM, ignoring other costs like landlord insurance, repairs & upkeep etc.. While it is occupied, it is an Asset as it's adding money to your account after all expenses have been covered. You can have as many of those as you like, as you will never (theoretically) run out of £££ if the rent comes in on time.... in the long run, you are hoping for capital appreciation of the house to move up, and obviously for your mortgage to be paid down by the tenants... 25 years later you have a free house, producing £650-£800pcm cash flow (hopefully, if not more due to inflation)... That is an Asset!
How many times could you afford to pay for your house a month?
RWD cossie wil said:
The point being is that everyone sees their home as investment, it really isn't! Granted, we all need somewhere to live, & I agree 100% that it is far better to own than rent, but it really isn't an investment until you cash it in when you sell it, hoping that it is worth more than when you bought it! It also forgets to include all of your bills for the last 25 years, plus the interest you have paid on your mortgage....Your home in all probability is going to cost you £1500pcm inc bills, energy, phone, etc etc.... If you want to see who REALLY owns your house, stop paying the mortgage ... It is a liability, even when paid off it still incurs running costs every month.
A BTL at say £125k will require a deposit of 25%, £31,520. Mortgage will be about £555 @5% for 25 years, your rent income will probably be in the region of £650-£850 (very broad figures just for illustration purposes)... this means you cash flow approx £100-£200 PCM, ignoring other costs like landlord insurance, repairs & upkeep etc.. While it is occupied, it is an Asset as it's adding money to your account after all expenses have been covered. You can have as many of those as you like, as you will never (theoretically) run out of £££ if the rent comes in on time.... in the long run, you are hoping for capital appreciation of the house to move up, and obviously for your mortgage to be paid down by the tenants... 25 years later you have a free house, producing £650-£800pcm cash flow (hopefully, if not more due to inflation)... That is an Asset!
How many times could you afford to pay for your house a month?
Not really a like for like.... It is a liability, even when paid off it still incurs running costs every month.A BTL at say £125k will require a deposit of 25%, £31,520. Mortgage will be about £555 @5% for 25 years, your rent income will probably be in the region of £650-£850 (very broad figures just for illustration purposes)... this means you cash flow approx £100-£200 PCM, ignoring other costs like landlord insurance, repairs & upkeep etc.. While it is occupied, it is an Asset as it's adding money to your account after all expenses have been covered. You can have as many of those as you like, as you will never (theoretically) run out of £££ if the rent comes in on time.... in the long run, you are hoping for capital appreciation of the house to move up, and obviously for your mortgage to be paid down by the tenants... 25 years later you have a free house, producing £650-£800pcm cash flow (hopefully, if not more due to inflation)... That is an Asset!
How many times could you afford to pay for your house a month?
Where have you covered the buy to let's home where they live in, they will still be paying something somewhere, whether it is rental or another mortgage. They will still have bills to pay etc.
Any mortgage payment on rental property will soon be taxable so not just taxed on any monthly profit. May be wrong on this point ........
What happens with the rental when you don't have tennnants large repairs required due to bad tennnats - have to include negatives in there as well. Plenty have been bitten with BTL .
BTL are also part of the big problem with housing market.....
Edited by tighnamara on Tuesday 18th October 20:08
z4RRSchris said:
could be at the money or out of the money, but you have the underlying risk rather than the rental option which is no risk.
There can be massive risks in the rental market especially if you want the rental to be a family home. Bad landlord - slow at carrying out repairs
Restricted changes you can make to property to you and your family's liking
If changes are allowed you are spending money on someone else's property
Landlord can give notice if he wants to sell - unplanned upheaval for family
Possible no similar rental property available in that area
Think it is all relevant to each individual, all have different views and requirements, some things work for one but not others.
Really not a right or wrong either way......
tighnamara said:
RWD cossie wil said:
The point being is that everyone sees their home as investment, it really isn't! Granted, we all need somewhere to live, & I agree 100% that it is far better to own than rent, but it really isn't an investment until you cash it in when you sell it, hoping that it is worth more than when you bought it! It also forgets to include all of your bills for the last 25 years, plus the interest you have paid on your mortgage....Your home in all probability is going to cost you £1500pcm inc bills, energy, phone, etc etc.... If you want to see who REALLY owns your house, stop paying the mortgage ... It is a liability, even when paid off it still incurs running costs every month.
A BTL at say £125k will require a deposit of 25%, £31,520. Mortgage will be about £555 @5% for 25 years, your rent income will probably be in the region of £650-£850 (very broad figures just for illustration purposes)... this means you cash flow approx £100-£200 PCM, ignoring other costs like landlord insurance, repairs & upkeep etc.. While it is occupied, it is an Asset as it's adding money to your account after all expenses have been covered. You can have as many of those as you like, as you will never (theoretically) run out of £££ if the rent comes in on time.... in the long run, you are hoping for capital appreciation of the house to move up, and obviously for your mortgage to be paid down by the tenants... 25 years later you have a free house, producing £650-£800pcm cash flow (hopefully, if not more due to inflation)... That is an Asset!
How many times could you afford to pay for your house a month?
Not really a like for like.... It is a liability, even when paid off it still incurs running costs every month.A BTL at say £125k will require a deposit of 25%, £31,520. Mortgage will be about £555 @5% for 25 years, your rent income will probably be in the region of £650-£850 (very broad figures just for illustration purposes)... this means you cash flow approx £100-£200 PCM, ignoring other costs like landlord insurance, repairs & upkeep etc.. While it is occupied, it is an Asset as it's adding money to your account after all expenses have been covered. You can have as many of those as you like, as you will never (theoretically) run out of £££ if the rent comes in on time.... in the long run, you are hoping for capital appreciation of the house to move up, and obviously for your mortgage to be paid down by the tenants... 25 years later you have a free house, producing £650-£800pcm cash flow (hopefully, if not more due to inflation)... That is an Asset!
How many times could you afford to pay for your house a month?
Where have you covered the buy to let's home where they live in, they will still be paying something somewhere, whether it is rental or another mortgage. They will still have bills to pay etc.
Any mortgage payment on rental property will soon be taxable so not just taxed on any monthly profit. May be wrong on this point ........
What happens with the rental when you don't have tennnants large repairs required due to bad tennnats - have to include negatives in there as well. Plenty have been bitten with BTL .
BTL are also part of the big problem with housing market.....
Edited by tighnamara on Tuesday 18th October 20:08
Recently at 25. We didn't stretch ourselves in the slightest, took 60% of what the bank would offer us over 35 years. Our mortgage repayments are less than our rent was previously. However the house is a major renovation project, and was barely habitable initially, the hopes are that'll be fairly major springboard to the next place.
Our logic is that we're doing the sensible thing by buying a house but still retaining a great level of disposable income in our 20's.
I didn't want to stay trapped in the same cycle:
- Your priority is to concentrate in school so you can get into a good university (7 years)
- You priority is to buckle down at uni so you can get a good job (4 years)
- Now you have to save save save and buy a house as soon as possible (2 / 3 / 4 years?)
Then what?
- You need to stretch yourself as much as possible, concentrate on making as much money as possible to make the payments, take that overtime. Trade up constantly, bigger and better - Sure you want to go on holiday? That money should be going on paying off the mortgage... (25 years)
Great, now i'm mortgage free at 45 with a big house but I traded the best years of my life for it? I'm sure I'd rather just have the payments for an extra 5 years or so.
Our logic is that we're doing the sensible thing by buying a house but still retaining a great level of disposable income in our 20's.
I didn't want to stay trapped in the same cycle:
- Your priority is to concentrate in school so you can get into a good university (7 years)
- You priority is to buckle down at uni so you can get a good job (4 years)
- Now you have to save save save and buy a house as soon as possible (2 / 3 / 4 years?)
Then what?
- You need to stretch yourself as much as possible, concentrate on making as much money as possible to make the payments, take that overtime. Trade up constantly, bigger and better - Sure you want to go on holiday? That money should be going on paying off the mortgage... (25 years)
Great, now i'm mortgage free at 45 with a big house but I traded the best years of my life for it? I'm sure I'd rather just have the payments for an extra 5 years or so.
Edited by Ryan_T on Tuesday 18th October 22:04
RWD cossie wil said:
I'm not saying they are like for like, and I have already said that BTL is a risk, i.e. Ignoring other costs... the simple point is, your home is not an asset in simple terms, as you have to pay for it!
Maybe I am being stupid but when did an asset have to be something that you didn't pay for.........Joe purchased a house and paid a mortgage for 25 years until he paid the sum off - Joe subsequently has an Asset
Jim has rented for 25 years and continues renting - Jim has no Assett
Depends on how you look at things: is an asset something that puts money in your pocket every month or simply is an asset something of value you can sell and make do without?
The problem with your thinking of the home you live in as an asset, is you always need a home, so yeah you can sell it, then what, where do you live? do you go back to renting and putting money into other peoples pockets? in the meanwhile your home always costs something to run, taking money out of your pocket each month.
At best your home is something to secure loans against, so that you can then go and do something else with the capital; invest in businesses or rental property i.e. assets that put money in your pocket each month
A mortgage free property that you live in, is more an "asset" to your children than it is to you; they dont need it to live in, but it will be theirs to sell when you pass it on.....
The problem with your thinking of the home you live in as an asset, is you always need a home, so yeah you can sell it, then what, where do you live? do you go back to renting and putting money into other peoples pockets? in the meanwhile your home always costs something to run, taking money out of your pocket each month.
At best your home is something to secure loans against, so that you can then go and do something else with the capital; invest in businesses or rental property i.e. assets that put money in your pocket each month
A mortgage free property that you live in, is more an "asset" to your children than it is to you; they dont need it to live in, but it will be theirs to sell when you pass it on.....
bogie said:
Depends on how you look at things: is an asset something that puts money in your pocket every month or simply is an asset something of value you can sell and make do without?
The problem with your thinking of the home you live in as an asset, is you always need a home, so yeah you can sell it, then what, where do you live? do you go back to renting and putting money into other peoples pockets? in the meanwhile your home always costs something to run, taking money out of your pocket each month.
At best your home is something to secure loans against, so that you can then go and do something else with the capital; invest in businesses or rental property i.e. assets that put money in your pocket each month
A mortgage free property that you live in, is more an "asset" to your children than it is to you; they dont need it to live in, but it will be theirs to sell when you pass it on.....
Asset - an item of property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies.The problem with your thinking of the home you live in as an asset, is you always need a home, so yeah you can sell it, then what, where do you live? do you go back to renting and putting money into other peoples pockets? in the meanwhile your home always costs something to run, taking money out of your pocket each month.
At best your home is something to secure loans against, so that you can then go and do something else with the capital; invest in businesses or rental property i.e. assets that put money in your pocket each month
A mortgage free property that you live in, is more an "asset" to your children than it is to you; they dont need it to live in, but it will be theirs to sell when you pass it on.....
tighnamara said:
RWD cossie wil said:
I'm not saying they are like for like, and I have already said that BTL is a risk, i.e. Ignoring other costs... the simple point is, your home is not an asset in simple terms, as you have to pay for it!
Maybe I am being stupid but when did an asset have to be something that you didn't pay for.........Joe purchased a house and paid a mortgage for 25 years until he paid the sum off - Joe subsequently has an Asset
Jim has rented for 25 years and continues renting - Jim has no Assett
I'd hazard the guess that the answer is one? You have to pay £1000 PCM or it gets repossessed by the lender! At the end of the 25 years, yes you own it, (hopefully at an increased value), but you either have to sell it or refinance it to realise the cash, then where are you going to live eh? And the rest of the housing market has probably risen around you, so your increased capital value is eroded anyway...
With the BTL example, if it is cashflowing £100+ PCM, how many can you afford? As many as you can get your hands on! In 25 years time, you have (hopefully!) had all that cash flow every month, plus you now own however many x times properties mortgage free.... you can now either sell up for a lump of cash, refinance & pull some £££ out, or leave them ticking over as lets, earning you £££ every month... if I was a betting man, I would say that would be at least £750pcm for a £125k prop in 25 years times so 3k a month for 4x properties? Or 500k in cold hard cash as a minimum, plus you still have your own home to live in!
tighnamara said:
bogie said:
Depends on how you look at things: is an asset something that puts money in your pocket every month or simply is an asset something of value you can sell and make do without?
The problem with your thinking of the home you live in as an asset, is you always need a home, so yeah you can sell it, then what, where do you live? do you go back to renting and putting money into other peoples pockets? in the meanwhile your home always costs something to run, taking money out of your pocket each month.
At best your home is something to secure loans against, so that you can then go and do something else with the capital; invest in businesses or rental property i.e. assets that put money in your pocket each month
A mortgage free property that you live in, is more an "asset" to your children than it is to you; they dont need it to live in, but it will be theirs to sell when you pass it on.....
Asset - an item of property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies.The problem with your thinking of the home you live in as an asset, is you always need a home, so yeah you can sell it, then what, where do you live? do you go back to renting and putting money into other peoples pockets? in the meanwhile your home always costs something to run, taking money out of your pocket each month.
At best your home is something to secure loans against, so that you can then go and do something else with the capital; invest in businesses or rental property i.e. assets that put money in your pocket each month
A mortgage free property that you live in, is more an "asset" to your children than it is to you; they dont need it to live in, but it will be theirs to sell when you pass it on.....
Other guy has a point, in technical terms ok it's an asset but you need a home to live in.
I used to get annoyed about it quite a lot when people used to get so bloody happy that their own has gone up 40k or more. Well what do you think has happened to the next home you want to buy you plum.
XMT said:
Not much point of said asset if 90/95% of it is owned by said bank. Oh but you have 10% left for yourself you say, won't be much of that left by the time you move out, pay lawyers and all other said costs.
Other guy has a point, in technical terms ok it's an asset but you need a home to live in.
I used to get annoyed about it quite a lot when people used to get so bloody happy that their own has gone up 40k or more. Well what do you think has happened to the next home you want to buy you plum.
See above posts and take your time to maybe read them. Where did you read anything about owing 90% of the property to the mortgage company. Other guy has a point, in technical terms ok it's an asset but you need a home to live in.
I used to get annoyed about it quite a lot when people used to get so bloody happy that their own has gone up 40k or more. Well what do you think has happened to the next home you want to buy you plum.
If you read correctly I am referring to a home after the mortgage is paid off against somebody renting for the same 25 year period.
The point is it is an asset to the person on completing the mortage and owning outright, where as the person paying rental has paid xxxx amount and owns nothing, he has just help fund someone's BTL.
Understand that it is not an asset if you do not own it outright, similar to most buy to let's who have large mortgages.
I have made no reference to values appreciating as that is not my point, the point is once you have paid off the mortage fully it is an Asset to you.
Nice kind of chap ain't you, don't think there is any need to start petty little name calling......
I would suggest, in an answer to the OP, that buying the best house you can afford is the right answer, but "afford" doesn't mean now, it means if rates went up to x% or if you or your partner were out of work for a period (and therefore you were able to save at the same time as having a mortgage). Living in the here and now is the issue for a lot of people, as what is true today is not always the same next year.
Provided you can buy a house, pay the mortgage and save a little and/or overpay, then that's the ideal situation.
And it's not only 20 years ago things were better. I was talking with my daughter last week (she is 16 and thinking about careers and earnings) and I was explaining how her mum and I bought our house 7 years ago, in a London suburb for £300k. The same house is now 'worth' £450k. My point was people like us would no longer be able to afford it, and that's in just 7 years. Everyone is having to downsize or move out of a preferred area to keep to a purchase price.
I still think getting on the ladder is the right thing to do, but not at the expense of all else.
Provided you can buy a house, pay the mortgage and save a little and/or overpay, then that's the ideal situation.
And it's not only 20 years ago things were better. I was talking with my daughter last week (she is 16 and thinking about careers and earnings) and I was explaining how her mum and I bought our house 7 years ago, in a London suburb for £300k. The same house is now 'worth' £450k. My point was people like us would no longer be able to afford it, and that's in just 7 years. Everyone is having to downsize or move out of a preferred area to keep to a purchase price.
I still think getting on the ladder is the right thing to do, but not at the expense of all else.
tighnamara said:
XMT said:
Not much point of said asset if 90/95% of it is owned by said bank. Oh but you have 10% left for yourself you say, won't be much of that left by the time you move out, pay lawyers and all other said costs.
Other guy has a point, in technical terms ok it's an asset but you need a home to live in.
I used to get annoyed about it quite a lot when people used to get so bloody happy that their own has gone up 40k or more. Well what do you think has happened to the next home you want to buy you plum.
See above posts and take your time to maybe read them. Where did you read anything about owing 90% of the property to the mortgage company. Other guy has a point, in technical terms ok it's an asset but you need a home to live in.
I used to get annoyed about it quite a lot when people used to get so bloody happy that their own has gone up 40k or more. Well what do you think has happened to the next home you want to buy you plum.
If you read correctly I am referring to a home after the mortgage is paid off against somebody renting for the same 25 year period.
The point is it is an asset to the person on completing the mortage and owning outright, where as the person paying rental has paid xxxx amount and owns nothing, he has just help fund someone's BTL.
Understand that it is not an asset if you do not own it outright, similar to most buy to let's who have large mortgages.
I have made no reference to values appreciating as that is not my point, the point is once you have paid off the mortage fully it is an Asset to you.
Nice kind of chap ain't you, don't think there is any need to start petty little name calling......
I stand by what I said. Your welcome to do as you please.
In typical PH fashion you think everything is an attack on poor little you.
My statment about a plum was a general plum being happy their house has went up and not thinking what has happened to their next purchase. But if you felt I called you a plum then..... ok.
XMT said:
tighnamara said:
XMT said:
Not much point of said asset if 90/95% of it is owned by said bank. Oh but you have 10% left for yourself you say, won't be much of that left by the time you move out, pay lawyers and all other said costs.
Other guy has a point, in technical terms ok it's an asset but you need a home to live in.
I used to get annoyed about it quite a lot when people used to get so bloody happy that their own has gone up 40k or more. Well what do you think has happened to the next home you want to buy you plum.
See above posts and take your time to maybe read them. Where did you read anything about owing 90% of the property to the mortgage company. Other guy has a point, in technical terms ok it's an asset but you need a home to live in.
I used to get annoyed about it quite a lot when people used to get so bloody happy that their own has gone up 40k or more. Well what do you think has happened to the next home you want to buy you plum.
If you read correctly I am referring to a home after the mortgage is paid off against somebody renting for the same 25 year period.
The point is it is an asset to the person on completing the mortage and owning outright, where as the person paying rental has paid xxxx amount and owns nothing, he has just help fund someone's BTL.
Understand that it is not an asset if you do not own it outright, similar to most buy to let's who have large mortgages.
I have made no reference to values appreciating as that is not my point, the point is once you have paid off the mortage fully it is an Asset to you.
Nice kind of chap ain't you, don't think there is any need to start petty little name calling......
I stand by what I said. Your welcome to do as you please.
In typical PH fashion you think everything is an attack on poor little you.
My statment about a plum was a general plum being happy their house has went up and not thinking what has happened to their next purchase. But if you felt I called you a plum then..... ok.
If you dont want to move your house price going up can be seen as good as you will have more to bank/leave to someone one day.
If you move areas then your house price going up can be seen as good if the other area hadnt risen as much. I have gone from a 1 bed flat worth £170k, to a 4 bed house worth £600k in 5 years because of this. Half was due to refurbing but half was due to the markets and slightly moving areas (not more than 10 miles though). My mortgage has risen £100k but my property value has risen £430k.
XMT said:
I did read the above posts and have contributed to the thread throughout.
I stand by what I said. Your welcome to do as you please.
In typical PH fashion you think everything is an attack on poor little you.
My statment about a plum was a general plum being happy their house has went up and not thinking what has happened to their next purchase. But if you felt I called you a plum then..... ok.
Just bizarre to finnish a statement they way you did. Don't think it is any attack and had to laugh that you needed to say plum. I stand by what I said. Your welcome to do as you please.
In typical PH fashion you think everything is an attack on poor little you.
My statment about a plum was a general plum being happy their house has went up and not thinking what has happened to their next purchase. But if you felt I called you a plum then..... ok.
Who says there is a next house purchase, the point is it is all relevant to the individuals circumstances.
What part of "there is no reference to the appreciating value of the house" do you not understand.
I am only saying once the mortgage is paid off you have an asset that has value that someone who rented would not have.
okgo said:
One of my only regrets when buying a place was not having a little more foresight and waiting a few months, both changed jobs and doubled joint income, I could now be sitting on £200k equity instead of £100k 2.5 years later.
Yeah, I also regret not buying all of the best-performing shares of 2014 and 2015. Hindsight's a wonderful thing.Gassing Station | Finance | Top of Page | What's New | My Stuff