Renting vs Buying - Tell me my maths is wrong!?!?
Discussion
Just after some advice from the masses really ...
We currently rent at £1050 a month, including service charge, maintenance, etc etc, if it breaks, they fix it. After 5 years, we would have paid £63k in rent, with no additional costs/maintenance, easy to move house if needed for jobs, etc.
The identical flat next door sold for £270k last year, which would be circa £1100 per month over 35 years, plus service charge of £150 = £1250. So £200 a month extra. To buy that flat, we would have had to put in the following:
Deposit: £27000
Stamp Duty: £8100
Other Fees (approx): £1900
TOTAL £37,000
After 5 years, we would have paid £75k in mortgage/service charge payments, leaving an outstanding balance of £226k (initial mortgage £243k). Lets say we then sell the property for £300k, lose £4k in selling fees, so net £296k, clear off mortgage, £53k in cash/equity remaining.
Compared to renting, we would have our £37k still in the bank, plus £1.5k of interest (1% per annum over 5 years), plus £200 a month saving per month for 5 years of £12k. Total Cash available = £50.5k.
Difference over 5 years for all that effort, assuming if i buy the house, nothing breaks, & it costs nothing in repairs? £2500.
If thats actually correct, it doesnt seem like a particularly brilliant return for investing £37k over 5 years?
We currently rent at £1050 a month, including service charge, maintenance, etc etc, if it breaks, they fix it. After 5 years, we would have paid £63k in rent, with no additional costs/maintenance, easy to move house if needed for jobs, etc.
The identical flat next door sold for £270k last year, which would be circa £1100 per month over 35 years, plus service charge of £150 = £1250. So £200 a month extra. To buy that flat, we would have had to put in the following:
Deposit: £27000
Stamp Duty: £8100
Other Fees (approx): £1900
TOTAL £37,000
After 5 years, we would have paid £75k in mortgage/service charge payments, leaving an outstanding balance of £226k (initial mortgage £243k). Lets say we then sell the property for £300k, lose £4k in selling fees, so net £296k, clear off mortgage, £53k in cash/equity remaining.
Compared to renting, we would have our £37k still in the bank, plus £1.5k of interest (1% per annum over 5 years), plus £200 a month saving per month for 5 years of £12k. Total Cash available = £50.5k.
Difference over 5 years for all that effort, assuming if i buy the house, nothing breaks, & it costs nothing in repairs? £2500.
If thats actually correct, it doesnt seem like a particularly brilliant return for investing £37k over 5 years?
Thanks for the thoughts so far, did forget to mention that we are considering this purchase purely over the next 5 years, after that, it will be sold to move into a 'family house' for kids, etc. That would naturally be mortgaged so as to plan for retirement - dont want monthlies at that point of my life. Our rent is fixed for the next 18 months iirc...
If that makes any difference?
If that makes any difference?
A very interesting post.
We actually considered buying a flat in a cheaper area to let out (25%/£40k deposit should get a £150k 2 bed in Basingstoke which lets for £800 a month), then continuing to rent in our current flat (considerably more expensive area to buy, but our rent is comparatively cheap).
But alas, ive been told that doing a BTL will be nigh on impossible without already owning another property?! Unless this is b
ks of course.
We actually considered buying a flat in a cheaper area to let out (25%/£40k deposit should get a £150k 2 bed in Basingstoke which lets for £800 a month), then continuing to rent in our current flat (considerably more expensive area to buy, but our rent is comparatively cheap).
But alas, ive been told that doing a BTL will be nigh on impossible without already owning another property?! Unless this is b
ks of course.
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