Rent or buy - decisions
Discussion
Simpo Two said:
Soovy said:
If you pay interest only, then you don't own a thing!
I thought all sensible people used repayment mortgages now? Endowments are dead and all the 1980s sharks who sold them are in jail etc.Soovy said:
Again I say, I pay £400 a week for a £650,000 flat - that is FAR FAR FAR cheaper than an interest only mortgage, and I have zero costs.
So your landlord is happy with a 0.06% return on his investment? Methinks it must be more complex than that!That's about 3.5%
And I've been there for 7 years, and I am a perfect tenant who always pays on time.
I'd say rent for a couple of years, get used to having your own place and all the bills that go with it! Enjoy moving about a bit and trying different areas and types of property before saddling yourself with 25-30 years of payments.
It's a world apart living in your own place and sorting all the associated hassles from living at home with the parents and renting for a while is a good way to get used to it.
As you already have a substantial deposit, you can just keep a keen eye on the market and buy when the time is right.
It's a world apart living in your own place and sorting all the associated hassles from living at home with the parents and renting for a while is a good way to get used to it.
As you already have a substantial deposit, you can just keep a keen eye on the market and buy when the time is right.
Amateurish said:
I've rented for about 10 years, and owned for 3. When renting I got to live in much better places for the same cost. Owning is a PITA - maintenance costs stack up (e.g. new boiler), plus no flexibility. I need to move now and it's a massive hassle compared to when renting. Plus the way the market has been we'll lose capital on the sale. Not even counting what I could have done with the capital had it not been tied up in the mortgage.
So renting = fixed cost plus much nicer place (at least round my way).
Purchase = interest + maintenance + hassle .
How would that have looked if you'd bought 13yrs ago though?So renting = fixed cost plus much nicer place (at least round my way).
Purchase = interest + maintenance + hassle .
And there are plenty of threads on PH from people who are having hassle with their landlord.
Soovy said:
If you pay interest only, then you don't own a thing!
Again I say, I pay £400 a week for a £650,000 flat - that is FAR FAR FAR cheaper than an interest only mortgage, and I have zero costs.
Interest Only mortgages are hard to come by now. Again I say, I pay £400 a week for a £650,000 flat - that is FAR FAR FAR cheaper than an interest only mortgage, and I have zero costs.
I calculate your payments to be a gross yield of just over 3% for your landlord, this is vey low. £400 a week would get you a £500k property near me (based on £1800 pcm).
However you can get sub 3% Cap Repayment mortgages at the moment subject to ltv etc.
For the OP, you need to think about where you curently are in life. Do you need the flexibility of renting?
Soovy said:
Monthly rent is £1800 x 12 = £21,600 pa
That's about 3.5%
And I've been there for 7 years, and I am a perfect tenant who always pays on time.
Also the landlord probably bought the place for £300,000. Its misleading really to quote current market price. I agree with Soovy. There are loads of places in SW London that don't look a good deal for the landlord till one factors in that they bought donkeys years ago or inherited them etc and so the monthly income is much better on a yield basis. That's about 3.5%
And I've been there for 7 years, and I am a perfect tenant who always pays on time.
They could sell at the current price of course but then there is the re-investment risk of what do do with the money and the Capital Gains Tax etc too.
Renting can make sense. Its all dependent on location and the individual circumstance surely?
Soovy said:
Again I say, I pay £400 a week for a £650,000 flat - that is FAR FAR FAR cheaper than an interest only mortgage, and I have zero costs.
What about if you include capital growth?As an example, I bought my house near where you live for £160k and sold it 11 years later for £445k. If I had rented over the same period I would not have that £285k of capital now.
Deva Link said:
How would that have looked if you'd bought 13yrs ago though?
Pretty f
king rosy. But as a student, I probably would have found it tricky to get a mortgage!I could probably have bought in 2006. which looking at the Nationwide House Price Index would mean a loss of 5% over the next 6 years (not taking into account inflation).
Anyway, OP is looking to buy today, not in 2000.
furtive said:
What about if you include capital growth?
As an example, I bought my house near where you live for £160k and sold it 11 years later for £445k. If I had rented over the same period I would not have that £285k of capital now.
Unfortunately, that only works if you are selling a BTL or selling to move to a cheaper area or downsize. That £285k capital means diddly squat if you need to spend it all to move because everyone else's house price has gone up.As an example, I bought my house near where you live for £160k and sold it 11 years later for £445k. If I had rented over the same period I would not have that £285k of capital now.
Wow, thanks for all the replies. Plenty of angles to look at it and plenty for me to consider.
I think one of my main concerns is that once say all or even 60%,70%,80% of my savings have been given to a bank and all the others involved in a house purchase, then I will have little left to feel secure for the future if things were to 'go south' (for whatever reasons).
So the renting side is showing a slightly stronger position with me at the moment. But the down side to this is that I've always viewed renting as 'dead' money, paying off somebody else's mortgage. So like some have hinted, both sides have pro's and con's. I am just struggling to find the right balance for my particular situation in order to make the best decision.
I do have ideas of wanting to freely move around and constantly bettering myself with moving up in the jobs market. This also not being confined to the UK if the opportunity arises.
I have some friends and family who have experience of living outside the UK and they say to me that one can get a much better 'deal' and better standard of living in places such as Canada, USA, Australia, Europe for example. ie. your money goes a lot further outside the UK in terms of renting and property buying.
Now, I'm not sure how accurate all that is but the ideas are playing around in my head.
Once again, thanks for the replies. Most useful indeed.
I think one of my main concerns is that once say all or even 60%,70%,80% of my savings have been given to a bank and all the others involved in a house purchase, then I will have little left to feel secure for the future if things were to 'go south' (for whatever reasons).
So the renting side is showing a slightly stronger position with me at the moment. But the down side to this is that I've always viewed renting as 'dead' money, paying off somebody else's mortgage. So like some have hinted, both sides have pro's and con's. I am just struggling to find the right balance for my particular situation in order to make the best decision.
I do have ideas of wanting to freely move around and constantly bettering myself with moving up in the jobs market. This also not being confined to the UK if the opportunity arises.
I have some friends and family who have experience of living outside the UK and they say to me that one can get a much better 'deal' and better standard of living in places such as Canada, USA, Australia, Europe for example. ie. your money goes a lot further outside the UK in terms of renting and property buying.
Now, I'm not sure how accurate all that is but the ideas are playing around in my head.
Once again, thanks for the replies. Most useful indeed.
Amateurish said:
Anyway, OP is looking to buy today, not in 2000.
Well, yes, but what's going to happen in the next 13 years?OK, no-one knows for sure, but based on what's happened in the last few years it appears to be unlikley that the market will be absolutely decimated.
I suggest a bigger risk, in terms of consequences for individuals, is that the market could pick up, and once it starts rolling it could pick up rapidly. For people at the margins of owning their own property, it wouldn't take much for the market to move away from them.
Soovy said:
Simpo Two said:
Soovy said:
If you pay interest only, then you don't own a thing!
I thought all sensible people used repayment mortgages now? Endowments are dead and all the 1980s sharks who sold them are in jail etc.Soovy said:
Again I say, I pay £400 a week for a £650,000 flat - that is FAR FAR FAR cheaper than an interest only mortgage, and I have zero costs.
So your landlord is happy with a 0.06% return on his investment? Methinks it must be more complex than that!That's about 3.5%
And I've been there for 7 years, and I am a perfect tenant who always pays on time.
furtive said:
Soovy said:
Again I say, I pay £400 a week for a £650,000 flat - that is FAR FAR FAR cheaper than an interest only mortgage, and I have zero costs.
What about if you include capital growth?As an example, I bought my house near where you live for £160k and sold it 11 years later for £445k. If I had rented over the same period I would not have that £285k of capital now.
speed of light said:
I've always viewed renting as 'dead' money, paying off somebody else's mortgage.
You need to remember the other half of that statement is that while you have a mortgage, you're renting part of the property from the bank and that's 'dead money' just the same. I would work on the assumption of a flat market over the next five years if it was me and ignore the appreciation of capital element that would skew things in favour of buying rather than renting. If you have a good deposit and are able to save quickly then your best bet is likely to be to buy using an offset mortgage as mentioned above, so that you can define your own capital repayment profile. You can clear the mortgage as quickly as you want, while retaining access to capital if you need to buy a new car etc.
The one downside of an offset is that you won't get a fixed rate offset I don't think. I couldn't find one when I was looking a few months ago.
The other thing to consider is that if you buy a property that needs work doing there's an opportunity to create your own capital appreciation if you are capable of doing work yourself. Think of it as creating a second job for yourself.
Manicminer said:
Unfortunately, that only works if you are selling a BTL or selling to move to a cheaper area or downsize. That £285k capital means diddly squat if you need to spend it all to move because everyone else's house price has gone up.
It worked great for me 
Moved from a small 3 bed mid-terrace in London to a large 4 bed detached with double garage in prime commuterbelt without increasing my mortgage
I bought my first property when I was 19 and have always been a great be believer of putting your money into bricks and mortar.However, if I was in your shoes now I'd be renting.Property prices on the whole are going to be stagnant for a few more years yet, you cant rely on getting back your costs such as mortgage fees and stamp duty if you decide to sell after a couple of years, as the house/flat price may not have risen.Rent for a year or two and then think about this again.
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