Rent or buy - decisions
Discussion
I'm new on to these forums but noticed there is a section for homes etc. 
I have a home issue question which I hope I may gain some advice if possible.
I finished university a few years ago and landed myself a decent paid job in Manchester city. I'm 27 years old and have been saving like mad since starting full time employment. I am embarrassed to say it but I'm still living with parents as I've not been in a position to buy a house due to the prices sellers are asking for them; and also I've viewed renting as pure 'dead' money.
So instead I've been paying parents a decent weekly board amount so that the money can stay within family.
The question I have is that I have managed to save up around £40,000 (some of this being some inheritance from a relative that died last year), would this money be better waxing all on a deposit for a house or would it be worth going down the route of renting knowing that I'd still have a decent amount of savings in the bank?
The way I see it at the moment is that I could wax £40,000 on a deposit and then rely on keeping my job and maintaining a good salary for the rest of the years required on the mortgage.
OR, I could rent, have the freedom to move if my job required it with little hassle and have some savings to use for emergencies, holidays, future pension provisions etc.
Any advice welcome.
I have a home issue question which I hope I may gain some advice if possible.
I finished university a few years ago and landed myself a decent paid job in Manchester city. I'm 27 years old and have been saving like mad since starting full time employment. I am embarrassed to say it but I'm still living with parents as I've not been in a position to buy a house due to the prices sellers are asking for them; and also I've viewed renting as pure 'dead' money.
So instead I've been paying parents a decent weekly board amount so that the money can stay within family.
The question I have is that I have managed to save up around £40,000 (some of this being some inheritance from a relative that died last year), would this money be better waxing all on a deposit for a house or would it be worth going down the route of renting knowing that I'd still have a decent amount of savings in the bank?
The way I see it at the moment is that I could wax £40,000 on a deposit and then rely on keeping my job and maintaining a good salary for the rest of the years required on the mortgage.
OR, I could rent, have the freedom to move if my job required it with little hassle and have some savings to use for emergencies, holidays, future pension provisions etc.
Any advice welcome.
I'm no financial adviser, but always strikes me that rent is money down the pan. Savings don't earn a great deal in terms of interest. So I would buy a house/flat, using some/all of your savings and live there. If work takes you away for whatever reason, rent out your flat so your mortgage is covered but then rent somewhere for yourself. That way, hopefully property prices will increase and you have something to fall back on.
Property is a long terms investment. Short term gains are a thing of the past.
Property is a long terms investment. Short term gains are a thing of the past.
Rent, or pay mortgage interest. It's the same.
Buying gives you upside IF prices rise, BUT downside if they fall. You also have costs of maintenance, white goods etc etc etc.
Renting gives you flexibility, and fixed cost, with no downside if prices fall, but no upside if prices rise of course.
I currently rent a flat worth £650,000 for £400 a week. Less than the interest on an interest only mortgage would be.
If I was you, at your age, I'd invest £30k in Premium Bonds, rent a flat and enjoy your life for a while.
Buying gives you upside IF prices rise, BUT downside if they fall. You also have costs of maintenance, white goods etc etc etc.
Renting gives you flexibility, and fixed cost, with no downside if prices fall, but no upside if prices rise of course.
I currently rent a flat worth £650,000 for £400 a week. Less than the interest on an interest only mortgage would be.
If I was you, at your age, I'd invest £30k in Premium Bonds, rent a flat and enjoy your life for a while.
Wish I had the common sense to have done the sameI have been in rented for the past 7 months after always being a property owner (mortgage). I'm keen to buy again and will do so this spring/summer. I'm paying £1350 a month, and I have plenty of capital to buy something and cut my costs by a huge amount.
If you own a property and the value falls, will it fall more than the cost of the mortgage per month? For example a £200k house drops in value by 5% in 1 year - £10k. Less than the rent? Therefore you're still 'up'. Of course if renting a landlord would fix your broken boiler and you will spend money on decorating your home if you're an owner. IMO you're not going to lose unless you pay way over value in a really crap area.
If you own a property and the value falls, will it fall more than the cost of the mortgage per month? For example a £200k house drops in value by 5% in 1 year - £10k. Less than the rent? Therefore you're still 'up'. Of course if renting a landlord would fix your broken boiler and you will spend money on decorating your home if you're an owner. IMO you're not going to lose unless you pay way over value in a really crap area.
speed of light said:
I'm new on to these forums but noticed there is a section for homes etc.
I have a home issue question which I hope I may gain some advice if possible.
I finished university a few years ago and landed myself a decent paid job in Manchester city. I'm 27 years old and have been saving like mad since starting full time employment. I am embarrassed to say it but I'm still living with parents as I've not been in a position to buy a house due to the prices sellers are asking for them; and also I've viewed renting as pure 'dead' money.
So instead I've been paying parents a decent weekly board amount so that the money can stay within family.
The question I have is that I have managed to save up around £40,000 (some of this being some inheritance from a relative that died last year), would this money be better waxing all on a deposit for a house or would it be worth going down the route of renting knowing that I'd still have a decent amount of savings in the bank?
The way I see it at the moment is that I could wax £40,000 on a deposit and then rely on keeping my job and maintaining a good salary for the rest of the years required on the mortgage.
OR, I could rent, have the freedom to move if my job required it with little hassle and have some savings to use for emergencies, holidays, future pension provisions etc.
Any advice welcome.
How much is a property you would buy? what type ?I have a home issue question which I hope I may gain some advice if possible.
I finished university a few years ago and landed myself a decent paid job in Manchester city. I'm 27 years old and have been saving like mad since starting full time employment. I am embarrassed to say it but I'm still living with parents as I've not been in a position to buy a house due to the prices sellers are asking for them; and also I've viewed renting as pure 'dead' money.
So instead I've been paying parents a decent weekly board amount so that the money can stay within family.
The question I have is that I have managed to save up around £40,000 (some of this being some inheritance from a relative that died last year), would this money be better waxing all on a deposit for a house or would it be worth going down the route of renting knowing that I'd still have a decent amount of savings in the bank?
The way I see it at the moment is that I could wax £40,000 on a deposit and then rely on keeping my job and maintaining a good salary for the rest of the years required on the mortgage.
OR, I could rent, have the freedom to move if my job required it with little hassle and have some savings to use for emergencies, holidays, future pension provisions etc.
Any advice welcome.
At the moment prices are not going up so there is no rush ,as thers have said buying has responsibilities if things break and if prices fall then that we negate any savings made by buying over renting
Renting is not dead money in a falling market it can actually be the better choice ,ex as if you rent for a year (what will that cost you ?) and the house you want falls by 10% (how much is that ?) which would you be better off doing?
LaserTam said:
My comments were assuming the OP was not considering an Interest Only mortgage. I will never understand the point of these, unless you have been forced down that route, re-mortgage to reduce the repayments for whatever reason.
Interest only v Rent = rent
unless the property increases in value....Interest only v Rent = rent
there is no right or wrong , but if it were me i would study the local property market , attend auctions and then buy one which is a good deal
I'm the same age and I'm in a remarkably similar position, I'm 27, and I'm looking to buy my first place shortly (currently house searching). For me buying was a no brainer, because like you I have a large deposit and my deposit is over 40% which makes the mortgage cheaper than renting (by quite a way) around where I am looking.
First thing to point out is a house you live in is NOT an investment. Why, because to cash in your investment you would have to be homeless. Any rises in the price of the property will likely be mirrored in the local market so when the price rises you're either the same or worse off for example:
You buy a house for £150,000 and it gains 10% in value, it's now worth £165,000. You sell and buy a property for £200,000 which had a 10% rise in value, you've lost out £3,180.
I am not against renting and I can see the argument from each side, but in my opinion the money isn't much good in the bank while I'm paying somebody else's mortgage. If you're wanting to travel for your job (or another country) then renting might be right for you, but if you've got a stable job and medium term plans to stay in the area I would get the house. If you're anything like me you've pondered which sportscar you could buy instead with the money, but I am sure its hollow parking your flash car in front of a rented house (or worse, your parents').
In addition to your deposit you'll need to ensure you have enough left over for:
- Mortgage arrangement fees
- Conveyancing + survey fees
- White goods
- Furniture
- First month bills (phone, TV license...etc))
- 3 month's salary as a safety buffer
All surprisingly expensive so I would leave at least £10k aside in the bank if possible.
First thing to point out is a house you live in is NOT an investment. Why, because to cash in your investment you would have to be homeless. Any rises in the price of the property will likely be mirrored in the local market so when the price rises you're either the same or worse off for example:
You buy a house for £150,000 and it gains 10% in value, it's now worth £165,000. You sell and buy a property for £200,000 which had a 10% rise in value, you've lost out £3,180.
I am not against renting and I can see the argument from each side, but in my opinion the money isn't much good in the bank while I'm paying somebody else's mortgage. If you're wanting to travel for your job (or another country) then renting might be right for you, but if you've got a stable job and medium term plans to stay in the area I would get the house. If you're anything like me you've pondered which sportscar you could buy instead with the money, but I am sure its hollow parking your flash car in front of a rented house (or worse, your parents').
In addition to your deposit you'll need to ensure you have enough left over for:
- Mortgage arrangement fees
- Conveyancing + survey fees
- White goods
- Furniture
- First month bills (phone, TV license...etc))
- 3 month's salary as a safety buffer
All surprisingly expensive so I would leave at least £10k aside in the bank if possible.
Edited by minimods on Monday 7th January 21:53
minimods said:
If you're wanting to travel for your job (or another country) then renting might be right for you, but if you've got a stable job and medium term plans to stay in the area I would get the house.
I'd be thinking the opposite. With a good LTV, one could rent out the house while travelling for extra beer and hookers money.davepoth said:
I'd be thinking the opposite. With a good LTV, one could rent out the house while travelling for extra beer and hookers money.
Something I've considered, but aside from the EU most working visas are only a year and it makes things tricky if you decide or are forced to come back early. You would need a good friend or relative's house as a base in the UK if you want to, as an example come back for birthdays or Christmas... Might not be so straight forward.Targarama said:
If you own a property and the value falls, will it fall more than the cost of the mortgage per month? For example a £200k house drops in value by 5% in 1 year - £10k. Less than the rent? Therefore you're still 'up'.
Do you mean "own" or "buying on mortgage"?If buying on mortgage then as well as losing £10K of value you've also spent around the same on the mortgage. And you'll likely have a chunky amount of money tied up as a deposit.
Having said that, I tend to think most ordinary (those who aren't loaded) people should buy when they can. Who can be certain of what's going to happen and if prices do pick up they could easily move away from people.
I'm mortgage free now - it's a great feeling. To rent my house would cost around £1000/mth. I really wouldn't want to be paying that out every month at this stage on my life.
Edited by Deva Link on Monday 7th January 23:05
Soovy said:
Rent, or pay mortgage interest. It's the same.
Although after 25 years of the latter, you have a house. 25 years of rent and you're back where you're started.Whether a house value rises or falls after you buy it is of little consequence IMHO. If you don't need to move it's only a paper loss/gain; if you DO need to move then property elsewhere has gone down or up as well - sell cheap, buy cheap etc. So you're in a boat on the tide.
Buy to let. Live somewhere else for the time being. Rental prices are stable because people don't have faith in the property market at the moment so you can ask what you like (relatively speaking). When the prices rise (they will) then sell on or go up in the chain.
People will always need somewhere to rent but not all will feel the need to buy
People will always need somewhere to rent but not all will feel the need to buy
Buy a house you like, with a minimum deposit IO, offset mortgage. Aim to have a couple of spare bedrooms.
Put the rest of your capital in the offset, so that you still have it avaiable, but it has the effect of paying down the capital loan. Keep saving as you have, into the offset. It a lot easier to save when you know you have instant access!
As you are living at home I assume you are will be living alone in the house? If so rent the other two room out, and stick that in the offset too.
When you have enough to pay your house, then do so if you wish, or possibly buy a BTL.....or that Ferrari you promised yourself
Put the rest of your capital in the offset, so that you still have it avaiable, but it has the effect of paying down the capital loan. Keep saving as you have, into the offset. It a lot easier to save when you know you have instant access!
As you are living at home I assume you are will be living alone in the house? If so rent the other two room out, and stick that in the offset too.
When you have enough to pay your house, then do so if you wish, or possibly buy a BTL.....or that Ferrari you promised yourself
Rent may be "dead" money but so is stamp duty, surveys, EA fees, mortgage arrangement fees, interest, etc. In the early years of your mortgage you're barely repaying any capital, just the interest on that enormous amount of money you've borrowed. You'll be liable for maintenance costs, the boiler breaking, the pipe leaking, etc.
Capital appreciation seems to be very much stagnant (esp outside of London), you're presumably not planning to live in a one-bed flat in Manchester for the rest of your life - you may change job, location, partner, have kids, etc and then you'll be stuck with yet another one-bed flat to sell. If you're lucky you might get out having not spent any more than renting it would have. If you're less lucky, you have even less of a deposit for the next place, or not be able to sell and become yet another reluctant landlord. I've seen a lot of my peers do just that over the last 5-6 years.
But hey, you'll doubtless be getting encouraged to buy by a generation who have ridden the wave of massive house price rises and done very well out of it. Don't assume you'll be the same.
Capital appreciation seems to be very much stagnant (esp outside of London), you're presumably not planning to live in a one-bed flat in Manchester for the rest of your life - you may change job, location, partner, have kids, etc and then you'll be stuck with yet another one-bed flat to sell. If you're lucky you might get out having not spent any more than renting it would have. If you're less lucky, you have even less of a deposit for the next place, or not be able to sell and become yet another reluctant landlord. I've seen a lot of my peers do just that over the last 5-6 years.
But hey, you'll doubtless be getting encouraged to buy by a generation who have ridden the wave of massive house price rises and done very well out of it. Don't assume you'll be the same.
Simpo Two said:
Although after 25 years of the latter, you have a house. 25 years of rent and you're back where you're started.
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.
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.
And don't forget 3/4/5% stamp duty!
So renting = fixed cost plus much nicer place (at least round my way).
Purchase = interest + maintenance + hassle.
And don't forget 3/4/5% stamp duty!
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!Gassing Station | Homes, Gardens and DIY | Top of Page | What's New | My Stuff