House prices..

[Stretch]

Health of myself and family, long-term security, overall quality of life/happiness, stuff like that.

My view is that that is achievable without owning one's own home. For example given then choice between

1) Owning my own home, but really struggling to pay the bills and put food on the table, working really long hours, constantly stressed, never having any free time etc; and
2) Not owning my own home, but having an overall good quality of life with plenty of luxuries and free time

...I'd probably go for the latter. That's what I mean by it not being the 'be-all and end-all'.

Renting a family home would cost the same if not more than the equivalent monthly mortgage payments. I don't see how your comparison adds up?

 

[HangTime]

^depends a bit on the term of the mortgage though; while 2 years won't take much off a 25 year mortgage, look at shorter terms and it will have reduced that debt well under £200k.

In any event, it would only be £25k unsecured debt if the mortgage was taken out at 100% LTV

 

[lozza23_uk]

I didn't buy my house because the value might go up and this is where the UK makes a mistake. You buy a house to live in it, you shouldn't see it as merely an investment.

goto have somewhere to live.

I bought a house. I wanted somwhere to live, could afford to, could afford also if when my fixed rate end the interest rate is hugely different.

9 months in all is good. A success I feel. even if it does crash around my ankles, still got somewhere to live. just wont be making any money from it as quickly, nor using it as a spring board to a larger house (I want a drum room, a garage etc).

But...still got somewhere to live.

 

[HangTime]

Renting a family home would cost the same if not more than the equivalent monthly mortgage payments. I don't see how your comparison adds up?

I think you are missing the point I was trying to make - I am not debating the costs of renting/buying, I am purely talking about my statement regarding the mentality of home ownership, and that I don't view it as the "be-all and end-all". If it was, then by definition, one would give up pretty much everything for it - so I can create an example as impractical as I like (say, renting £100/month, mortgage £5000/month).

To make my viewpoint clearer, I think there are merits to both buying and renting. I bought myself because in my situation I deemed it to be the best option at that time. But that doesn't mean to say that I would necessarily hold up home ownership as the holy grail that I would give up everything for.... this train of thought ties in with some of the other things mentioned today about how 'you need to borrow 4x+ income because that's what it costs to buy a house'..... my viewpoint is that if 'because that's what it costs' reaches such a high level that it has a seriously detrimental impact on your quality of life, maybe other alternatives need to be considered.

Of course, it may turn out that after consideration, buying still works out better than renting for some people. Which is fine! But in my experience some people never even really consider renting properly (I used not to due to the mentality we discussed... see here from 20 months ago or so: http://forums.overclockers.co.uk/showpost.php?p=7579286&postcount=102 ) and so many times I've heard the phrase "RENTING = DEAD MONEY" from people.

 

[Dolph]

Yup, problem is that if you get a 200k mortgage on fixed rate then it gets reviewed after 2 years and the value of your property is now 175k expect the bank to up your rate as you now have effectively a 25k unsecured loan with them.

Your mortgage doesn't get reviewed when the fixed rate ends. It will change to whatever you've agreed when you took it out. You can then remortgage to get a better deal, but you should know exactly what you're getting in to from the start.

 

[jas72]

Your mortgage doesn't get reviewed when the fixed rate ends. It will change to whatever you've agreed when you took it out. You can then remortgage to get a better deal, but you should know exactly what you're getting in to from the start.

Tell that to a friend of mine who's mortage with NR has just been reviewed through the roof

Naturally he assumed he could switch when his fixed rate came to an end but other banks are not interested in NR customers nor can he get 100% anywhere else so he either has to sell up or borrow 10-20% unsecured to find a 90-80% mortgage somewhere else. This is reality of the credit crunch.

 

[Stretch]

To make my viewpoint clearer, I think there are merits to both buying and renting. I bought myself because in my situation I deemed it to be the best option at that time. But that doesn't mean to say that I would necessarily hold up home ownership as the holy grail that I would give up everything for.... this train of thought ties in with some of the other things mentioned today about how 'you need to borrow 4x+ income because that's what it costs to buy a house'..... my viewpoint is that if 'because that's what it costs' reaches such a high level that it has a seriously detrimental impact on your quality of life, maybe other alternatives need to be considered.

Rental costs are directly related to house prices, so renting is going to have an equal if not greater impact on your quality of life. If you can't keep up rental payments you get eveicted, what's the difference? Compounded with the fact you get none of the benefits of owning the house I fail to see why you would consider renting. People rent because they can't afford to buy or they don't feel settled enough to commit to a property.

What other merits do you see in renting?

 

[HangTime]

Some of the merits of renting as I see it (one of which probably fall into your 'feeling settled' reason above!):

-Potentially cheaper than buying (dependent on medium term housing market changes) providing you have a good investment vehicle for spare cash
-No stamp duty
-More flexibility in terms of relocating (say, you get a job offer somewhere else). It's easier and cheaper (no HIPs, estate agent fees etc) to move if you don't have an existing property to sell.
-No large debt hanging over you / less risk
-Less responsibility for maintenance

Now, of course the argument is that some of the additional costs (stamp duty etc) are effectively passed down to tenants - but if we do that then there's not much point even looking at the actual figures as we are just basing it all on assumptions. From what people on this forum have been telling me, say £800/month rent gets you a much superior family home than a more expensive mortgage in some areas.

Rental prices are linked to house prices, but some schools of thought suggest that the cost of renting a property in some cases works out cheaper than taking out an interest-only mortgage over the same term. Or in other words, in some cases house prices are overvalued relative to the potential rental income they can achieve.

 

[Dolph]

Tell that to a friend of mine who's mortage with NR has just been reviewed through the roof

Naturally he assumed he could switch when his fixed rate came to an end but other banks are not interested in NR customers nor can he get 100% anywhere else so he either has to sell up or borrow 10-20% unsecured to find a 90-80% mortgage somewhere else. This is reality of the credit crunch.

That's not what I mean. When you take a mortgage, you know what the deal is. As an example, my mortgage is 5 year fixed which then goes on to a tracker. Other mortgages are x year fixed then moving to the bank's standard variable rate. The bank can't alter this part of the agreement under normal circumstances. They can change the value of their SVR (which is what NR have done), but there were plenty of deals where you didn't get stuck with the SVR when your deal expired.

That people failed to consider they may not be able to switch is a problem, but that's why it was important to look at the full term deal as well as the promotional one.

 

[nightwish]

Rental costs are directly related to house prices, so renting is going to have an equal if not greater impact on your quality of life. If you can't keep up rental payments you get eveicted. Compounded with the fact you get none of the benefits of owning the house I fail to see why you would consider renting. People rent because they can't afford to buy or they don't feel settled enough to commit to a property.

What other merits do you see in renting?

I haven't read the whole thread, so I may have missed something, but...

Where does it say that rental costs are directly related to house prices? As I understand it, due to the recent glut of buy-to-letters, there are now tons of houses to rent in most places, which makes rental prices more competitive (ie. cheaper).

Also, do some maths on it...

Me and my girlfriend are renting a (nice) 2-bed end-terrace in Chesterfield for £500 a month. That's £6000 a year. In around a years time we will be looking to buy a house together around the £200,000 mark (assuming we're still together, etc, etc). We can afford to buy now, but I think that's a really bad idea atm.

Now, £6000 is 3% of £200,000. So if house prices fall by 3% or more in the next year or so, then we will be financially better off.

The point I'm making is that renting can be the better option depending on the current climate. Also, more flexibility, no fees (apart from £85 admin costs which is peanuts compared to buying), etc

Someone please tell me if that doesn't work?

 

[Sagalout]

Renting a family home would cost the same if not more than the equivalent monthly mortgage payments. I don't see how your comparison adds up?

But thats just it - its massively cheaper for us to rent - £550 a month cheaper for the same house. Or put another way, if we spent £1200 a month on rent we could live in a huge 4 bed detatched with double garage. A mortgage for the same amount would get us a 3 bed semi with single garage (if lucky).

Maybe it depends where you live but renting is much much cheaper than buying here at the moment.

 

[div0]

Rental costs are directly related to house prices, so renting is going to have an equal if not greater impact on your quality of life. If you can't keep up rental payments you get eveicted, what's the difference? Compounded with the fact you get none of the benefits of owning the house I fail to see why you would consider renting. People rent because they can't afford to buy or they don't feel settled enough to commit to a property.

What other merits do you see in renting?

You're totally misunderstanding his point....he's not saying renting is better/worse than buying.

All he is saying is that he doesn't view buying your own property as the 'be all and end all'....

He's basically saying that some people view owning their own property as more important than anything else in life.

Whereas, he values other things such as health, quality of life, etc more than being able to say he owns his own property.

So in his example he says IF he was given the choice between:

1) Owning my own home, but really struggling to pay the bills and put food on the table, working really long hours, constantly stressed, never having any free time etc; and
2) Not owning my own home, but having an overall good quality of life with plenty of luxuries and free time

...I'd probably go for the latter.

Whereas some other people seem to be of the opinion that option 1 is more desirable, simply because they would own their own house....

 

[The Mad Rapper]

Someone please tell me if that doesn't work?

It doesn't work.

You've neglected to consider two important issues:

1. At the end of the mortgage, the owner will own the property outright.

2. Comparing the relative merits of renting versus buying only really works if you save the difference between the cost of rent and the cost of the mortgage payment on that property. So say a place costs £500 PCM, but the mortgage would cost £1000, then you'd need to save £500 PCM as well and factor that, and the resulting interest, into the equation.

 

[[TW]Fox]

where have you seen that to?? the rentals market at the moment is awesome.

Flogging people rental contracts sat behind a desk is a rather different process to buying and letting a house yourself.

One is easy, the other is more frought with risk and difficulty.

 

[Stretch]

But thats just it - its massively cheaper for us to rent - £550 a month cheaper for the same house. Or put another way, if we spent £1200 a month on rent we could live in a huge 4 bed detatched with double garage. A mortgage for the same amount would get us a 3 bed semi with single garage (if lucky).

Maybe it depends where you live but renting is much much cheaper than buying here at the moment.

Not here in Cambridge.

Also in the long term rental income must at leased cover the cost of borrowing the money to buy the property, or the money would be better invested elsewhere.

It doesn't work.

You've neglected to consider two important issues:

1. At the end of the mortgage, the owner will own the property outright.

2. Comparing the relative merits of renting versus buying only really works if you save the difference between the cost of rent and the cost of the mortgage payment on that property. So say a place costs £500 PCM, but the mortgage would cost £1000, then you'd need to save £500 PCM as well and factor that, and the resulting interest, into the equation.

And what he said.

 

[nightwish]

It doesn't work.

You've neglected to consider two important issues:

1. At the end of the mortgage, the owner will own the property outright.

I'm not talking about renting for 25 years tho! Only for the next year or so, so that argument only applies to the value of mortgage payments made over the year. (Which is outweighed by other issues as far as I'm concerned)

2. Comparing the relative merits of renting versus buying only really works if you save the difference between the cost of rent and the cost of the mortgage payment on that property. So say a place costs £500 PCM, but the mortgage would cost £1000, then you'd need to save £500 PCM as well and factor that, and the resulting interest, into the equation.

Which I would if I had a job (Looking right now). My spending habits are quite restrained.

And what about the interest on the ~£40k worth of savings that I would put down for a deposit?

 

[The Mad Rapper]

I'm not talking about renting for 25 years tho! Only for the next year or so, so that argument only applies to the value of mortgage payments made over the year.

Well in that case I would just rent and not worry about it

And what about the interest on the ~£40k worth of savings that I would put down for a deposit?

You'd have to weight that against the interest saved by putting down a greater deposit. I'd contend that you'd save more in interest payments then you'd earn in interest on the same sum

 

[nightwish]

Well in that case I would just rent and not worry about it

I am

You'd have to weight that against the interest saved by putting down a greater deposit. I'd contend that you'd save more in interest payments then you'd earn in interest on the same sum

Probably, but not significantly - a good chunk of those savings is tax free

 

[clv101]

1. At the end of the mortgage, the owner will own the property outright.

And at the end of the same period of time the renter will have a huge stack of cash (saved rather than paid the capital off a mortgage) which has been growing thanks to compound interest. At the moment, with rent less than the interest, more can be saved than would be paid off the capital.

Rental costs are directly related to house prices...

That's not the case at all. The rental markets and house markets have very different drivers. Renting is driven by supply and demand whereas the housing market is driven by money supply.

 

[leaskovski]

Renting vs Owning. Some of you fail to see what happens at the end of the mortgage and you are retired.