House prices..

[The Mad Rapper]

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.

If you read my post properly you'd note that I identified that myself

For STR to work, one MUST save the difference or you'd be no better off. It does imply a degree of restraint and self-discipline

 

[clv101]

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

What do you mean?

 

[dirtydog]

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

You get ill and are forced to sell your house to pay for your care, which you'd have got for free otherwise?

 

[leaskovski]

What do you mean?

usually you aim to have paid your mortgage off before you retire thus you can kick back and enjoy that extra cash you dont have to give out each month.

 

[leaskovski]

You get ill and are forced to sell your house to pay for your care, which you'd have got for free otherwise?

lol, yeah, well, erm, sell it and gift the cash to your kids and hope you dont die within 7 years?

 

[Cosimo]

usually you aim to have paid your mortgage off before you retire thus you can kick back and enjoy that extra cash you dont have to give out each month.

Dead right and you don’t have to worry about paying rent from your pension when you retire.

 

[jas72]

You get ill and are forced to sell your house to pay for your care, which you'd have got for free otherwise?

or you simply sell your house and deposit the cash in your grandkids accounts at the first signs of illness.

 

[clv101]

usually you aim to have paid your mortgage off before you retire thus you can kick back and enjoy that extra cash you dont have to give out each month.

Same applies with renting... instead of your quarter million being tied up in a house it's in a range of investments earning more than enough to pay the rent. How do you think Germany manages?

In Germany only 43% of houses are owner-occupied whereas in the UK it's 71%. German retirees do just fine without owning a house.

 

[Hedge]

So many pages to trawl through.

The idea of owning my own house is nice, as with everyone, i think its part of our culture...

but if it would cost say 1000 quid pcm to buy a 3bed house... or say 500 to rent it...

then you could potentially save up the 500 quid you save, and have 150k at the end of 25years (with interest on top)

but im guessing thats been covered numerous times here and been disregarded as there is probably a huge factor i dont know about lol

 

[leaskovski]

Ah, ok. I wish there were more savey people like you guys when it comes to renting. I suspect there are a few people out there who are not investing that spare money!

 

[Yeggstry]

I'm not investing, but saving in an ISA at the moment Filled up last year's allocation and will start on this year's shortly. Having only been out of uni for nearly 2 years I've only just had the opportunity to put some money away for the future.

My gf and I are in a strong position with regards to our wage, we earn close to £50k between us meaning we would be comfortable with a mortgage which is only 3 times that amount. Unfortunately its going to take a while to save up for a deposit

 

[v0n]

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.

That's interesting way of thinking. You and your girlfriend are renting for £6000 a year. That's money thrown down the drain, unless you are only here temporary before you emigrate somewhere else. On the other hand, if prices fell 3% or 10% or even 20% this year, providing you have to live somewhere throughout your life, in a long run they are guaranteed to go up, anyway. This way, ten years from now, providing complete market collapse and values only following minimum inflation for a decade (like between 1990 and 2000) you will still be £60,000 down in your rentals, but a home owner will have £60,000 in assets...

 

[Posty]

Same applies with renting... instead of your quarter million being tied up in a house it's in a range of investments earning more than enough to pay the rent. How do you think Germany manages?

In Germany only 43% of houses are owner-occupied whereas in the UK it's 71%. German retirees do just fine without owning a house.

They have much more generous state aid, Britons will not tolerate a German tax rate.

 

[lozza23_uk]

So many pages to trawl through.

The idea of owning my own house is nice, as with everyone, i think its part of our culture...

but if it would cost say 1000 quid pcm to buy a 3bed house... or say 500 to rent it...

then you could potentially save up the 500 quid you save, and have 150k at the end of 25years (with interest on top)

but im guessing thats been covered numerous times here and been disregarded as there is probably a huge factor i dont know about lol

but what would the property be worth in 25 years time?

 

[clv101]

That's interesting way of thinking. You and your girlfriend are renting for £6000 a year. That's money thrown down the drain, unless you are only here temporary before you emigrate somewhere else. On the other hand, if prices fell 3% or 10% or even 20% this year, providing you have to live somewhere throughout your life, in a long run they are guaranteed to go up, anyway. This way, ten years from now, providing complete market collapse and values only following minimum inflation for a decade (like between 1990 and 2000) you will still be £60,000 down in your rentals, but a home owner will have £60,000 in assets...

Yet another person ignoring the cost of borrowing money.

That £6k has put a roof over their heads for a year, quite a valuable thing. Buying a house doesn't achieve the same for free.

Just because house prices go up in the long term, doesn't make buying one when the price is falling a good idea.

 

[Posty]

but what would the property be worth in 25 years time?

well the last 10 years average price has increase 214%, even with a 20% fall that is still a large increase

 

[Posty]

the thing about house prices is that its hard to predict, i remember on this very forum people talking about a major crash in 2005, i feel sorry for anyone who listened to them at that time and put off buying a house

 

[nightwish]

That's interesting way of thinking. You and your girlfriend are renting for £6000 a year. That's money thrown down the drain, unless you are only here temporary before you emigrate somewhere else. On the other hand, if prices fell 3% or 10% or even 20% this year, providing you have to live somewhere throughout your life, in a long run they are guaranteed to go up, anyway. This way, ten years from now, providing complete market collapse and values only following minimum inflation for a decade (like between 1990 and 2000) you will still be £60,000 down in your rentals, but a home owner will have £60,000 in assets...

Sigh... stop with the "long run", "ten years", "end of the mortgage" stuff... I never said I thought renting was a good *long term* option...

But that *does not* mean that renting is always "money thrown down the drain" either. I hear this again and again and it just ain't so.

Consider choosing between renting and buying for the *next year* only. Let's just look at mortgage/rental payments. (If we consider setup costs/fees then renting is even better, but thats a bit unfair cos a mortgage is a long term commitment)

If I rent somewhere for 1 year for £6000, then that money is thrown away right? But if the house I want to buy started the year at £200,000 and ended it at £190,000. Then I can buy the house at the end of the year for £10,000 less than at the start of the year. Take away the rent from that and I end up £4000 better off at the end of the year in real terms.

So renting is a better financial option *if* you think that the price of the house you want to buy will drop by more than the cost of renting for that year, which I think it will.

 

[HangTime]

That's interesting way of thinking. You and your girlfriend are renting for £6000 a year. That's money thrown down the drain

If they bought a £200,000 house, even with a 25% deposit, they would be paying over £6000 in interest in the first year. That's money thrown down the drain (as much so as the rental payments) unless house prices rise.

 

[lozza23_uk]

well the last 10 years average price has increase 214%, even with a 20% fall that is still a large increase

can anyone see that being sustained for the next 10 years?

i.e. my 1bed house. parking. garden. expensive location. 160k april last year agreed price.

right now the houses on my road go for the same (although I have about 5k's more garden...debatable)

in 10 years time my property would be worth nearly 350k.
the lets say 220-250k i would aspire to for 2-3 bedrooms (drums etc) and a garage (VW project) would set me back 470-545k.

I can't see me keeping up...even though I have no problem paying for a 160k house right now. my wages arent set to rise 214%.

interesting food for thought.