Do you save money every month?

[robj20]

that is like saying you don't see the point in buying food or paying for electricity because at the end you hsve nothing to show for it.

The gain from paying rent is a roof over your head.

He's comparing renting Vs buying, your comparing renting Vs living on the street. Makes sense. Lol

I also don't see renting as an option personally, I see it like this at retirement my house will be paid for and I'll just have the running costs. If I were renting I'd still have those running costs plus rent.
Obviously with renting you don't have the expense of things like boilers and plumbing, bit those are a fraction of the extra it costs to rent. Round my way renting typically is at least double a mortgage for the same property.

 

[Andreworex]

He's comparing renting Vs buying, your comparing renting Vs living on the street. Makes sense. Lol

I also don't see renting as an option personally, I see it like this at retirement my house will be paid for and I'll just have the running costs. If I were renting I'd still have those running costs plus rent.
Obviously with renting you don't have the expense of things like boilers and plumbing, bit those are a fraction of the extra it costs to rent. Round my way renting typically is at least double a mortgage for the same property.

Exactly my point, the argument that investing the money you would have paid in a mortgage while renting is so out of touch with reality.

Paying double the mortgage cost on rent while investing what would have been the cost of the mortgage in a fund is just not realistic when you can pay a mortgage and invest the same cost again in a fund and end up with the same result...

or am I missing something?

 

[Scam]

or am I missing something?

No. The issue is that renting is so expensive. It means that you lose twice; because you're not able to put savings away every month (or if you can, it's less), and those savings earn way less than capital growth in our ludicrous housing market. Parts of the south east see houses easily "earn" more than the average local salary per year. It's utterly bonkers.

For me personally, I have always saved money. Even when I was earning minimum wage in my first job in London. I managed to scrape something together every month to put away. It's a mindset, and so far has served me well. I can't fathom not having a buffer. Even now I'm (amazingly) paying a mortgage, I'm still putting money away every month. It's not much right now, or is rather going straight into our house renovations.. But once that's done our mortgage is at a sensible rate so that I should be able to put away just as much as I did before. Whether my mindset changes because I'm no longer saving hard for a deposit, I don't know... But I imagine I'll still want to save something.

 

[SpeedFreak]

The mindset in getting a mortgage is simple. IMO...It's not about investment, it's not about what else i could have done with that money. That is not the mindset. The mindset is having a place to live when I am not working anymore. 4 walls that they can't kick me out of.

(wait for someone to find reasons for how they can kick me out of my home that i own outright which has nothing to do with rent/mortgage payments)

Such as not paying the ever increasing council tax bill

 

[Andreworex]

Such as not paying the ever increasing council tax bill

Can claim reduced on benefits, I had someone I know on benefits recently complaining that the council tax had increased.

They pay £20, it had increased from £18.

Government also gave them the £150 rebate this month, that should last them a few years of council tax!

 

[SpeedFreak]

How can you get a rebate when you're basically not paying it!?

 

[AndyCr15]

that is like saying you don't see the point in buying food or paying for electricity because at the end you hsve nothing to show for it.

The gain from paying rent is a roof over your head.

No, it really isn't. It's like buying bread and just throwing it in the bin, or buying the bread and actually eating it...

I clearly stated paying rent puts a roof over your head, which paying a mortgage does too, but you have the house after a while with the mortgage too.

Maybe where DP is it's much cheaper to rent? That's the only way the argument can make any sense (but he's not made it as that being the case yet). I don't know about everyone else, but in London, it's about the same, rent is about the same as a mortgage, you just need to be able to afford the deposit.

Let's do some very basic maths on it.

RENT
£1,000 for what, shall we say 60 years? (From leaving home to dying) = £720,000
(We'll ignore that rent will likely be much more in 10 or 20 years)

MORTGAGE
Initial outlay = £40,000
1,000 for 25 years = £300,000
Random upkeep costs = £10,000 (at most)
And you then own an asset from around £250,000 to £400,000

So we're comparing a loss of £100,000 through to a possible net gain against a £720,000 loss. What am I missing here?

 

[D.P.]

No, it really isn't. It's like buying bread and just throwing it in the bin, or buying the bread and actually eating it...

I clearly stated paying rent puts a roof over your head, which paying a mortgage does too, but you have the house after a while with the mortgage too.

Maybe where DP is it's much cheaper to rent? That's the only way the argument can make any sense (but he's not made it as that being the case yet). I don't know about everyone else, but in London, it's about the same, rent is about the same as a mortgage, you just need to be able to afford the deposit.

Let's do some very basic maths on it.

RENT
£1,000 for what, shall we say 60 years? (From leaving home to dying) = £720,000
(We'll ignore that rent will likely be much more in 10 or 20 years)

MORTGAGE
Initial outlay = £40,000
1,000 for 25 years = £300,000
Random upkeep costs = £10,000 (at most)
And you then own an asset from around £250,000 to £400,000

So we're comparing a loss of £100,000 through to a possible net gain against a £720,000 loss. What am I missing here?

economics 101

 

[PapaLazaru]

Overpay the mortgage each month.
Put a little aside for some liquidity.
Max investment allowed in my employers Sharesave scheme.

We are lucky that we are fortunate enough not to owe any money apart from the mortgage and that will be gone before I am 50.

 

[D.P.]

economics 101

actually, sorry to be blunt but im tired.

In summary, you have pointed out purely economic advantage to owning using hand picked numbers to show ownership in the best possible light.

If you assume the differences are economic then you will need a much deeper economic analysis, ans understand that what works out best depends on very specific figures for interest rates, market returns, rental rates, property taxes, tax rebates on mortages, insurance, maintenance costs.

The latter is something many people ignore. Myself, i have a 120k bill coming my way as a home owner which i wouldn't face as renter (but i knew it before buying). Economically it would be extremely close between buying and renting, with pros and cons each. The main reason to buy has nothing to do with economiy but ensuring consistent school district for my children. And to make the maximum economic gains i need to pay off the smallest amount of mortgage legally possible (unfortunately you are forced to buy 1%pa). But i wilk die will a massive mortgage because it makes zero financial sense..More likely, my kids eill flee the nest and i will sell up and rent, perhaps buying a small chalet in the mountains where rental returns and taxes are more favourable.


You ahve to understand, in mist of Europe mist people rent, and it is more economical to rent.

More to the point within the UK, mortgage rates are far lower than market returns so it never makes sense to over pay mortgages.


And don't get too comfortable owning a house you wont need and might not afford the upkeep of when you eventually have to ouve in a retirement home.

At the end if the day, you want to make sure youcan afford retirement. That is easily and predictably done renting with low risk for most people in the devoloped world.

 

[builder22]

economics 101

please elaborate...?

the 'argument' must be that investing the deposit for a mortgage and paying higher rental costs will leave you with more in the bank at the end of whatever the mortgage term is?

is that assuming UK rent prices and any possible inheritance of parents (owned) properties?

 

[BennyC]

The only benefit to renting when mortgage costs are similar is flexibility.

If you can cover rent and invest enough, to the same combined valued as a mortgage payment, to deliver greater total return than owning property then fair enough. But I expect you would need to be well paid and living in an area with very low property or rental costs to do so.

Renting is the equivalent of financing a car on PCP or HP and not settling the balloon payment at the end. It's sunk cost with nothing to show for it at the end of the term.

It sounds a little like D.P. is in the minority having been landed with a very large bill, which admittedly, knew was in the pipeline at the time of purchase. Most property shouldn't need much work beyond basic maintenance, decorative, plumbing upkeep, a boiler, roof tiles / guttering etc. If buying new even less so. Choosing to landscape or remodel isn't a necessity if viewed purely as an investment, except where it'll increase value beyond the cost.

 

[Lord-Jaffa]

I try to save 250 a month plus an extra 5% of salary into Pension, usually end up wasting it on gadgets though, I don't see myself living much into retirement age so it all seems fairly pointless to plan for a 30 year retirement.

 

[bayo000]

MORTGAGE
Initial outlay = £40,000
1,000 for 25 years = £300,000
Random upkeep costs = £10,000 (at most)
And you then own an asset from around £250,000 to £400,000

Not sure what you consider random upkeep costs but my old leasehold flat cost me about half that in the 5 years I owned it in service charge, ground rent and few repairs I needed to do. Unless you buy a freehold flat I can't see you getting anywhere near £10k on upkeep costs over 25years and even than only if you're extremely lucky things don't break. Generally over that period of time you'll be looking at several boilers, one or two kitchen refurbs, new doors and windows, roof repairs, garden maintenance etc. We've been in our house for little over a year and already spent more than that just on essential repairs/ updates. We're also about to start on fairly big renovation which will cost in a region of £70k (likely more). Granted all that will/ should add to the value of the property but owning a house is not as cheap as you make it out to be.

e: and to answer the question in the title, yes I do. 15% into pension and another 20-30% goes aside.

 

[EvilRob]

I do but I often wonder why I bother as it seems like a useless pot of money, neither enough to afford a house deposit or buy a nice car, or do anything useful with at all. Don't get me wrong I wouldn't give it away but it just seems completely useless.

I can understand it if you maybe earn a decent wage and have a good portion left over that can go towards something nice, but what if it's not, why bother?

Short answer: Yes, most financially prudent adults put money aside for a rainy day rather than living paycheck to paycheck.

Rarely seen as much bs as that being spouted by D.P. You have a 120k (GBP?) bill due on your property? That's as much as some UK properties cost to buy outright. Please show how renting ever makes financial sense in the UK if you can avoid it.

 

[AndyCr15]

Not sure what you consider random upkeep costs

You can only really base things on your own experience, but I wouldn't include having your kitchen done up, in that tbh. Boilers yes. The one were I live was installed before 1988 (as there was a service sticker from then) and we replaced that a few years back, so I guess over 70 years, yes you might put two or three new boilers in. Quite honestly that's small fries in the grand scheme of the maths I gave above. As I said, I didn't even bother about the issue that rent in 20 years time could easily double or triple. (I moved to London around 1995 and paid £215 a month. 20 years later it was just under £1k a month I think - albeit for a nicer place)

The numbers I gave were just some simple ones for someone to point out something I'm missing... I'm honestly asking. It stuns me that someone can suggest that renting is financially better, long term, than renting?

At the end if the day, you want to make sure youcan afford retirement. That is easily and predictably done renting with low risk for most people in the devoloped world.

I just don't get it. I honestly can't understand a sensible person thinking that not owning the brick and mortar you live in is a better position in retirement than owning it with no monthly costs? I've had one unpredictable bill for around £3k or £4k over 8 years as opposed to £1k a week over that time if I was renting... I just don't get it?

It sounds a little like D.P. is in the minority having been landed with a very large bill, which admittedly, knew was in the pipeline at the time of purchase.

This is the only thing I can think. His experience is pretty unique. Mind you, even then, with a known £120k bill coming, only an idiot would pay the full price, surely? If the property is worth around 500k, you pay 380k and take on the 120k bill. Once done, you own 500k's worth of property?!

 

[LeeUK]

I didn't when I lived pay packet to pay packet but now since I'm on an OK wage I save quite a bit. Boris Johnson and his Tory chums hate the working class having any money as it gives them less control over us so carrying on saving with no desire to spent spurs me on.

 

[gronf]

Basically save the few-several hundred I feel which is around partly whatever I guess is more than enough to offset any bad spending, disappointing investments etc.

 

[D.P.]

The standard maintenance costs on property are about 1%. This is a figure mortgage providers work around when calculating affordability. Apartments are a little cheaper, detached houses more. and this is a long term average, new houses is less but older houses can be much more, with an expectation that you put away 1% pa and for many years maintenance is low but then a year will come when a bathroom eill need gutting, or you need to upgrade a boiler to be a heat pump etc.


From a pure economics perspective, you have to understand that 500k in liquid assets is much more desirable than an iliquid 500k house. Which is why investors chase the stock market and don't simply buy property.


You also must not underestimate the risks in property ownership just because things have been stable recently. As an example, when i bought my previous house in the US the prior owner purchased it for about $600k but sold it to me for under $500k, and in their 4 years if ownership spent something like $120k upgrading kitchens, landscaping, finishing the attack etc. I owned the house for 3 years then sold it for only $5 than i purchased, but given the closing costs, stamp duty and legal fees this was a sizeable loss in absolute terms. Then there was the 20k spent in replacing the AC system because the fluorocarbon system that was installed in the 2008 house could no longer be supported.

The previous owner made a massive loss. I made a small loss relative to renting.


Here in Switzerland, the basic economics comes out relatively even to renting but only by minimising mortgage payments to reduce taxes. However, the true costsis the lost opportunity cost of investment. 20-25% down payment +7-8% closing costs means that i locked away 400k CHF in assets. If i rented, then that 400k could become 800k in 10 years (on average)

 

[AndyCr15]

but then a year will come when a bathroom eill need gutting, or you need to upgrade a boiler to be a heat pump etc.

Yeah, we covered that, still won't really make much of a dent...

You also must not underestimate the risks in property ownership just because things have been stable recently.

But even if my property dropped in value by half, I'm still about £200k better off than if I rented. Also, the only time that really matters is if you're selling and not buying again, like maybe moving into a care home.

However, the true costsis the lost opportunity cost of investment.

But this is another bit I don't get. What's the benefit paying £1k rent and investing £200 a month and paying £1k mortgage and investing £200 a month AND owning your home?

I think I'll just drop out here at this point as it's just not making sense.