Caporegime
Your chances of owning your own home?
- Thread starter PiKe
- Start date
It's not a foal fallacy although you are right, it has outstripped inflation.
However inflation wipes a load of the increase out. You then have to take into account mortgages are far easier to obtain and we have far more disposable income.
People expect to much and no sacrifices, that's pretty much what it boils down to.
Go back to 60/70s and see what are parents had to do as a first time buyer and you will be shocked.
Caporegime
I was able to get my fist home at 23 using the government scheme FTBI (First Time Buyers Initiative) combined with £10k of savings from my girlfriend (now wife). We got a mortgage for £105k, and the government fronted the rest for 3 years, after which we pay an increasing yearly fee. It still works out much cheaper than mortgaging the entire house or shared ownership which was the other scheme we looked at. I'm now 26 and earning £50k and in a position to get a mortgage for the entire properly value £180k.
Not sure what government schemes they are running now but may be worth a look.
http://www.homebuy.co.uk/
Not sure what government schemes they are running now but may be worth a look.
http://www.homebuy.co.uk/
I don't get why people get so hung up on this - it's the same thing basically unless you buy a leasehold flat with 3 years left on it for full lease value, and fail to realise. Yes, the lease renewal costs money, but this is almost always reflected in the selling price of the property anyway if it needs doing any time soon.
The only restrictions I've noticed with owning a leasehold property is that I can't stick a satellite dish up on my flat (I have to use the hidden communal one), and also means that I couldn't paint my window frames pink if I wanted to - but then neither could my neighbours, so surely this is a good thing?
If it's about 'ownership', then does that also mean that you don't 'own' any of the income that the property generates through either letting or capital gains?
It's not like shared ownership - which is often scamtastic.
Yup - it clearly is overpriced, but people who already have mortgages are now in the best position to pay them off than they ever had been in the past in terms of interest rates. This means that people generally aren't stuggling to service the debt, and house repossessions remain low. It also means that people aren't willing to sell houses at a loss, or what they consider to be below market value as they don't actually *need* the money.
The demand for house purchasing will always be high as it's engrained in our culture (just look at the opinions about renting in this thread for instance). However, people simply can't get mortgages as first time buyers as deposit requirements are too high.
Which leaves the market in a bit of a stalemate - people aren't willing to sell at lower values, and people who want a house can't get the credit to buy one.
This leaves only the option of renting. If the situation doesn't change massively (I.e. if Interest rates stay low in the long term - which is a possibility; and banks continue with low LTV %'s) then house prices will remain where they are, and it's likely renting for life will become more acceptable - much like it is in the rest of Western Europe.
Caporegime
I still don't get why anyone in their 20's would want to be a 'home owner'. Personally I want to build my career up and the best way to do that is work at a company for a few years then move to another and onwards and upwards, the same for my girlfriend. As an engineer this means that I may have to find work at different ends of the country and renting gives me the flexibility to do that and take opportunities as and when they arise. With a ball and chain of a house, this would be soooo much more difficult to do. I can only presume that these people who are young and buying houses are set for life in a rock solid job and have decided to put their roots down.
Then there is always the financial argument - renting is dead money but so is mortgage interest. I rather pay the rent and put my savings in a better performing financial asset, for example, gold for the last 3/5 years, let that appreciate and cash buy 10 years down the line.
I also find it amusing when people announce that they are home owners when in fact they don't even own a single brick - the bank does until the last mortgage payment is made. In the meantime said home owner is liable for maintenance and upkeep of the property which to me seems a very poor deal. These reasons summarise for me why renting is very much not dead money.
I forgot the 4th reason - Houses are now a depreciating asset class so are rather poor as an investment. I understand the general population has had 15 years being brain washed otherwise so this may take some time to filter through.
Then there is always the financial argument - renting is dead money but so is mortgage interest. I rather pay the rent and put my savings in a better performing financial asset, for example, gold for the last 3/5 years, let that appreciate and cash buy 10 years down the line.
I also find it amusing when people announce that they are home owners when in fact they don't even own a single brick - the bank does until the last mortgage payment is made. In the meantime said home owner is liable for maintenance and upkeep of the property which to me seems a very poor deal. These reasons summarise for me why renting is very much not dead money.
I forgot the 4th reason - Houses are now a depreciating asset class so are rather poor as an investment. I understand the general population has had 15 years being brain washed otherwise so this may take some time to filter through.
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You realise you can just rent your house out, so you can move to a new job.
There are lots of places where mortgage is cheaper than rent, so there is no saving left over from renting to invest.
And of courses biggest reason in my mind, is you can't alter or decorate a rented house, anything you do spend on that house is certainly totally wasted and giving money to the landlord.
As others have said it depends a lot on location, job and your financial circumstances.
I know loads of people who have purchased and moved on, renting out their property for more than the mortgage. Some have gone on to buy a 2nd house, where others are still just renting.
There are lots of places where mortgage is cheaper than rent, so there is no saving left over from renting to invest.
And of courses biggest reason in my mind, is you can't alter or decorate a rented house, anything you do spend on that house is certainly totally wasted and giving money to the landlord.
As others have said it depends a lot on location, job and your financial circumstances.
I know loads of people who have purchased and moved on, renting out their property for more than the mortgage. Some have gone on to buy a 2nd house, where others are still just renting.
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Man of Honour
That's not true though, is it? As long as you are in equity when you sell you receive the cash for it minus the money that goes to the bank. The bank doesn't deny all knowledge of your owning the propery until the last payment is made!
Poor as an investment, maybe. But if you compare it to renting if the monthly payments are the same you at least come out with something. You can't put the money you pay for rent in as an investment elsewhere.
Soldato
Unless you go live in Chesterton!
Is Chesterton that bad? When I first moved down here I lived in Arbury, which was still expensive to rent in. Thankfully got a place in college at the start of this year so I don't have to be careful about going home now
Everybody's circumstances are different. You'd say that you'd put your money in gold for the last 3/5 years, but hindsight is all too easy to base investment ideas upon.
In certain areas, house prices aren't depreciating. I've moved from renting in zone 1 to "owning" in zone 2 (london) and reduced my spend by 80%. I have the flexibility to rent out my room should I need to go work abroad. This surely counters all of your points above. But like I said, everyone has differing individual situations and solutions, and therefore what might seem ludicrous to you seems overwhelmingly sensible to me.
my understanding was you wouldn't get a mortgage on anything less than a 99 year lease. say you look at a flat and there is 70 yrs left on the lease and the lease holder wants £10k/£20k+ to put it to 99 years? feels a bit like being over a barrel to me
You see the bank wont allow you to fully own your home, its to much of a loss for them.
Renting and mortgage are frankly the same, the difference is that mortgage does give you more choice, but its a lie more or less that you will eventually own it.
Renting and mortgage are frankly the same, the difference is that mortgage does give you more choice, but its a lie more or less that you will eventually own it.
Capital appreciation usually - although a lot of people in their 20s are buying places to let and continuing to live with their parents, or renting cheaper places. I.e. having the property pay for itself.
Tell me where I should be putting my savings then? You've quoted Gold - does that mean you put all of your savings into Gold back in 2007 and are riding the wave now? Or is this wealth of knowledge retrospective?
I'm in my 20s and I have a solid professional career thanks, and also consider myself footloose - in fact I quite fancy moving to Geneva next year. Are you sure that your decision not to buy is based on the fact that an Engineering career is usually slow starting in terms of salaries and that you can't actually afford to buy - and you're trying to justify your choice to rent?
As for the bank 'owning' the place, how is that an issue? The actual substance is that the person who bought it owns it - the bank can't walk into your house, the bank don't have a say in the type of carpet you buy, and the bank can't tell you to mow the lawn. Ironically, if you're renting, you landlord can probably do all of these things.
If I suddenly decided that home ownership wasn't for me in the future, I could sell my flat and walk away with the capital I've paid in as well as my original deposit.
Don't get me wrong, I do see the merits of renting (particularly on the maintenance front) - however, I do find it irritating when people are put down for actually wanting to own their own property early on in life.
Man of Honour
no it's not, you pay a mortgage off (say 25 years) and the home is yours. pay rent for 25 years and you will have to continue paying
Caporegime
Yes, true, but it does require selling the house at a price that gives you positive equity. That may be fine for those who bought a decade ago or have time on their side and can let it sit on the market for years, but for those in financial trouble and are distressed sellers then there maybe problems.
I also agree that it maybe possible to rent out in order to move elsewhere but that is very messy and I know people who have done it and can't get the rent to cover the mortgage.
Finally - London is doing its own thing, normal rules don't apply!! (Yet, although my money would be on some post Olympic action)
Man of Honour
Well, as long as it's a 100% mortgage...Which, half of the mortgages nowadays are not
Why does it need to be a 100% mortgage?
I can assure you that you can get a mortgage on a 70 year lease flat.
The lease renewal will be at market rates, so they can't just charge what they want - however the key here is that the £10k you do spend on renewing the lease almost always hives itself up into the value of the property. So spend £10k on the lease value, and the value of the flat goes up by £10k.
Ok, this is annoying if you don't sell the flat any time soon - however, the increased value may bump up you up into a new LTV bracket for mortgage purposes. Even so, you could just lump the cost into the mortgage next time you come to sorting a new deal.