Rent or Buy? Whats the general opinion?

bargain_hunter25

Hi

I'm in a position where I need to move out of my parents house as I simply need my own space. I am quite lucky as I do have a well paid secure job and a large deposit which makes me eligible for the majority of current mortgage deals that have a 75% LTV. My question is, should I buy a house or rent a house and wait for house prices to fall further and hopefully mortgage rates to potentially fall further? I know the main issue for me with renting is simply that £500 a month worth of rent or more is going nowhere. That £500 a month could be paying a house off but as an example, if I was to rent for 12 months at £500 a month thats £6000 a year completely wasted in rental costs, im disregarding other household costs as I would need to pay them regardless of renting or buying. Whereas its highly likely the price of the average home will reduce by over £6000 in the next 12 months and if mortage rates go down further then thats also worth a significant sum of money specifically if fixed rates come down which will then mean that im still better off in the long run renting for 12 months whilst keeping my eye on the market. I suppose I need to stick with what I think will happen with the housing market and mortgage rates.

I have my eye on a house to rent so I could be moved in a matter of weeks whereas I havnt really spotted anything I would really like to buy.

Any general opinions on this would be appreciated. Staying at home much longer isnt really an option.

hethmar

I think you have already worked out the best course yourself. Rent the house and watch the market

Entertainer

Rent.

Why is it £6000 wasted? Are you going to buy your house with a zero % mortgage? Interest rates are already very low at 2%. Unless the economy enters a depression then expect them to go back up in 2010 to 5%.

LilacPixie

I would rent

As you said yourself a house will most likely fall in value by more than £6000 over the next 12 months. I would magine that whatever you buy will not be your forever home so you really do not want to be ending up stuck in negitive equity for years to come.

bargain_hunter25

Entertainer wrote: »

Rent.

Why is it £6000 wasted? Are you going to buy your house with a zero % mortgage?

That's a very good point and I am really glad you said that. It wouldnt be £6000 wasted, only say £3000 wasted as I would have wasted £3000 paying interest on the mortgage anyway over that year.. When its looked at in that way I think renting is the the only sensible option :-)

bargain_hunter25

Entertainer wrote: »

Unless the economy enters a depression then expect them to go back up in 2010 to 5%.

I agree with that. My aim would be to see what kind of fixed rate deals are available towards the end of 2009.

bargain_hunter25

LilacPixie wrote: »

I would rent

As you said yourself a house will most likely fall in value by more than £6000 over the next 12 months. I would magine that whatever you buy will not be your forever home so you really do not want to be ending up stuck in negitive equity for years to come.

Hi

The house that I rent will be in an area i would like to buy so I suppose its a good tester to see what its like without the commitment of owning a house there if i didn't like it. I also view it as a good time to build up household items so that when I do buy I wont also have the outlay of a full house worth of furnishings an appliances.

themanbearpig

Considering the average house is losing about £2000 a month in depreciation, I would say £6000 on rent is well spent!

rl290

My opinion is that house prices cannot stabilise (and will certainly not begin to rise) until mortgage interest rates reduce. I believe this will have to happen eventually - either the government will force state-owned banks to lower costs, or banks' asset bases will stabilise to a level where they can begin to be a bit more competitive. The latter option will take longer to come about, but both options will lead to cheaper loans. By waiting, you will achieve a double-success: buying when the market is near its lowest point, and getting a cheaper mortgage. By having significant savings, you will be ready to pounce! Whilst you are waiting, you can add to your savings.

As for this idea of renting being "dead money", this is an all too common misconception:
1) If house prices are falling (as they are now), then you could be losing 10's of thousands in capital depreciation if you were to buy... which you wouldn't if you rented.
2) You are giving money away to a landlord if you rent... but if you buy you are giving money away to the bank in interest if you buy.
3) If you rent, the landlord pays for any repair and maintenance costs. These fall to you if you buy.
4) Renting is MUCH more flexible - you can move around every year as you wish, following jobs etc as needed.

Buying does make sense for most people, but not when prices are falling, and probably not if you're not going to be there for too long.

I am reasonably young and have both rented and bought, and... I love renting! You move in straight away, everything is set up to go and you don't have to worry about maintaining the place. If you need to move due to your job, or even if you're just bored with the area, you can find somewhere new every year until you're ready to finally settle down. Once you buy, you lose that flexibility and freedom (which seems to be what you are craving) and have a whole host of other responsibilities!

RL290

PasturesNew

Definitely rent. One thing about houses is they all have annoyances. Over the years you build up a "must have" list for the next house. You can learn from the rented one what things annoy you.

It might be the type of heating, or kitchen layout, or window types.... but something will make it onto your hate list. When you buy that's one more thing to be checking for

never_enough

^Agree with poster above. Am facing an unwanted move from what I thought of as my dream/forever home, but already have a few 'must haves' on a list for the next one that I hadn't even considered last time. Also a few that I'm more than happy to compromise on or not have at all.
Renting will give you the space you want, time to look around locally & the way things are it makes total financial sense. You will however need to either time a purchase around the end of your lease (v tricky to do) or be prepared to move home to your folks/live in a friends broom cupboard until your sale goes through. Or pay rent & mortgage for a month or so.