Rent or Buy? Whats the general opinion?

bargain_hunter25

rl290 wrote: »

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

I'll get filling in the application form then.. :-) :T

Every comment has been for renting so it's clear thats the way forward.

JayZed

bargain_hunter25 wrote: »

im disregarding other household costs as I would need to pay them regardless of renting or buying.

On the contrary, other household costs are normally higher if you own the property. Fixing/replacing the boiler; electrical problems; damp problems, etc, etc - if you're renting these are all the landlord's problem, not yours. In most rented accommodation you'd also expect to get at least basic white goods (fridge, oven etc) and again the cost of buying/repairing/replacing these lies with the landlord.

_bankrupted

bargain_hunter25 wrote: »

Every comment has been for renting so it's clear thats the way forward.

Yes but these boards are always very pessimistic, the trend is down and it's a very brave person who bucks the trend (well maybe not so bad on an anonomous forum!), but don't dimiss buying out of hand.

I think most people will agree this year will see falls of 10%, maybe less in some areas maybe more in others. Personally I think if we do see falls of 10% that will bring us pretty close to the bottom.

So lets for example say June/July we are 5% down and you decide to enter the buying market, you will be in a strong positon to buy, it will be a buyers market and you will probably be able to negotiate a price reduction of 5% or more if the buyer really does need to move. So you are buying close to what maybe the bottom.

That gives you 6 months to look around for your ideal place, 8 months maybe from moving out of your current place into your new one.

I think a lot of people will sit on the sidelines waiting for the bottom that they can never recognise. Only when it's clear that prices are rising has the bottom being called and by then it's turned back into a sellers market. It will happen quicker than people think when interest rates are 2% and falling.

Don't buy just yet.. but then again don't relax into the idea that you can sit it out for another year or more.

Running_Horse

bargain_hunter25 wrote: »

Hi

I'm in a position where I need to move out of my parents house as I simply need my own space.

Any general opinions on this would be appreciated.

Are you confusing need with want?

I know what it's like to be that age and want independence, but if you can stick it out for a year or two your financial situation would be greatly strengthened. An extra £5,000 to £10,000 will make a huge difference to what kind of home you can buy.

besonders1

Rent,

after all no thinks that paying board to parents is dead money when you live at home as most people do. As others have said houses are set to lose more than 6K and thats probably after the 3 months it takes you to actually buy it, I think many EA and banks have taken advantage of the fact that buying seems better than renting, hence the reason for the high prices and growth in homeownership but people are just starting to see the disadvantages such as the cost of repairs possible risk of repossession and debt if you lost your job etc

milliemonster

I have always been a homeowner, my brother is a renter, being forced into it following repossession 3 years ago but whilst he has his financial freedom now and I am tied, I still prefer to be an owner, but then I see my house as my home and an investment for my future (ie I will have no mortgage/rent to pay when I retire, how do you afford rent on a pension?) and to be handed down to my children when I am gone.

As a homeowner I also like the fact the money I spend on my house is adding value to it, I don't mean in monetary terms, although that certainly helps over the course of time, but in it being 'Mine'

Ok I know some of you will argue that it's not my home, it belongs to the mortgagee, well actually it is my home, it's my name on the title deeds, not the bank's and it will remain that way unless I stop paying the mortgage (just like if you stop paying your rent you will be evicted, but pay your rent for now until kingdom come and the house will never be yours)

Maybe I'm old fashioned I don't know but my brother has had to move house 3 times in the last 3 years, he can't redecorate or even put up a shelf in the houses he has lived in, I couldn't live like that. I think if we had a house rental system in this country that allowed for long term (15 years plus) leases and you could redecorate/change fittings etc then it would be more appealing to many.

I do think renting has its place for short term situations if you work away from home and need somewhere for a few months etc, but long term I would begrudge paying out for something that would never be mine.

DireEmblem

Forgetting the way the market is going etc etc, find out the estimated value of a property you would like to go for, and then figure out how much it would cost you to buy.

I mean, with your deposit, how much Interest/Capital will you be paying off?

Like you say, you would pay ~6k PA on rent, would the interest on your mortgage be less than this, if so then possibly worth a look?

Regardless if house prices fall further, imo now is probably a good time to lock in a lower fixed rate, and make overpayments. Your home will be a long term investment. Only reason I am waiting is to save for a greater deposit.

Also for example in ten years, you would have paid 60k out in rent.

I'm going to take a stab and guess you have a 30k deposit, with the 75% mortgage you would get a property currently valued at 120k.

Quick google gives a £424 repayment mtge at a 3.89% fixed rate with Cheltenham & Gloucester(you will get better deal with better searching).

So as you can see borrowing the extra 90k over 30 years only costs you 424PCM extra, you have to ask is it worth it for you?

You will end up paying out less than you would renting, which eliminates the loss of house prices dropping further(ten years you would have spent 60k on renting, which you wont see a return of anyway), as you end up paying out less than you would have done anyway by renting. Of course this does not take into consideration any additional maintenance bills to pay.

I just want to end by saying dont do anything off the back of anyones advice here, including mine, my 2p is just to weigh up your options, figure out what each will cost you, and then decide...

Doozergirl

If you stay at home for another six months and then buy then you'll have saved at least 3000 on rent without even considering the associated bills. If house prices have fallen further then it's an extra benefit to you.

I appreciate that if prices fall further then perhaps you haven't made the absolute best buy at the best price but if the amount you spend out each month is comparable then in the long term you've not lost out on anything particularly tangible and there are great benefits to owning a home which for me far outweigh renting.

If the decision is so financial that buying makes no sense to you at this particular moment then staying at home for a bit longer needs to be an option higher up the list!

the_ash_and_the_oak

Another important thing to remember is that a house isn't just a financial decision, a house is primarily a home and that is really something that is not easy to put a price on.

I really like the house that I live in and regardless of anything that is going on in the housing market I like actually being there. Though it does help that my landlord is very responsive if any problems do occur.

bob79

DireEmblem wrote: »

Forgetting the way the market is going etc etc, find out the estimated value of a property you would like to go for, and then figure out how much it would cost you to buy.

I'm going to take a stab and guess you have a 30k deposit, with the 75% mortgage you would get a property currently valued at 120k.

Quick google gives a £424 repayment mtge at a 3.89% fixed rate with Cheltenham & Gloucester(you will get better deal with better searching).

So as you can see borrowing the extra 90k over 30 years only costs you 424PCM extra, you have to ask is it worth it for you?

You will end up paying out less than you would renting.

DireEmblem, I basically agree with you. But I have one big problem with your reasoning: you calculated with the rate on a short term fix. Interest rates will not stay this low for the entire 30 years of the mortgage. Over a long period of time an interest rate of 6 or 7% is more realistic. Interest paid and rent should be compared with that higher interest rate in mind.

Also: I agree with previous posters that its generally best to rent your first home. Especially in a market like this where you can't easily sell if it turns out you overlooked something (which is very likely to happen with your first home).