"Rent money is dead money"

FungusFighter

neverdespairgirl wrote: »

OH was travelling to Israel on his own by the age of 7 (put on the plane, collected off it) and by 13 was getting off the plane in Tel Aviv and making his own way to his grandparents' flat in Jerusalem.

At 13 I was travelling alone right across town, 3 buses and a tram, to take my son to nursery :j

carolt

IveSeenTheLight wrote: »

How?
After a typical 25 years, the current short term depreciating asset is fully yours and you no longer have to pay a monthly amount in order to live under a roof.
Can the same be said about rented accomodation?

Additionally, over 25 years, recorded history has shown that properties are never less than what was paid for them 25 years later

No -Lydia is correct.

If the money spent on interest payments to buy a house currently depreciating in value is more than the rental costs for the same property, then it makes financial sense to rent it instead.

You gain nothing by buying it, as any exta repayments you would have made on top of interest charges, you can still save up in a high-interest savings account. Meanwhile, the fixed debt - the capital you have to repay, goes down. So if you bought it say, 3 years down the line, you would have saved yourself 3 years worth of falls in the value of that house, plus the differnce between the rent and mortgage interests costs.

That's why all this malarkey about 'buying at the bottom' seems such nonsense to me - even if I only save say 50% of the amount I would have saved on buying at the absolute bottom, that would still be an enormous amount of money to save.

For an otherwise intelligent guy, you seem not to have this one through very well.

Cleaver

neverdespairgirl wrote: »

Am I going to have to wheel out my Black Death speech again?

Is that an interesting factoid about house prices not rising during the Black Death?

Or is it a threat of the Black Death to anyone that continues this tedious debate?

Doesn't matter actually, I'd like to hear it either way.

beingjdc

phil_b wrote: »

I'd agree renting is dead money, since you'll never see it back.

Buying a depreciating asset is only dead money if you sell shortly after. However, house prices WILL go back up again and you'll be back in the black. The money will have returned. Equally, you will have only then made money if you sell.

Yes, renting and mortgage interest are both dead money. Like electricity, food, and petrol.

You are right about capital values in a world where there's usually inflation, but if you pay £200,000 for a house, and it goes down to £150,000, even when it goes back up to £250,000, you've still lost £50,000 compared to if you'd waited a little while!

The_Grateful_Ghoul

Ironically buying a house can be classed as DEAD money.
You spend your life struggling to make the payments, but comforted by the fact you can tell people your house is worth a huge ammount but you never actually see this money do you?

Before you know where you are, you're retired and the kids can't wait to throw you into a nursing home or worse still for you to die and end up fighting over the large property left behind. Making it quite literally DEAD Money.

The whole thing is an illusion, but rather than concentrate on figures on paper, make sure you live a full and exciting life say I, afterall you're here for a good time not a long time.

mr.broderick

carolt wrote: »

No -Lydia is correct.

If the money spent on interest payments to buy a house currently depreciating in value is more than the rental costs for the same property, then it makes financial sense to rent it instead.

You gain nothing by buying it, as any exta repayments you would have made on top of interest charges, you can still save up in a high-interest savings account. Meanwhile, the fixed debt - the capital you have to repay, goes down. So if you bought it say, 3 years down the line, you would have saved yourself 3 years worth of falls in the value of that house, plus the differnce between the rent and mortgage interests costs.

That's why all this malarkey about 'buying at the bottom' seems such nonsense to me - even if I only save say 50% of the amount I would have saved on buying at the absolute bottom, that would still be an enormous amount of money to save.

For an otherwise intelligent guy, you seem not to have this one through very well.

Biggest load of rubbish i've read for a while.

beingjdc

mr.broderick wrote: »

Biggest load of rubbish i've read for a while.

It is absolutely correct in financial terms, in a time of low inflation - that's what people don't seem to be able to get their head around.

Buy a house where the mortgage is £600 a month interest and £100 repayment, at the end of the year you own £1,200 of house.

Rent a house where the rent is £600 a month and put £100 a month into a savings account, at the end of the year you own £1,200 cash.

You could use that cash to buy £1,200 worth of house, or not. You haven't lost out, the homeowner hasn't gained, nor vice versa, unless rents or house prices have gone up or down in that time.

mr.broderick

beingjdc wrote: »

It is absolutely correct in financial terms, in a time of low inflation - that's what people don't seem to be able to get their head around.

Buy a house where the mortgage is £600 a month interest and £100 repayment, at the end of the year you own £1,200 of house.

Rent a house where the rent is £600 a month and put £100 a month into a savings account, at the end of the year you own £1,200 cash.

You could use that cash to buy £1,200 worth of house, or not. You haven't lost out, the homeowner hasn't gained, nor vice versa, unless rents or house prices have gone up or down in that time.

Wasn't my point believe me the patronising carolt will buy a house as soon as she can afford to.

beingjdc

mr.broderick wrote: »

Wasn't my point believe me the patronising carolt will buy a house as soon as she can afford to.

Maybe, maybe not. I haven't bought one yet (since I sold the last one, anyway).

IveSeenTheLight

carolt wrote: »

No -Lydia is correct.

If the money spent on interest payments to buy a house currently depreciating in value is more than the rental costs for the same property, then it makes financial sense to rent it instead.

You gain nothing by buying it, as any exta repayments you would have made on top of interest charges, you can still save up in a high-interest savings account. Meanwhile, the fixed debt - the capital you have to repay, goes down. So if you bought it say, 3 years down the line, you would have saved yourself 3 years worth of falls in the value of that house, plus the differnce between the rent and mortgage interests costs.

That's why all this malarkey about 'buying at the bottom' seems such nonsense to me - even if I only save say 50% of the amount I would have saved on buying at the absolute bottom, that would still be an enormous amount of money to save.

For an otherwise intelligent guy, you seem not to have this one through very well.

I have thought it through and I agree with your above statement.
I made no ascertations on whether the rent was cheaper or more expensive than the interest while buying. You have made the ascertations by assuming and saying IF the mortgage interest is more than the rent.

My BTL that I bought in Jan 2007 interest payments are currently circa £450 per month on a fixed rate mortgage. The rent I receive on this property is £850 per month.
Therefore the rent received is far more than the interest on the mortgage

I therefore can reverse your statement and say: -

If the money spent on interest payments to buy a house currently depreciating in value is less than the rental costs for the same property, then it may make financial sense to buy it instead.

For an otherwise intelligent woman, you seem not to have this one through very well from both sides of the financial market.
Not everywhere is as unaffordable as your area.