Psychology of Home Owning

ess0two

Also add i'm basing moving on buying and selling,if renting then different kettle of fish.
Only ever moved twice,but do have a city apt,for breaks away.

Must have taken me 10yrs to get my last house how i wanted it.

SingleSue

lostinrates wrote: »

My parents have moved, just in the last 30 years, over ten times (that even shocks me) discounting short term work moves. (I've discounted anything under a year).

I can't think of any of my peers who've moved as few as three times post university. (there might be some, I just can't think who right now!)

My parents haven't moved in the last 40 years! Before that though, they moved around an awful lot for his job (those were rentals though, they only purchased the house they have now as it was a 3 year construction contract).

I have moved 4 times since the age of 18, only once into a purchased property.

Amazingly, in the arguement of better off buying than renting costs over the years, I agree with Hamish! Once the mortgage is paid off, that is it and you can get a good 40 years of not having to pay anything else after that, with renting, you pay until you die.

It also gives freedom of choice later on in life...to sell up and travel the world on the proceeds, to pay for better care facilities (if needed), a cushion if the worse happens although it does bring worries alongside..my parents are now reaching the stage of their lives where mobility is becoming a problem but for what they could get for their house, would not get them a partcularly brilliant bungalow....there are other options of course but talking to my mum about them is like talking to a brick wall!

HAMISH_MCTAVISH

Harry_Powell wrote: »

History has shown that the stock market beats all other investments long-term, including property.:)

Yes, it may well do. When you are talking about the same level of investment in each.

But there is no way in hell that the stock market can outperform property with just 10% of the investment. Which is all you can put in when the other 90% is spent on rent..... Paying someone elses mortgage.

Calculate returns of stock market and property since 1975 investing an equal amount in each one.

Then remove 90% of that figure from the stock market.

Then tell me which one wins, even after you subtract your supposed 60K for moving costs etc.....

roswell

Rochdale_Pioneers wrote: »

I can think of only 2 reasons to own rather than rent - you can do what you want with it, and its an asset with saleable value . If you're not bothered about having an asset to sell at the end (assuming the market allows you not to lose money of course!) then rent. If its a flat and "buying" means owning nothing but the door keys, then rent.

buy at the right time and your outgoing decrease... rents rise over time not decrease.

Pagg

Very good thread, thanks to the OP for posting. As for me...

1) How did you feel when you moved in to your first place?
Elated, a sense of belonging/identity ("this is my place"), ticked off one of life's "things to do". Felt also it was good long term, having spoke to parents of girlfriends who had either paid their mortgage off or "how much rent are you paying? Eh, I pay £15 a month mortgage".

2) Has owning a home limited your choices?
Missed out on job opportunities because you'd have to move - very definitely. But maybe that's me rationalising about being risk averse, a friend of many years has always rented and though he's job-hopped he's always stayed within 10 or so miles of his parental home.

3) Has owning a home enriched your life, or do you imagine it would?
* You can keep pets - had a lovely dog for years while with my long term gf. It was a shame that when me and her broke up, mum and dad had to take care of the pooch, as it was unfair to leave her alone while I went out working. Better for the mutt though.
* You can change things to your taste - yes but more generally, doing things as and when and how you want to, without having to worry about the landlord/lady or god forbid, other HMO-occupants getting upset.
* Sense of stability for you - yes. Also something to aim at i.e. 'only x years to pay off the mgage'
* Or has it been a source of angst / worry - only with it being an old (1880s) place, have had to shell out several K for things like a roof renovation occasionally to make sure it was ok for the future.

4) How did you feel when you paid off your mortgage?
6 months to go! One of those bloody endowments that misperformed, but I converted the amount the endowment was projected to shortfall by to repayment, and that's all but gone. The endowment guaranteed sum will pay the difference. Provided the insurance company doesn't go belly up.

5) Any other good/bad things about owning that I've missed but you'd like to share?
Mum and Dad were renters all their lives and drummed into us kids 'rent is money in a drain'. We all went and bought as soon as possible, I was fortunate in getting a house before the second big property boom of the 80s. I recall people at work going out getting a second job taxi-driving JUST so they could afford a bigger mortgage. Insane I thought even at that time.

More toward the present... the growth in dual-income families has I think contributed a heck of a lot to HPI, and is one of the reason why younger people today are further and further away from getting a payable mortgage. It's like being driven to get married or buy a home in shared equity. Does anyone actually buy shared equity mortgages? I don't know of anyone who does.

Thanks again for the OP, fascinating thread.

ceridwen

My own feelings - wouldnt tie so specifically into the questions I guess - but are:

- basically: thank goodness I do.

One does worry a lot more about the area one's home is in if one actually owns it and therefore cant move at the drop of a hat - not that I could really do that any more anyway - with a house full of possessions to shift.

I couldnt care two hoots about the area I lived in way way back when I was in Bedsit Land and only had a few possessions to shift anyway. Now I have this house full of possessions and own the place - I am very very concerned about the area and keep a sharp weathereye out on anything going on that means the area might deteriorate. It depends on the area one is in I guess - but I do have to "work quite hard" at stopping my area "sliding downhill".:mad:

I was bothered if I got noisy neighbours back in my "rental" days - but am obviously even more concerned that I dont get noisy neighbours now.

All round one is MUCH more concerned with the environment ones home is in if one owns it.

Having said the downside position - I am still convinced I did much the best thing to buy a home of my own. If I was in rented accommodation still I would be scared s******s of losing my job - as I would be worried in case the DWP didnt give me sufficient rent allowance to actually cover my rent.

I would be scared out of my wits also that I might lose my job before I had decided to retire. As it is - I'm not that bothered if I do - as I could manage (because I dont have to find any money for rent).

baileysbattlebus

HAMISH_MCTAVISH wrote: »

Yes, it may well do. When you are talking about the same level of investment in each.

But there is no way in hell that the stock market can outperform property with just 10% of the investment. Which is all you can put in when the other 90% is spent on rent..... Paying someone elses mortgage.

Calculate returns of stock market and property since 1975 investing an equal amount in each one.

Then remove 90% of that figure from the stock market.

Then tell me which one wins, even after you subtract your supposed 60K for moving costs etc.....

I have to agree with Hamish to a degree.

This is our 4th house since 1982 we have lived here since 1993. I'm not sure what the rent would have been in 1993 because I never looked at rental rates. The mortgage payment when we moved in was around the £700 mark - most of the time our mortgage payment has hovered somewhere between £550 - £650 for the 16 years - now is the exception - the payments are about £400.

To rent a similar house to ours would cost around £1750 - £2000 - we live not far from Reading and renting isn't cheap, neither is buying btw, and it wasn't 16 years ago either. Our mortage payments now are 20-25% of the the rental cost - I wouldn't like to be paying rent on this. OH is taking early retirement next year and if we rented this we would have to move into somewhere cheaper.

For us buying the house generally has meant that as OH's pay has increased and other costs, council tax, fuel, utilities have increased our mortgage payment hasn't fluctuated by a huge amount, which meant, that what seemed like a lot of money 16 years ago, seems like very little now and as a proportion of his pay it isn't a lot. This is regardless of any HPI that has happened over the years - equity in house can easily disappear as we discovered in the last crash.

I suppose, fortunately interest rates have stayed relatively stable and to us reasonable during the 16 years we have been here - unlike the 3 previous houses.

This was the family house we wanted, which is why we have been in it so long. I think most people if they end up with a house that is big enough and in a decent area will stay in it quite a number of years.

Having the house has not stopped us moving for OH's job - our first house was sold to move with the job - what has stopped us moving from here have been the kids - a couple of times an opportunity cropped which would have meant moving from here - but it was the wrong time for the kids to be uprooted - early and mid teens at the time.

the_ash_and_the_oak

I have to agree with Hamish here about property outperforming everything over the last 30-40 years when you consider its a leveraged investment and the gains that come from that (obv for each move you lose a little but considering hpi has been in place for most of those years as long as the duration of each stay was more than say 2 years then each individual duration would prob have outperformed renting even taking buy/sell costs into account)

tho the future is not the past, over the next 25 years its not unlikely it will outperform renting again (even with demographic clouds on the horizon for the longer term) but still think that each buy vs rent calculation must be calculated over the length of each stay (25 years in one house can be calculated against 25 years rent but someone who stays 4 years, moves, stays 7 years, moves, stays 11 years, moves, stays 3 years imo has 4 separate buy vs rent calcs - may well come out ahead with something like lose, win, win, lose but win overall because of the 7 and 11 year stretches. they may well come out ahead in the initial 4 year stage too if HPI is sufficient but without HPI during that 4 year period ONLY there is nothing to say they would come out ahead of someone who rented for 4 years, bought and stayed for 7, bought and stayed for 11.

with 25 year fixes not available imo each time you move you are sort of cashing in your chips at that point and then immediately going back in. new deposit (gains/losses christalized at that point) - also new IRs when fixes expire (could be much better/worse)

If you are looking at a starter flat as an FTB now then any HPI over the next 25 years isn't going to help you - only the HPI of the amount of time you will stay in that flat (obv you can't know how long you will stay in the place you are going to live but imo anyone who is buying a flat who is planning a family at some point in the future should have some idea of timeframe - and should base rent vs buy calcs on that kind of period - not 25 years unless you are planning to be in the same place when you are 55 imo)

Harry_Powell

HAMISH_MCTAVISH wrote: »

Yes, it may well do. When you are talking about the same level of investment in each.

But there is no way in hell that the stock market can outperform property with just 10% of the investment. Which is all you can put in when the other 90% is spent on rent..... Paying someone elses mortgage.

Calculate returns of stock market and property since 1975 investing an equal amount in each one.

Then remove 90% of that figure from the stock market.

Then tell me which one wins, even after you subtract your supposed 60K for moving costs etc.....

Why is there "just 10% of the the investment" by the tenant?

OK, he has to pay rent but then the house holder has to pay interest on his mortgage. What's the difference?

If a renter pays £550 per month rent and an OO pays £550 per month Interest Only on his mortgage, then they're both losing the same amount of 'dead money'.

If the OO pays a further £300 per month as part of his mortgage repayment and the renter pays £300 per month into an ISA, then they're both investing the same amount of money.

Please explain why you think the renter cannot invest the same as the Owner Occupier?


p.s. it's not my 'supposed £60k for moving costs", I got it from the BBC. If you want to refute that figure, then please do, though with more evidence than your 'gut feeling'.

Harry_Powell

SingleSue wrote: »

Amazingly, in the arguement of better off buying than renting costs over the years, I agree with Hamish! Once the mortgage is paid off, that is it and you can get a good 40 years of not having to pay anything else after that, with renting, you pay until you die.

Do you not think that the OO and the renter are in exactly the same position?

The owner occupier has invested his money into a single asset (his home) and the return from that investment is that he gets to live in it.

The renter has invested his money into a portfolio of funds (his ISA) and the return from that investment pays the whole of his rent.

The differences are that if there is an excess of money, the renter can also choose to reinvest that excess or can use it to pay other bills. The home owner cannot access his equity and so cannot use any of that money.

The financial fact that many people can't grasp is that paying a mortgage off doesn't mean you live in a house for free. It means that you have invested a significant amount of money and will receive zero return for that huge investment, other than having a roof over your head.