What does having a house (to live in) actually 'cost'?

Generali

michaels wrote: »

I agree with what everyone is saying - unfortunate as some is contradictory...

I can manage where I am, where I am looking is better but what I want is a good way to measure how much that better will cost - anyone any more thoughts on what the real monthly cost of 200k is so I can do the trade off of better house vs less money?

A very crude calculation of the extra cost:

Annual house maintenance can be assumed to be 1% of the value of the house so an extra £2,000pa.

We assume a real (inflation adjusted) interest rate of 3%. Neutral base rate is usually thought to be RPI+2%, add 1% to that to get your mortgage rate should be about right. That's £6,000 in the first year.

Presumably there will also be extra council tax to pay too.

As the extra £200,000 on the mortgage is going to be the last £200,000 you pay off the mortgage you will face an extra £8,000+additional council tax until you get your mortgage down to £200,000 then you can use a mortgage calculator to work out the interest component down to zero.

As I see it, calculating it in this way, while extremely crude, strips out inflation and has the benefit of simplicity.

dopester

Harry_Powell wrote: »

Great to hear it. I think what the ScareBears forget is that the important thing is not the size of the mortgage, but the ability to pay it. You could have a £500k mortgage and £200k in investments and you'd be better off than someone with a £50k mortgage and zero savings when a job loss occurs.

Odd though to sit in judgement on someone who seems to have a lovely house, lifestyle and happy family when you're sat loney, single and depressed in your mum's back bedroom. Does Dopester not see that most people on here would choose your life over his, regardless of his perceived financial security.

Life is a rollercoaster. Without the ups and downs, it's just a train ride to the grave.

1) Life might be a roller-coaster but it doesn't mean that your first involvement in the housing market should be. If it's a roller-coaster then the past 50+ years have mostly been the roller-coaster carriage making it's way up the track, to the top of the peak. A couple of times the carriage has slipped back gently and slowly, but now the peak has been reached and the carriage is now swinging around the first gentle bend, picking up speed. For housing, and those who own and those with mortgages, it's not likely to be an enjoyable ride I want to join you on. Looks like it's going out of control to me.

(Clip: 15 years age+ certification)
http://www.youtube.com/watch?v=KN6LG8rE8-o&feature=related

The £50K mortgage person in your example. Well if that mortgage was say on a home worth about £180K, and they had no savings then yes, they might find it tough. Instead of your extreme, let's say they have £8K in savings. At least they will have more flexibility on the types of jobs and pay they can accept, in their job hunt, to service the remainder of their lower mortgage towards full ownership.

The area of my focus where £500K mortgage person wouldn't be better off, is a 35%-50%+ crash would likely sting a lot more for the owner. Even with £200K strategic lifetime savings to plough into it and support the family, has to hurt when the value of the property is substantially less than it once was.

2) I should add that I £pay my way here. I'm not going into it but my conscience is very clear. I know a doctor and very capable solicitor, both a touch over 30, still living with their parents because they feel you don't get enough for your savings and mortgage commitment in today's market. In my case the conditions involved aren't nearly as miserable a life as you've chosen to project it as, but admittedly can be difficult. I'll endure it for now. We'll see what people would have chosen in a couple of years time when I buy my own nice home at 40% or more lower than today's market price, and still have some money left over in strategic savings. Suffering now, rewards later.

Thankfully Michaels strategic savings allows them an unusually high cushion against future uncertainties, but I don't regret posting my beliefs that it was a poor time to upsize. To take on a lot more mortgage debt. Their strategic savings would go further in the same circumstances post-crash (imo) although many people don't believe, with some justification, that we are heading in that direction anyway for values.

Harry_Powell wrote: »

I think that if you had £200k sat around in a bank account and decided to invest it in property, then after asking if you had adequate emergency savings and enough in your retirement fund and you thought you'd get a better return in the housing market than in other investments, I'd say that you should go for it.

Harry_Powell

"You say that the soul lives forever. Okay. If the person was good, then the soul was rewarded in the world to come, and if the person was bad, then the soul is punished. But why are there rewards and punishments at all? I'll tell you why. Because as long as a person lives, he has choices. He can do good things, if he wants, or bad things, if he wants. But what happens to a person who never does anything, good or bad, who never makes any kind of choice? A person who isn't really a person, whose life isn't really a life? What happens to that person's soul?"

"Nothing! It just keeps living in its own imaginary world, like it did before. No one in our town has ever really died, because no one in our town has ever really lived!" When people in our town die and come back, they don't remember anything, and no one remembers them, because there is nothing to remember. They just crawl out of their graves, go home, put on their pyjamas, and go back to sleep." - The dead town.

I read this on the train into work this morning and thought of you, Dopester. Are you reading this in your Mum's back bedroom, wearing your pyjamas?

Graham_Devon

Just a small point. Michaels DID put this out for discussion, and erm, got discussion.

No point in trying to slam those who had differing opinions, as michaels would have known that from the start, hence the whole point in posting.

Harry_Powell

Graham_Devon wrote: »

Just a small point. Michaels DID put this out for discussion, and erm, got discussion.

No point in trying to slam those who had differing opinions, as michaels would have known that from the start, hence the whole point in posting.

<- Graham, AKA Mr. Muddle.

JonnyBravo

Graham_Devon wrote: »

Just a small point. Michaels DID put this out for discussion, and erm, got discussion.

No point in trying to slam those who had differing opinions, as michaels would have known that from the start, hence the whole point in posting.

I'm not sure what you're trying to say?
Is a differing opinion ok or not? And if it is ok, is it ok to question that?

That's all that's happening isn't it?
(Yes, I know Harry is wording it provocatively to ensure a response from dopester but I'm sure he's heard it all before)

Harry_Powell

JonnyBravo wrote: »

(Yes, I know Harry is wording it provocatively to ensure a response from dopester but I'm sure he's heard it all before)

I actually really like Dopester and feel he provides a sober, cautious juxtaposition to my own natural exhuberance. However, I did feel that his post that resurrected this thread was beneath his usual standards and he should remember that while trying to prove his point, this involves a real person with a family, not a theoretical scenario. As you say, Dopester has heard worse, and I assume so has micheals.

What we shouldn't allow ourselves to do though is be drawn into a threadwrecking trap laid by Mr Muddle (aka Devon), so I'll travel no further down this tangent.

Batchy

Stop doing the numbers, if it makes you happy, and doesnt add to your stress its a no brainer.
However, if it does add stress and you'd rather spend it on a car or booze and fags, then do so... its not a problem, there is no right or wrong! Just do the RIGHT thing, that personally makes you feel really happy!

StevieJ

michaels wrote: »

Hi
?

If I get made redundant I reckon I have enough savings to tide me over for 300 months if I don't get any other income coming in and of course after about 280 months my savings will be small enough to qualify for benefits.

Wait a minute if you have 25 years worth income need as savings, why do you need a mortgage, am I missing something here?

michaels

StevieJ wrote: »

Wait a minute if you have 25 years worth income need as savings, why do you need a mortgage, am I missing something here?

Mortgage makes me money on spread between borrowing rate and savings rate. Mortgage funds are also there to fund planned extension. Mortgage is interest only thus if I lived of the capital for 25 years I would not be able to repay the principle (although of course at that point I could just downsize)

However elsewhere I have been asking people the merits of paying off the mortgage in order to maximise my benefits entitlement for means tested benefits.