Renting - Dead money ?

lynzpower

Its not dead money for the LL, who get to pay thier property off.

Id prefer to pay off the LLs mortgage than pay an IO mortgage.

At least the little guy gets something, instead of the banks shareholders.

If you buy a place on IO as Ive done, thats the deadest money there is.

I am selling to rent with a view to maybe buying in the future, maybe here or abroad, maybe rent forever, who really knows whats round the corner.

We will save almost 500 a month by renting, plus the interest that we will make on our equity. Bear in mind theres buildings insurance life cover, mortgage protection cover etc that renters dont have to pay. Maintainence costs are also negligible.

Dead money to me is anything that doesnt work for a return. While houses "make money" ( only when you come to sell though) they also lose money in the interest on the mortgage, maintainence, and all the covers, fees and the like.

clairehi

lynzpower wrote:

Id prefer to pay off the LLs mortgage than pay an IO mortgage.

At least the little guy gets something, instead of the banks shareholders.

If you buy a place on IO as Ive done, thats the deadest money there is.

I am selling to rent with a view to maybe buying in the future, maybe here or abroad, maybe rent forever, who really knows whats round the corner.

We will save almost 500 a month by renting, plus the interest that we will make on our equity. Bear in mind theres buildings insurance life cover, mortgage protection cover etc that renters dont have to pay. Maintainence costs are also negligible.

Dead money to me is anything that doesnt work for a return. While houses "make money" ( only when you come to sell though) they also lose money in the interest on the mortgage, maintainence, and all the covers, fees and the like.

How much are you paying in EA and solicitor fees to sell?

surely the point of having an IO mortgage is that there is capital appreciation? so why is that deader money than renting?

also the banks shareholders are mostly pension funds that we all have an interest in seeing grow!

lightspeed

lynzpower wrote:

Its not dead money for the LL, who get to pay thier property off.

Id prefer to pay off the LLs mortgage than pay an IO mortgage.

At least the little guy gets something, instead of the banks shareholders.

If you buy a place on IO as Ive done, thats the deadest money there is.

I am selling to rent with a view to maybe buying in the future, maybe here or abroad, maybe rent forever, who really knows whats round the corner.

We will save almost 500 a month by renting, plus the interest that we will make on our equity. Bear in mind theres buildings insurance life cover, mortgage protection cover etc that renters dont have to pay. Maintainence costs are also negligible.

Dead money to me is anything that doesnt work for a return. While houses "make money" ( only when you come to sell though) they also lose money in the interest on the mortgage, maintainence, and all the covers, fees and the like.

I really think "dead money" is in the eye of the beholder.

The fact is that renting and IO mortgages are almost identical. Yes! there are obviously slightly lower costs (not always as great as £500) when renting but ultimately you will never see your rent money ever again. With an IO mortgage, there is the potential to see your money again in the long term.

Whichever way you look at it, you are either renting from a landlord or renting from the bank (who cares who gets the money, it certainly aint yours anymore. I certainly dont go out of my way to give my business to a local grocers if i can get the same product from the supermarket with the rest of my shopping. As long as i get what i paid for i'm happy) Granted, there are more risks involved with buying property, however, you will always have something to show for your money, albeit, the monetary value is only seen when you sell. If you dont want to sell, the value of you home becomes irrelevant whether it has increased or decreased.

Paying any rent or interest is dead money (no different to the interest when buying that LCD TV on finance) because once you pay it its gone, but in both situations you have a home that you live in.

£500p/m rent, at current rates is the equivalent of a IO 130K mortgage. Where i live 130K will still by you a decent property. Therefore, to me there is no competition between the 2. You must ensure that you have a buffer zone for any IR hikes to be safe.

For most, it is a fact of life that they will never have enough "free cash" available to buy a property outright, therefore, the only option available is to throw money away renting or throw money away on interest on mortgages. Either way the difference between the 2 is often very small and the benefits of having your name on the deeds has far outweighed this cost recently. You gotta do what you gotta do.

Renting appears to be the way to go down south but up north i definitely see renting as dead money.

Just my opinion

lypsey

Hello Yeslek

You state "fair enough you have more easy freedom - but at least with buying you always have something to show for it."

If you own shares in Japan or many of the stockmarkets in theory I have something tangible (shares) but if that piece of paper is only worth 80% in 2 years time whats the point

I am STR at the moment and despite everything you read in the papers from all the VI's about continously rising markets - in Kent it has been stagnant for 2 years. I live in a 5 bedroom house that costs me 800 a month . If i bought this property it would cost be a lot more than that . On top of this I have a load of money in the bank that pays half my yearly rent. Therefore giving me the oppourtunity to save even more money

Don't forget we have a trillion pounds of debt , more money on credit cards than all the other EU countries added together, unemployment rising , global inflation rising and therefore global interest rates . Yesterday the Telegraph reported that 1- 3 million people in the UK are only paying the interest only on there credit cards and not the balance

But don't worry Gordon has it all under control . The housing market is different this time

The housing market is going to fall big time .... it just a question of time

clairehi

lypsey wrote:

Hello Yeslek

I live in a 5 bedroom house that costs me 800 a month .

thats cheap! until recently we were renting a 4 bed in Herts for £1000 pcm. to buy, same house would have cost approx £300 K.

rental yields on larger properties are very low compared to flats/small houses.

Toto

But buying a house only makes you money if you sell and downsize or move to a cheaper area. I know it's been said a million times but if your house price goes up, so does everyone else’s. A mortgage costs you 3x the price of the house over 25 yrs. Even when you are mortgage free you have to live somewhere, so your profit is only on paper, unless as I said you downsize etc.

I am selling to rent, with a view to becoming completely debt free and having a sum to invest. My rent is much cheaper, I will have no added costs other than my bills (even council tax and water rates is included).

My IO mortgage is a millstone round my neck and frankly I can't wait to be done with it. Maybe in the future I will buy again but as Lyn has pointed out, it will be when I have a larger deposit, can afford a repayment mortgage, in an area I choose (not one I am tied to) and most importantly at my leisure, meaning no pressure of a chain.

mando_2

We are stepping off the property market and going in to rented. The amount of lectures we have had off people that we should buy as rent is dead money. But in our eyes we are doing the right thing and buying would be dead money to us.

We are renting for various reasons such as we don't know if we want to stay in the new area for more than a year, we don't know the area so have no idea what is a good area or bad, we don't know what the property market is doing there and we have had unfortunate luck in buying houses that are just not right for us for various reasons.

To us the money isn't dead, we no longer have to fork out for boiler insurance, mortgage insurance or buildings insurance. So we are making a saving, plus we have the added advantage of the flexability of moving when we want and if we want to move back to our old area we can without being stuck in a house that we have to sell. PLus pay out all those solictors and estate agent fees.

Renting and owning your home both have there pro's and con's and really depends on your circumstances as to which is better for you.

Although I do have to admit, we are worried about stepping off the property market and not been able to get on as the house prices have gone up, but saying that we can't afford a decent house that we want anyway - so no real loss to us.

EagerLearner

F_T_Buyer wrote:

Buying a cup of hot tea is also dead money. I mean, what have you got to show after you have drank it?

Tea doesn't even hydrate you (unless it's a herbal tea) so... 50p less in your wallet? or £1.50 if you're in Brighton like I am he he...

EagerLearner

EagerLearner

Yesterday was reading an article from the Fool from 23rd June that talked about house prices keep rising but wages don’t rise in tandem with this - thought you might find it of interest:

“In summary, only someone who uses their skull to store rocks could believe that house prices can keep on rising faster than wages indefinitely. Eventually, the housing bandwagon will grind to a halt and will go into reverse.

The main prop which supports today's record house prices is the low cost of borrowing, which this Bank of England report shows is remarkably low by historical standards. When the BoE's base rate starts to rise and mortgage rates follow, as surely they must, the housing market will choke. It's really as simple as that.

Therefore, don't expect extraordinary returns from property for the foreseeable future, and don't overstretch yourself by taking on too much debt!”

We nearly bought 6 weeks ago and the surveyor would not approve the property at the value that had been agreed due to a not-so-good area. So now, we're able for the same £650, to have a garden flat in a lovely, lovely area AND save £400 a month to add onto the deposit we already had.

Had we bought, our savings would only be £150 a month once all extra monthly insurances etc had been allowed for.

So therefore renting is 'making us' an extra £400 quid a month compared to buying - pretty nice returns + we don't panic each time the Bank Of England sneezes...

EagerLearner

ChrissieI

If you are buying your house then hopefully the mortgage will be paid off by the time you reach old age and you can live mortgage free. If you are renting then you will still have to pay the rent later in life.
If you sell your house, bank the money and rent then there is always the temptation to spend the money thats in the bank.
I'm not saying that you shouldn't rent as I have been thinking the same thing recently Just that I wonder what would happen when I get older and if all that equity is sitting in my bank account would be too much of a temptation.