Buy or Rent?

Prosaic

I'd really appreciate opinions on this..

Ok, our house is under offer- we moved at the start of 2007 before the crash, so we've lost only 2k on what we've paid ( not bad compared to some stories I've read IMO)

Anyway I have about 50k equity, but would need most of that to trade up to the next property

Or, alternatively, I could use most of that 50k to pay off joint debts which are years old and we've never addressed, and rent a decent house in the area we want, but that would mean we have to rent for 3 years in order to save up a big enough deposit to buy again at the size property we want

Abbey are happy to loan me money with our outstanding debt and just keep chipping away at it as we have been, but I like the idea of paying off everything, owing nothing to anyone and saving - but then people always tell me how renting is 'dead money'

We are both late 30s with kids though and it feels scary having no property in our name and being a tenant, which we've never done

I hope it doesnt seem a brainless question, i'm sure the answer will be 'pay off your debts first' but do you think it would be wrong to leave the property market now?

I know there are conflicting views on whether the recent rise in prices is recovery or a dead-cat bounce before another crash

any thoughts welcome

P

CloudCuckooLand

Stop moving every three years!! Fees, stamp duty, etc add up!!

Search out a house that has not retained its value like yours. You may find one that has lost 20% since 2007, which could mean you jump up the ladder for little exta - leaving some of the £50k for debt clearing.

Prosaic wrote: »

I wish I had the extra money just to get rid of it...

If you cannot find a bargain, then maybe go for the "clean slate" option.

Prosaic

Thanks

We're not just moving for the sake of it. I actually can't stand the moving process, it's one giant headache, but there are several changes in personal circumstances which mean we felt we need to move - job, going down to one car, not near rail links for the new job etc

I just wonder whether renting is a good option in these times and the money we use each month to pay debts could go straight to savings instead for the next 3 years for a deposit. That way in 3 years time, whatever state the market is in we are effectively first-timers again with nothing to sell and able to make an offer and get on with it

jamesd

Get an interest only mortgage if you can. Then pay each month the repayment mortgage amount split into two pieces: the interest to the mortgage and the remainder to pay off the other debts. This would save you money because the mortgage interest rate on the capital you're not paying off will be cheaper than the interest on the debt. Once you've cleared the other debt start overpayments on the mortgage.

This middle ground keeps your capital amount intact but increases the clearance speed of the other debt compared to a repayment mortgage.

Bobby2

My father gave me the best advice ever - he said he would rather sleep in a tent than rent. Ok we are a nation that likes to "own" our own homes and renting does away with the maintenance side of home owning which saves money but I would rather have to do this myself than to rely on a landlord to decide when and how a repair should be done. Why don't you see if you can extend your mortgage to pay off your debts?

david29dpo

No one knows what the market (or the country) will be like in three years but most likely worse. Interest rates can only go up. In your shoes? I wound pay all you loans back and rent for three years.

property.advert

Well, as someone who has come back to not owning property, this renting thing scares the hell out of me.

For starters, you cannot do anything to the property. You have no idea what the landlord actually intends to do with your home. You can be out in as short a time as a couple of months. There is no guarantee that you will be able to get a decent place to live when you are forced to move. You might have to take something and hate it because the only other option is sleeping on the streets.

I used to rent when I was single and it was fine. I rented rooms, flats, houses and I basically lived out of a couple of bags, even after university. With kids, as the OP has, I look forward now to a tenancy agreement that ends in May with trepidation and though I cannot buy, I actually think about how and when I should look because I can give 2 months notice and I would rather give it than receive it because I would then be forced to move at the LL's behest. It is stressful.

So no, don't rent. But don't buy and move again. Renting is for dummies, at least long term.

Todder

[FONT=&quot]You should stop moving. Now it is time to live in own home. I feel that there is comparison of our “own home”.:T[/FONT]

Procrastinator333

Hello,

A couple of points - IMO opinion, renting isn't as bad as suggested. You can get a 12 month fixed term contract, that way neither you or the landlord can cancel the contract. Even if they do want the property back, they always must give you 2 months notice, so you will never just find yourself out on the streets one day. Plus, if you are a good tenant, they really are very unlikely to want to get rid of you.

It is a pain you can't do everything you want to a place, but then the flipside is you don't pay for much. The other big downside for me is having to deal with letting agents - scumbags, all of them.


In terms of renting being dead money, in many cases that is simply wrong. What about the interest part of your mortgage? That is dead money too. Might be a lower rate, but it is no different to the interest on a loan or credit card. It really all depends on what house prices do. Take the last 2 years. The property i'm in was available to buy at £300k, or rent at £1,100. We could have bought it.

The interest would have been about 6% as a first time buyer, so every year we would have been paying about £18k in interest alone. Compare that dead money to the £13.2k dead money we are paying in rent. Renting has actually cost less dead money than buying.

The other aspect is then of course house prices. The last 2 years they have fallen and then risen again, down overall on the 2 years. So had we bought 2 years ago, not only would we have spent more on dead money, but we would actually have lost money on the house too. This argument wasn't true for a long time while prices were rising 10, 15% a year, then it was obviously very different. Imo prices are not going to rocket up again, maybe stagnation or falls. To me that means there is no rush to buy because of the maths above. You actually spend less dead money renting than you do buying.

The above is quite a simple example, but it is a real choice we had and I think we made the right one. There are many things to consider, but I'm just trying to show that "renting is dead money" is not that simple.

jamesd

property.advert, if you're worried about May, ask for a new one year assured shorthold tenancy now. Repeat so you always have at least say six months of AST to go. For someone whose initial AST term has expired the notice periods set out by law are one month from tenant to landlord and two months from landlord to tenant under what's called a statutory periodic tenancy. Those are fine - the landlord doesn't have to keep on renewing contracts and so long as you're paying the rent has a great incentive to keep you on as a low hassle tenant.

I've been on a statutory periodic tenancy for around four years now. The place I'm living in was sold to a new landlord some three months after I moved in.

Renting can offer lower costs, particularly buying and selling costs and mortgage arrangement fees, as well as more flexibility to move easily if you change job. It has some drawbacks that you mention and those can be particularly significant for those with guaranteed jobs and a desire to try to stabilise education for children, say.