I Cannot See Value

HAMISH_MCTAVISH

treliac wrote: »

Maybe you don't know the 'right' kind of women.

Probably because he's the "wrong" kind of man..... (which I can completely relate to )

Well, meet me by the river that goes nowhere.
Let me lay my sorry trip on you.
Won't you meet me by the river, little darling'?
I might just let you see my bad tattoo.

Well I was gonna bring you flowers, but I didn't.
It's the thought that counts and I think I'm a bit too broke.
But there's some change in my ashtray--maybe just enough to pay.
For a half pint of somethin', probably make us choke.


Well you know I'd rather not go and meet your family.
They'd probably send me back where I belong.
Don't want to hear about Mr. Right.
'Cause he's out of town tonight.

Baby come and spend some time with Mr. Wrong.

http://www.youtube.com/watch?v=zUYz6m40NwU&feature=related

treliac

Oooh, there's a really romantic side to you Hamish!

Procrastinator333

Deleted_User wrote: »

That makes no sense. Where would the lifetime renter get that 25% deposit? Ours came from profit made when we sold previous homes.

Well hubby and I both bought our first places because the monthly payments when buying worked out cheaper than the monthly payments when renting. So in actual fact the BUYER was in a better position to put a little in the bank each month.

Perhaps back then, but that isn't true now. By a long way. If a repayment mortgage cost less than rent I would buy tomorrow. I'm not disagreeing that long term it is better to buy and that if you took just about any 25, 50, 60 year period you would be better off buying over the last 100 years. But that is the past, you can't buy there now, some of us were not even born or were still in school.

The only comparison that matters now is today and going forward. The renter saves over the buyer on day 1 and does for a fair while. Yes long term the buyer takes over, absolutely. But not to the degree many suggest, and there are times when you are better off waiting for short periods.

This is a bit of a pointless argument really. We all agree buying is better long term. We are arguing over the degree to which it is financially advantageous. That is only going to be solved by a comprehensive calculation. If this thread is still alive at the weekend might have a crack at it.

DaddyBear

StiflersMom wrote: »

Don't you need to update your signature ?

I'm sure that figure will soon be positive

:T

Actually retard, it was updated 2 weeks ago. -0.4% last month. :T:T:T

take the rose tinted specs off.

jetta_wales

This page as tickled me pink but I'll admit i haven't read the 3 pages before it (my eyes are crap and somewhat achey now).

I only had to rent for 6 months when I first moved out (what a hell hole that was) then bought a place with my ex when I turned 18 (he was older so we got the mortgage on his wages a lot more than mine but I still payed half) then for another 18 months when we split up, he moved out first then I moved out and he moved back in before buying me out.

But I absolutaly hated renting both times and would hope to never have to do it again.

But with all these comparrisons you're making you're not taking into account how much you can jump up that property ladder if you put a little effort in. You can be a hell of a lot better off than any renter in as little as 6 months if you don't mind doing some gardening, wallpapering , tiling etc and getting a new kitchen and bathroom (which can be very cheap if you know where to go).

I could never face sitting put and paying my mortgage untill 25 years later you finaly own your home completely after having ultimatly paid for it three times.

It's a nightmare to get onto the ladder now as a first time buyer, especialy if you're young but once you are on no matter at what rung you can jump up a lot quicker if you're willing to work for it.

Charterhouse

Deleted_User wrote: »

That makes no sense. Where would the lifetime renter get that 25% deposit? Ours came from profit made when we sold previous homes.

You can't ASSUME HPI when you start off trying to prove that buying is cheaper. :facepalm: He would get the deposit from saving, since renting right now costs about 4%, whereas a repayment mortgage will cost more like 7.1% even if the actual interest rate is only 5%.

Deleted_User wrote: »

Well hubby and I both bought our first places because the monthly payments when buying worked out cheaper than the monthly payments when renting. So in actual fact the BUYER was in a better position to put a little in the bank each month.

I'm not sure what the rental would have been on our house 10 years ago, but right now it's 750 - 800 per month. I know that 9 years ago one of my neighbours moved to Australia for three years and rented out her house while she was away. The rent she recieved covered all of her costs (mortgage, agents etc).

I find it hard to believe that the rent 10 years ago would have been less than the payments on a 75% mortgage. Otherwise how could anyone afford to rent out places like ours? And people most certainly did rent them out to pay off their mortgage.

The past doesn't matter. Now matters. If you want to do the sums, you have to look at today's numbers. Right now renting an equivalent house is cheaper on a per month basis.

Deleted_User wrote: »

And you're completely missing the most significant factor - that the buyer typicaly only pays out for 25 years with monthly payments becoming more and more afordable whereas the lifetime renter pays out for 60 years....with monthly payments increasing as the years go by.

I think the key thing is that you're calculating mortgage costs over 25 years but rental costs over 60 years.

Mortgage payments will stay pretty much constant for the life of the mortgage (with fluctuations due to varying interest rates) whereas buyers salary can typically be expected to ramp up quickly at the rate of inflation or above. After a few years they quickly start to represent an ever decreasing percentage of the buyers income.

Rent will increase in line with inflation and will always represent the same percentage of the buyers income.

That amounts to a saving of hundreds of thousands for the buyer over a lifetime. That's over and above what the house is now worth.

Actually, that's the least important point of all, because you need to discount those cash flows back to today. Cash flows starting in 25 years and continuing for 35 years are worth pretty close to nothing.

Two other things, my example where I worked it out with proper discounting missed out the principal paydowns on the mortgage, as well as the cost of moving. Let me run those numbers now.

Assuming:-
Interest @ 5%, repayment mortgage 25 years, 160k property, 100% mortgage to get round issues over where the deposit comes from.
Rent @ 4%, rising by 2% per year, 60 years
4 moves in lifetime - costing an average of 7.5k, every 12 years (this is maybe low, but I'm trying to not be accused of favouring one side!).

Total Costs in Present Value Terms:-
Buying:- £168,625
Renting:- £175,861

Not quite as clear cut as people seem to think. And a very small fall in house prices would make renting overall better, although I accept that it is very unlikely for house prices to fall over a 60 year term.

[Deleted User]

That sounds a bit like gobledygook to me (my fault not yours, I'm sure!). You haven't shown your workings but I *THINK* your mistake is that you've forgotten that the renter has to make monthly payments for life (60 years). Whereas the buyer stops paying after 25 years.

I gave MY real life example - because I could tell you how much I actually paid. But if you want to use your example here's the actual figures. (I used an online mortgage payment calculator to get the monthly payments - I used that to get your 4% monthly rental (So I know that's wrong). You may want to use a different figure. knock a couple of hundred off even and still you'll see that rental over alifetime costs a small fortune). In my neck of the woods a house costing that much would cost about £750 - £800 per month to rent.

Loan of £160k @ 5% = £960 per month

IGNORING THE FACT THAT INTEREST RATE WILL FLUCTUATE OVER THE YEARS

Total paid = 12 x 25 x £960 = £288,000

Rent at 4% = £853 per month

IGNORING THE FACT THAT RENT WILL RISE STEADILY OVER 60 YEAR PERIOD

total paid = 12 x 60 x £853 = £614,160

So renting costs more than twice as much even if you ignore the fact that rent will rise A LOT over a 60 year period. Even if interest rates go sky high it wouldn't be long before the renter was paying sifnificantly more than the buyer. What's the renter likely to be paying per month in 10, 25, 60 years time? In 25 years time the buyer is paying nothing.

And then you have to take account of the fact that the buyer also owns an asset that at the time of buying was worth £160k. What's that likely to be worth in 25 years, or even 60 years time? EVEN IF IT'S WORTH NOTHING THE BUYER IS QUIDS IN. Which is why I think it's silly to worry about house price drops when trying to decide whether to rent or buy.

Actually, I think 30% is probably very low in the case of someone that buys at the start of their adult life and manages to stick to a 25 year mortgage. Even if you factor in high interest rates, huge moving costs and expenses.

Charterhouse

No. I haven't forgotten that. Stop posting in capitals as if I'm stupid. Do you understand discount rates and the concept of present value?

If not, go look it up and check.

The 35 years of rental payments after the owner stops paying are only worth £65,800 in today's money. It's virtually irrelevant to a decision taken today.

[Deleted User]

Calm down. I'm just trying to emphasise the bits I think are important. Posting in capitals is just a way of highlighting various sections - along with embolding and underlining.

As I said, your explanations of where you get your figures are gobbldygook to me (again I'll say probably my fault and not yours). Why not show your calculations - using capital letters if it makes things clearer if you like?

I understand the concpet of present value - I've calculated everything at present value. What I don't understand is why you'd then want to apply discounts to that figure to get todays value when that's where I started !?!?!

When I make a decision a very important factor is what I'll actually pay at the end of the day. You claim that in todays terms the sum total of 35 years rent (starting 25 years from today) will be only £65,800. Yet I know that today it would cost me £800 per month - so 800 x 12 x 35 = £336,000. In 60 years - even 25 years it would cost significantly more. Not less.

Which just goes to show how fancy calculations can skew the figures and convince you of anything!

jetta_wales

Charterhouse wrote: »

No. I haven't forgotten that. Stop posting in capitals as if I'm stupid. Do you understand discount rates and the concept of present value?

If not, go look it up and check.

The 35 years of rental payments after the owner stops paying are only worth £65,800 in today's money. It's virtually irrelevant to a decision taken today.

I must admit I have no idea where your logic is coming from either there is no way that renting for a lifetime can be anywhere close to the benefits of buying and having no mortgage to pay at all by retirement or even before. Paying for somebody elses mortgage is definatly a fools game, sure it's a necessary evil at times but if it's in any way possible, get the heck out of dodge as soon as you can.