Buy or rent (cost comparison)

Mary_Hartnell

alixandrea wrote: »

Buy a property and you have that property as your own home. You can do what you like with it and the only person you are beholden to is yourself. You can improve it however you want. You can stay in it for as long as you want without the likelihood of having your monthly payments hiked unsustainably for no good reason.


Alixandrea

This does not apply to a one bed flat on a limited lease with service charges.

Try to make your first purchase a terraced house, even if you have to buy a wreck and renovate it.
Buy one with its permitted development rights and you have some freedom and flexibility for the future.
(Go back & go up when you are ready).

littlejo-5

mostlycheerful wrote: »

“
Still not convinced? Ok, look around you at some people in their fifties and sixties and compare their lifestyles, quality of life and quality of properties of those who own with those who rent. You should quickly notice that most of the buyers tend to have relatively nice big places and a new or fairly new car or two parked up while the renters tend to have smaller places and either a cheap car or no car. The homeowners go on holiday twice a year to expensive destinations, the renters can’t afford to go away or if they do it’s to cheap places. Homeowners get a positive psychology of security and independence and being part of the world, renters have an underlying insecurity all the time and relatively speaking are often treated as being second class citizens pushed about from pillar to post.

I actually feel very incensed by this paragraph. I am very grateful the person who posted the above paragraph does not live anywhere near me. What an arrogant person!

I am a 43 year old, single woman. I have been a teacher for 9 years and I live in the north of England. I can not afford to buy a property, certainly not a property similar to the one I rent. I rent a fantastic farm cottage - 2 large bedrooms, a large sitting room and gorgeous views over open countryside and hills. I paid a rent of 180 a month when I moved in 9 years ago which over the years has increased to 240 a month. I am moving in a few weeks - next door - for two reasons - a bigger garden, radiators off the fire and it's end of terrace. The rent is more and I have opted to pay a bit extra for new windows put in (the wooden ones in the whole row are pretty rotten) I actually feel very privileged to be able to live in such a lovely area and have such a fantastic cottage that, despite increase, is very cheap.

In no way, do I feel a 'second class citizen' and I actually feel the benefits of renting far out weigh the benefits of paying a mortgage. For instance: I need a new fire grate at least twice a year - do I go and buy one? No, I pop to the farm office and pick one up for nothing. When the bathroom ceiling started leaking, did I phone for Bob the Builder? No I phoned the farm office and Bob the Builder was paid for by the estate. When my immersion heater had a bit of a glitch, did I pay a plumber? No the estate paid. When my coal shed door needed fixing, did I pay the carpenter? I'm sure you get my drift. :j

And yes, I have done the maths. If I stay where I am (or rather next door) for the next 25 years I will have paid (adding in approx. rent increases and what has already been paid for last 9 years) approx. 140,000 quid. Yes, that sounds a lot of cash going nowhere, Mr Arrogant might say, but I will have been living in the kind of place I dreamt of living as a child and for that sort of money I could not buy what I have now. What I might have been able to afford is a flat or poky house on the outskirts of Newcastle with no fine views or garden.

Living? It's not a question of how affluent you want to be or 'look'. It's about living the life you want. And finally, going back to Mr. Arrogant's quote: Do I have underlying insecurities all the time? No. Do I go on holiday twice a year to expensive destinations? No. I can go on holiday 6 times a year if I want (I am a teacher :rotfl:) and I usually go wild camping in Scotland in my little Berlingo, self converted camper van, with my dog (not because I can't afford expensive holidays, but because that's what I choose to do). And obviously I have a decent car, it's not a cheap one that spends most of it's time being fixed at the garage. (have had my years of that in the past, which I'm sure we all have, even Mr Arrogant)

Do I live in fear that if I am made redundant from a teaching job I could lose my house? No, the council will pay the rent. If I suddenly get the urge to move to the wilds of Scotland, do I have to wait months for somebody to buy my house and watch as house prices fall, in which time I may have missed out on the croft of my dream? No, I give a months notice and off I go.

Do I have a wonderful life? Yes. Do I worry? No. Am I concerned of what will happen when I retire? Well at the rate the government is going, we'll all be working much longer by then and the amount I've saved from not buying will go towards my rent when I'm too old to do the odd bit of supply.

And as the old saying goes: "You can't take it with you"

PasturesNew

It depends on the flat/area/LHA/mortgage rates/your position in life.

e.g. there's a flat not 20 miles from me that's really nicely done out - part of a refurbishment/dividing of an old Town Hall, so lovely building, fab windows, super interior..... cost somebody £125k in 2007. It's been repossessed, so probably a BTL. At 6% BTL mortgage rate, let's say he put 10% down at the time, so borrowed £112,500. Interest only on that is £562, service charge (guessing) is £100. So £662. LHA is £480/month... so would need to appeal to a couple who both had jobs.

On the other hand, 2010, it's now for sale at £70k, I could buy it on an interest only (5%) mortgage for £262/month, plus £100 service charge makes it £362/month. MUCH cheaper than the LHA rate for 1-bed flats around (grottier ones too). Even on a repayment mortgage + service charge it'd be £372+£100=£472/month. Still a few quid cheaper than LHA rate and I'd not be asked to move out at 2 months' notice so long as I kept up payments.

Or, I could buy it for cash, losing about 2% savings rate and therefore 'pay' about £116/month in lost interest + £100 service charge: £216/month.... you can't rent a room at that price!

PasturesNew

littlejo-5 wrote: »

I rent a fantastic farm cottage - 2 large bedrooms, a large sitting room and gorgeous views over open countryside and hills. I paid a rent of 180 a month when I moved in 9 years ago which over the years has increased to 240 a month. I am moving in a few weeks - next door - for two reasons - a bigger garden, radiators off the fire and it's end of terrace.

An unbelievably cheap rent! My god, I wish I could get rents like that where I live. It's double that for a dingy 1-bed flat, in an economically poor (but lovely looking) area.

If I could rent at that price I'd move out of my parents' house like a shot.

Mr.Mulla

Given the current state of the world economy, for me it would be more viable to rent than to purchase a house now. It is too risky, as the OP has pointed out.

Hazel._2

My personal take is that buying is generally better in the long-term, assuming you can afford it. I do think that if you're going to buy though, that you should buy somewhere that you could see yourself living for at least 10 years or so. So it's probably not worth buying a one bedroom flat. My opinion is that it's best not to see buying as an opportunity to "get onto the property ladder" and/or "move up the property ladder". That's when people get stuck with negative equity. I think it's best to buy with a "this is my home and I could see myself living here for 15+ years" kind of attitude.

In the short-term, renting can be ok. If the plan is to rent to buy later, it's probably best to get somewhere with the cheapest rent possible though, even if it means somewhere not very nice. It's the best way of being able to put money away for a deposit. Long-term, I think buying is usually better though. It's lovely to have your own place and have the freedom to be able to decorate as you want and make improvements as you want. If you get a mortgage (with repayment), you're investing into something. If you rent, you're only securing your living arrangements month-to-month and there's no long-term investment. Buying means you're securing your living arrangements for a long time to come. I think there's also a sense of pride in making your home your own and doing little things bit by bit to make it uniquely yours.

Hazel._2

Jannetje wrote: »

Whilst I love my family, I'd like my own place now, but am pretty much clueless about what to look for, where to look, and whether renting or buying is a good option. I'd also like to find out more about part ownership deals, as I can't afford (or won't be given) a mortgage just on my salary alone. It would be alot easier, and nicer to be looking with a partner, but I don't have that option at the moment!

I'd like advice on what outgoing costs might be like, as I am pretty much clueless, as Uni was a different way of living and budgeting!

Directgov has a whole section devoted to giving advice about buying a home, so that's definitely worth a look (direct.gov.uk/en/HomeAndCommunity/BuyingAndSellingYourHome/index.htm). Check the "Low-cost home ownership schemes" section for info on part ownership. They call it "HomeBuy schemes".

For info about mortgages, I'd recommend bbc.co.uk/homes/property/mortgagecalculator.shtml. Play around with the figures and see what you might be able to afford per month. I'd put in 5 for the interest rate. Interest rates on mortgages are low at the moment, but it's best to overestimate than underestimate and they're probably going to go up at some point. It'll only be a very rough estimate, but it'll give you some idea of what you can afford, then you can match that up with the sort of property you're interested in and see if it's viable. I'd recommend checking findaproperty.com and looking at the house prices of the area(s) you're interested in buying in. That will give you a good indication of what you might realistically be able to afford. You'll also need to take into account the fees associated with getting a mortgage, which will take a chunk out of your deposit.

ontheweb

British people LOVE property values going up and they will smugly tell you how much money they have 'made' on their house. When I was a little child I remember being amazed by the change in my parents house prices, (doubling in a short time to figures that seem tiny now!) and everyone here seems to be agreed that short term costs are high but generally property is a good long term investment...
But, has anyone factored inflation into this?

using this tool: safalra.com/other/historical-uk-inflation-price-conversion/

i just looked at my experience -
2002 - bought a flat for 195,000 + repairs 20,000 + decor 10,000 = 225,000
2010 - valued by estate agents at 300,000, inflation adjusted value = 280,000 = 20k profit?
Well, no.
Add in the cost of annual buildings insurance (£1000 x 12) ongoing re-decor & garden (3000?), repairing roof (2000) remortgage costs (300) annual lease (200 x 12) and the cost of extending the lease (3000)... not including revamping the windows, installing security lights, furnishing and NOT including the saturdays down at the DIY store, days off work waiting for the plumber & sundays spent digging up the garden, painting, fixing switches, pipes, boilers etc... and the figures start looking a bit more even.

If you want to see your house only as an investment, then you need to understand inflation. It can destroy savings, but it can also erode debt (which is what our government is counting on to reduce the deficit over the next few years - but could also serve borrowers well to erode their mortgage debts...)

of course, the problem is deciding wether by renting and prudently saving if your nest-egg would be eroded by the same inflation!

I say, look at your house as a HOME, and however you choose it, live in somewhere you like, enjoy your community/family/local area, live within your means... and stop worrying about it!

Londonsu

littlejo-5 wrote: »

I actually feel very incensed by this paragraph. I am very grateful the person who posted the above paragraph does not live anywhere near me. What an arrogant person!

I am a 43 year old, single woman. I have been a teacher for 9 years and I live in the north of England. I can not afford to buy a property, certainly not a property similar to the one I rent. I rent a fantastic farm cottage - 2 large bedrooms, a large sitting room and gorgeous views over open countryside and hills. I paid a rent of 180 a month when I moved in 9 years ago which over the years has increased to 240 a month. I am moving in a few weeks - next door - for two reasons - a bigger garden, radiators off the fire and it's end of terrace. The rent is more and I have opted to pay a bit extra for new windows put in (the wooden ones in the whole row are pretty rotten) I actually feel very privileged to be able to live in such a lovely area and have such a fantastic cottage that, despite increase, is very cheap.

In no way, do I feel a 'second class citizen' and I actually feel the benefits of renting far out weigh the benefits of paying a mortgage. For instance: I need a new fire grate at least twice a year - do I go and buy one? No, I pop to the farm office and pick one up for nothing. When the bathroom ceiling started leaking, did I phone for Bob the Builder? No I phoned the farm office and Bob the Builder was paid for by the estate. When my immersion heater had a bit of a glitch, did I pay a plumber? No the estate paid. When my coal shed door needed fixing, did I pay the carpenter? I'm sure you get my drift. :j

And yes, I have done the maths. If I stay where I am (or rather next door) for the next 25 years I will have paid (adding in approx. rent increases and what has already been paid for last 9 years) approx. 140,000 quid. Yes, that sounds a lot of cash going nowhere, Mr Arrogant might say, but I will have been living in the kind of place I dreamt of living as a child and for that sort of money I could not buy what I have now. What I might have been able to afford is a flat or poky house on the outskirts of Newcastle with no fine views or garden.

Living? It's not a question of how affluent you want to be or 'look'. It's about living the life you want. And finally, going back to Mr. Arrogant's quote: Do I have underlying insecurities all the time? No. Do I go on holiday twice a year to expensive destinations? No. I can go on holiday 6 times a year if I want (I am a teacher :rotfl:) and I usually go wild camping in Scotland in my little Berlingo, self converted camper van, with my dog (not because I can't afford expensive holidays, but because that's what I choose to do). And obviously I have a decent car, it's not a cheap one that spends most of it's time being fixed at the garage. (have had my years of that in the past, which I'm sure we all have, even Mr Arrogant)

Do I live in fear that if I am made redundant from a teaching job I could lose my house? No, the council will pay the rent. If I suddenly get the urge to move to the wilds of Scotland, do I have to wait months for somebody to buy my house and watch as house prices fall, in which time I may have missed out on the croft of my dream? No, I give a months notice and off I go.

Do I have a wonderful life? Yes. Do I worry? No. Am I concerned of what will happen when I retire? Well at the rate the government is going, we'll all be working much longer by then and the amount I've saved from not buying will go towards my rent when I'm too old to do the odd bit of supply.

And as the old saying goes: "You can't take it with you"

Sorry but although you call the poster you are replying to arrogant
you come over a tad smug.

Its no use you using your experience to encourage people to rent when in fact what you have and what you pay is not the norm.

At the same time although buying worked very well for me and I made a profit on my last flat sale, it was mainly due to a combination of buying at the right time and in the right area in other words I was very very lucky I wouldnt use my experience to advise other people to buy as what I did again was not the norm.

You do realise of course that although the age of retirement will go up. the prospects of you still being employed at age 70 will be very slight, even now people of your age and upwards are finding it harder and harder to get a job, is teaching different, you tell me, how many 60=70 year olds are running a class room, not many I'll bet.

So you could find yourself at age 60 without work, how will your savings hold up - you could live another 30 years. do you have enough for that?

And if your savings run out and you have to go on HB who will pay for that not the 'council' as you seem to imply but the tax payers of the generation after you and why should they pay for you to live in a house of your childhood dreams when the rent and therefore their contribution towards it would be cheaper if you lived in a one bed flat in a council estate or would you expect the landlord to take a rent reduction just so you could live there.

I hope for the OPs sake and the sake of the younger generation that house prices will drop so that it will be always better to buy than rent and also that people who have to or prefer to rent get better terms and conditions then they get now. Maybe something like you have

dippy

mostlycheerful wrote: »

“Either way I end up with £235 (saved or invested).”

No, with renting you end up with £235 saved, with buying you end up with £235 invested AND ALSO THE £800 ALSO INVESTED.

And even if property prices drop a bit you’re not likely to lose any more than a maximum of 10% or 20% or 30% so you’ll still be massively quids in whereas with renting you lose all of the £800.

Mostcheerful, I am afraid that you are sorely mistaken. The interest of £800 is a bank fee that Mr Banker takes for himself every month. It is not your money, isn't invested for you, isn't yours at all: It is Mr Banker's and he's putting ALL of that £800 into his pocket.

Hope this clarifies things.