Is Renting Really Dead Money?

edited 30 November -1 at 1:00AM in House Buying, Renting & Selling
87 replies 13.2K views
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  • CB1979_2CB1979_2 Forumite
    1.3K Posts
    but as you say it's all ifs & buts.

    the bigger picture you've painted is one sided towards renting IMO.

    my philosophy about buying is very simple, if you can afford to and are happy with the payments then do it if you want to.

    I couldn't give a damn if prices crashed and IR rise as long as I have a product & monthly payments that I'm happy with, ie fixed at a rate for however long, my house is my HOME, some people see it very differently and see it purely as an investment.

    people have different wants & needs, do i care if my property devalues in the next 2 years? NO!
    over 25 years? that's a whole different ball game! lol
  • zag2mezag2me Forumite
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    JohnInDebt wrote:
    The same could be said if the interest rates went to 12% meaning that mortgage payments would go through the roof and the people who decided to save would be even better off.

    Rents would tend to follow the increases in mortgage payments. So if interest rates went up, inflation would also be going up and yep you guessed it your rent would be going up too :)

    Buying a house gives you a fixed total price for 25 years depending on interest rates of course, where you really make your money pay is when you overpay the mortgage saving lots of interest.
    Save save save!!
  • seven-day-weekendseven-day-weekend Forumite
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    Owning a house certainly doesn't make you rich. We have two mortgage-free houses (The Spanish one bought with the proceeds of an inheritance) but we certainly don't have any money and on an income of maximum £9500 (may decrease in the near future), the only way we will have any more money will be to sell one of them.

    I appreciate we are lucky to be in a position to do this. Most people don't have two houses and if you only have one and it's a city mid-terrace (as my UK house is), then downsizing isn't an option and the only thing you can do for extra funds is equity release.

    Whereas people who rented and invested wisiely will have the capital AND the flexibility.
    (AKA HRH_MUngo)
    Member #10 of £2 savers club
    Imagine someone holding forth on biology whose only knowledge of the subject is the Book of British Birds, and you have a rough idea of what it feels like to read Richard Dawkins on theology: Terry Eagleton
  • Renting is not 'dead money', nor is buying a property and paying a mortgage. In both circumstances you are receiving something for that monthly payment.

    Renting vs Buying can be veiwed in a variety of ways, but from my point of view, i would much rather live in property that i can do as i please.

    In 25 years i may have spent shedloads in interest, however, it is more than likely that i will have a property that has increased in value over this time period and with no regular monthly expense. This potentially provides me with an opportunity to either downsize and release equity or stay put and hope i have enough in savings and from my pensionto live comfortably.

    It has already been mentioned, how do people intend to pay their for 10+ years after retirement?

    Having a sense of "home" is priceless, thats why i dont mind paying 80K in interest periods over the 25years.
  • Dead_Eye_JonesDead_Eye_Jones Forumite
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    JohnInDebt wrote:
    Surely if his £88,500 was invested wisely it would almost be worth the property value after 25 years?

    The obvious floor is that you wont have £88k to invest at year 0! But yes there is a good article over at https://www.fool.co.uk which shows some examples of what you are talking about - its not a new concept!!

    The big financial benefit of house buying however is gearing, if you get a 10% rise on 10k invested well thats only £1000 profit, but if you use your 10k as a deposit, borrow 90k and buy a 100k house, a 10% rise on your house value represents a £10,000k profit (in reality its more complex but im just keeping it simple!) - so your 10k initial investment is making a 1000% more :D! Im afriad no other investment can come close, now imagine this over a few years and the fact you are banking some of the money you pay - you can see why people are so keen to invest in property?! Check out the fool.co.uk for some better examples, it gets messy when you start factoring fees and stuff!

    Essentially you a profit by investing someone elses money at the cost of interest you'll pay, now unless you have a big starting figure, eg the 88k you mention, you will prob be better off doing this (assuming your investment pays off!)

    Anyways, as to you question, personally I think renting is fully justified if it suits you, its not throwing money away at all because you are getting something for your money and its quite frankly madness for anyone to suggest otherwise. Included in that fee is maintenance for example, I loved the fact I could just phone my landlord and he'd have a legal responsability to sort it all out for me.

    For me the big reason for buying was stability. I got kicked out of places despite promises of longterm lets and I just couldnt risk bringing up a family with that treat. Although you do have legal protection if a landlord wants you out they can make you life hell and life's too short for those hassles. Essentially I put a lot of value on having a home, to me that was more important than money. Of course bing an MSEr I bought shrewdly but money was never the primary factor.

    Of course, house prices can go up or down, but for the reasons above im not too bothered, a home comes first. And lets face it, any high yield investment has some risk. Personally I dont see a big drop in prices happening, with a trend for single occupancy and increasing population and migration into London, the demand aint goni no where soon :(. Makes my next move up the ladder tough, but hey my family wont be that big - unless we have sextuplets - eek!

    Gl chap :)
    Debt: a bloomin big mortgage

    all posts are made for entertainment value only, nothing I say should be taken as making any sense and should really be ignored
  • Mrs_pbradley936Mrs_pbradley936 Forumite
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    I just want to say something about this which nobody seems to have picked up on and that is house price inflation. My figures are genuine but run over a 30 year period because I would have to fabricate/alter them if not. We bought our first house a two bed terrace in a suburb of London for £10,500 in 1975. I just had a look on House Price Spy and a neighbouring house (no details on our old place) sold in February 2005 for £220,000. Can somebody tell me the significance of that?
  • I have to say i agree - I have just started the process of buying my first flat and never mind the money, it will cost slightly more than my rent, but its bigger, we can decorate, ITS OURS! Can't wait.

    Renting was good when I was younger but my problem was that once you start renting its nigh on impossible to start saving for a deposit. I got some inheritance or I'd be looking at the next twenty years paying somebody else to live in their damp property (when I could be living in my OWN damp property :) )
  • ti1980ti1980 Forumite
    1.5K Posts
    There is no way I could afford to buy even if I wanted to which I don't at the moment.
    If the bank was to offer me a 4x mortgage then with my salary that would give me a property of less than £80,000, this is only enough to buy a flat around here (Manchester) and that is a flat in a less desirable area.
    I understand that some people have to make sacrifices in order to afford their homes but one thing I won't do is move to a less safe area. I know that things can happen wherever you live but I have lived in a couple of areas which were less than desirable when I was studying and have no intention of doing so again.

    How would I go about getting a mortgage? I'm a single person with a low salary, credit card debts and no savings apart from an ISA which I haven't added to in years.
    My salary would need to more than double (not going to happen) before I could afford a house like the one I live in now.
  • mi-keymi-key Forumite
    196 Posts
    Most of the people who say 'renting is dead money' are those who bought their homes ages ago and are paying a few hundred quid a month on the mortgage, and have no idea how much places cost now.

    One of my neighbours was shocked that we paid £600 pm rent, when he only paid £350 ish on his mortage - quite apart from the fact that he bought his house over 10 years ago, to buy the house we currently rent would cost us around £1500 a month in mortgage payments.

    As someone pointed out, renting isnt dead money, its a living expense the same as food and bills are, and the same as a mortgage is.

    I'll bet there are people paying huge sums for flats etc... now, who if they spend 25 years paying it off, wont actually have made ANY money when they work out what its worth when they finish paying the mortgage.

    Renting is a convenient way to have your own place ( rather than sponging off parents until you are 30 ) until you are in a financial position where you can afford to buy.
  • zag2me wrote:
    As everyone else says, its not dead money, but its certainly much better to get on the housing ladder sooner rather than later.

    Tell that to people who bought in 1989 rather than 1996 and got half as much property for the money than they would have done 7 years later, and also lost out on massive interest rates in the intervening period.
    My policies are based not on some economics theory, but on things I and millions like me were brought up with: an honest day's work for an honest day's pay; live within your means; put by a nest egg for a rainy day; pay your bills on time; support the police - Margaret Thatcher.
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