Is Renting Really Dead Money?

wheely

Wonderful thread and on a topic very much at the forefront of my mind at the moment.

I currently rent a nice 3 bed house in a nice rural village and pay £500 a month. The 3 bed house 2doors away has just come up for sale at a fairly reasonable £160k. Both my girlfriend and I love it.

I have around a £15k deposit but still need a mortgage in the region of £145k.
A very cursory glance around the market shows that I will need to pay in the region of £750-800per month on a mortgage

I have a meeting set up with a mortgage advisor later in the week to get a more detailed outlook on it but it still scare me that i may have to pay over 50% more to live in a very similar property.....and I property that I will have to maintain.

Big descisions to be made methinks!!

Gorgeous_George

I have spent a lot more on mortgage payments, endowment policies, home improvements, repair work, carpets and all the other things that are included in the rent than I would if I'd paid rent.

Is renting dead money? NO.



GG

anniecave

I think as a whole you do end up paying more whilst you are paying off your mortgage, but at the end you have something you own.
I have been renting for the last 7 years since I graduated from uni, and as I've been sharing with friends during that time, I've not paid much rent, and would have paid a lot more if I'd bought a place on my own, but would now be part way through the mortgage I suppose.
Nice to see both sides of the argument, but I do get a little annoyed when people imply that renting is a total waste of money. It's the best option in the short term as it's flexible.

ericthekidstoner

wheely wrote:

Wonderful thread and on a topic very much at the forefront of my mind at the moment.

I currently rent a nice 3 bed house in a nice rural village and pay £500 a month. The 3 bed house 2doors away has just come up for sale at a fairly reasonable £160k. Both my girlfriend and I love it.

I have around a £15k deposit but still need a mortgage in the region of £145k.
A very cursory glance around the market shows that I will need to pay in the region of £750-800per month on a mortgage

I have a meeting set up with a mortgage advisor later in the week to get a more detailed outlook on it but it still scare me that i may have to pay over 50% more to live in a very similar property.....and I property that I will have to maintain.

Big descisions to be made methinks!!

nice example wheely

I think ur in a good position with your large deposit. the other thing to consider is the effect of the joint financial commitment on your relationship.

if necessary u can always let out a room which would make up most if not all of your new increase in outgoings - one of the joys of owning

hope it all goes well!

PS. make sure u get the advisor to split the comission with u most will entertain the idea

wheely

At the moment we enjoy a nice lifestyle, enjoying going out and regular holidays. The additional £300-400 per month commitment will make a large dent in disposable income.

I put a lot of value on quality of life and, although probably not a great MSEer philosophy, I believe in enjoying the moment and living for now. I agree that there should be a plan in place for the future but does that have to be at the expense of enjoying life now.

Will I be able to enjoy holidays when I'm 65 and may have paid my mortgage off?
Will I actually make it to 65?!

I guess we all have to make difficult choices though!

franklee

Hi wheely, When weighing up the sums don't forget the interest you are getting on your 15K savings that you will use for the deposit. If you are a basic rate taxpayer and the 15K is in an account paying 5.25% then you will be getting just over 50 pounds a month interest. So that makes buying another 50 more expensive per month. Not forgetting the ammount your savings would grow by if you save the additional £300-400 per month...

wheely

The interest on the £15k is very good as it's stashed in ISA's and is being moved around to various high interest regular saver accounts to safely maximise my investment.

It really is a conundrum, as the house we've seen is lovely and in a beautiful area and is just what we are after.....but at what cost?!

Equally though, what is the point for saving for a rainy day if you are never going to put those savings to good use? I certainly have no intention of squirelling my money away for the whole of my life just so Gordon Brown's successors can get their greedy little hands on it at some future point.

I guess I'm going to have to bite the bullet at some point and make a descision and hope I dont come to regret it whichever way we go!

jago25_98

What about if you work away a lot like I will be soon,

paying for a place when I will only be there half the time moneysavers!

PosterBoy77

One aspect to bare in mind when deciding to rent or buy that is overlooked by many people are the costs involved in moving and selling. Buying anything worth more than 250k is something that should only be done if you intend to spend a long time in the property. Stamp duty on a 300k property will be 9k - money totally down the drain. If you decide to sell with an estate agent, they will charge between 1 to 2% which is a further 3 to 6k. You will then have solicitor costs about £500 per shot. You may then have other costs - boilers often go wrong for some reason just after you move into a house you buy! If you only stay in the property 3 years you would have to sell for at least 316k just to break even and more if you need to make repairs or improvements. 16k is just over a 5% increase. unless house prices rise by at least 2% per year in the area you decide to buy, there is no profit to be had in buying. If you also take into account that many house can be rented for less than the mortgage interest, now is actually a very good time to rent.

There will always be good times to buy and good time to rent. Buying a house to live in for 20 years is probably good. Buying a house to live in for 3 years is probably financially bad.

franklee

wheely wrote:

Equally though, what is the point for saving for a rainy day if you are never going to put those savings to good use? I certainly have no intention of squirelling my money away for the whole of my life just so Gordon Brown's successors can get their greedy little hands on it at some future point.

Yes I certainly agree with that. Personally I know what the bulk of my savings are for. 1. Deposit to buy a house, only not yet, I'm happy renting for the foreseeable future until I see which way prices are going (I admit I think it will be down) and have worked out where I want to live. 2. Apart from providing a buffer of security against the unknown, savings allow a person to take more risks than they otherwise could. I once walked out on a good job to go freelance. It could have been a disaster but was fortunately quite lucrative for a few years. Back then I had a mortgage so without the savings as backup I would not have had the confidence to do it. Now I work much fewer hours so the savings are buying me free time and I would hate to lose that by being cleaned out by buying a house.