Mortgage Interest is DEAD MONEY

maveli

!!!!!!_face wrote: »

OK, rent IS "dead" money. But... so is mortgage interest.

Not for me for the past 19 months. pays only 0.73% interst for 120K

IveSeenTheLight

LilacPixie wrote: »

Surely either rent or mortgage interest it is just a thing the vast majority have to pay to provide shelter.

Very True Lilac, however as you pointed out on the other thread, the capital repayment mortgage on a typical 3 bed house near you is less than a similar property would be to buy.

DaddyBear

LilacPixie wrote: »

Surely either rent or mortgage interest it is just a thing the vast majority have to pay to provide shelter.

True, but the person paying mortgage interest will reach a point when housing costs are zero, the renter will not.

dzug1

IveSeenTheLight wrote: »

As I said "I'm not aware of progressingly cheaper rental properties year after year"

True - but the government seems to be hoping that landlords will reduce rents so that tenants can afford them.

In vain I suspect.

IveSeenTheLight

dzug1 wrote: »

True - but the government seems to be hoping that landlords will reduce rents so that tenants can afford them.

In vain I suspect.

I personally have bever letted to people who are on housing benefit.
My tenants have always been professionals or students.

That said I do understand that the HB reductions may affect the wider market, but my personal thoughts are that they will drive people on HB to cheaper areas and that the private rental market (non HB tenants) will likely be untouched.

JimmyTheWig

maveli wrote: »

Not for me for the past 19 months. pays only 0.73% interst for 120K

It is still dead money. Just means you're not paying much dead money.

DaddyBear wrote: »

True, but the person paying mortgage interest will reach a point when housing costs are zero, the renter will not.

Only on the basis that the person paying mortgage interest is also repaying the capital. If the renter paid extra money into an account every month then they could reach the point where the interest from that money paid their rent each month. Not dissimmilar to the morgage scenario, if you ignore changes in house price / rents.

moneybagsuk

0.73% not dead money if you can invest it at 2.99% :-)

Blacklight

If I bought a house with an interest only mortgage in 1975 and used my dead money to pay the bank, that house would be mine today for about £10,000.

If you'd paid rent for that long you would have bought your landlord that house and probably another two besides.

JimmyTheWig

moneybagsuk wrote: »

0.73% not dead money if you can invest it at 2.99% :-)

But you can't invest it as you've used it to buy a house!

[Though I agree, if my mortgage rate was that low I wouldn't be in a hurry to repay any of it!]

Blacklight wrote: »

If I bought a house with an interest only mortgage in 1975 and used my dead money to pay the bank, that house would be mine today for about £10,000.

Which is why I wrote

JimmyTheWig wrote: »

The only difference is when prices go up or down. You should subtract the annual house price increase from the yearly mortgage interest (or add on the annual house price decrease) to get the real dead money figure.

As house prices tend to go up in value, those buying tend to pay less dead money in the long term than those renting.

getmore4less

They are both dead money BUT.

The market is cyclic so there are a good times and bad time to do one or the other.

Inflation reduces the relative cost of debt this is the long term winner but the effects are much smaller than they used to be.

It is possible to get it wrong buying high with high rates

or get lucky buy low with high rates that then drop to all time lows.