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Debate House Prices
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Better to buy than rent!!
Batchy
Posts: 1,632 Forumite
Hi Guys,
Just thought id do a quick calc
House worth £200k, or 750pm rent at todays values
Disregard inflation, even thou it plays a HUGE part in HPI and the fixed part of buying a house, etc.
Total cost of mortgage 140k with 60k deposit at around 3.9%
Total payments 283k House still worth 200k in 25 years (with no House Price Inflation, hardly likely and more like worst case scenario) in 25 years
Total cost 83k (after deducting house proceeds in 25 years time)
Renting same house today for 25 years £750 per month (with no inflation lol...)
Total cost £225k
Big difference
House worth £200k, or 750pm rent at todays values
Disregard inflation, even thou it plays a HUGE part in HPI and the fixed part of buying a house, etc.
Total cost of mortgage 140k with 60k deposit at around 8%
Total payments 387k House still worth 200k in 25 years (with no House Price Inflation, hardly likely and more like worst case scenario) in 25 years
Total cost 187k (after deducting house proceeds in 25 years time)
Renting same house today for 25 years £750 per month (with no inflation lol...)
Total cost £225k
So still cheaper even at rates of 8%
House worth £200k, or 750pm rent at todays values
Disregard inflation, even thou it plays a HUGE part in HPI and the fixed part of buying a house, etc.
Total cost of mortgage 140k with 60k deposit at around 9%
Total payments 416k House still worth 200k in 25 years (with no House Price Inflation, hardly likely and more like worst case scenario) in 25 years
Total cost 216k (after deducting house proceeds in 25 years time)
Renting same house today for 25 years £750 per month (with no inflation lol...)
Total cost £225k
So still cheaper at 9%
When you get to 10% consistently over the 10 years it doesnt work so well.
NOW
Lets change a couple of other variables
There is 3% HPI over the next 25 years on average
There is 3% CPI inflation over the next 25 years on average
Rents increase in line with CPI inflation
Interest rates mortgage rates stay broadly the same as they are now
Now cost of buying is nothing ... its free, its cost 283k to buy, in physical payment terms over the period, and the house is now worth over 405k so this property was making you a gross profit of 400pm over the term.
Compared to renting, which over the same term, cost 328k averaged over 300 payments is nearly 1,100pm this stays the same regardless
Compare this to 9% rates over the period, and taking into account house value at the end of the period and your still only talking a loss of £30 per month at the end of the 25 years. compared to average rent of £1100 pm, it seems a no brainer to me.
The inflation assumed above is not ... exceptionally high... and the HPI is modest to say the least!!
For all those folk who believe by not buying they are making money, its a false dawn... you need to do simple maths.
Just thought id do a quick calc
House worth £200k, or 750pm rent at todays values
Disregard inflation, even thou it plays a HUGE part in HPI and the fixed part of buying a house, etc.
Total cost of mortgage 140k with 60k deposit at around 3.9%
Total payments 283k House still worth 200k in 25 years (with no House Price Inflation, hardly likely and more like worst case scenario) in 25 years
Total cost 83k (after deducting house proceeds in 25 years time)
Renting same house today for 25 years £750 per month (with no inflation lol...)
Total cost £225k
Big difference
House worth £200k, or 750pm rent at todays values
Disregard inflation, even thou it plays a HUGE part in HPI and the fixed part of buying a house, etc.
Total cost of mortgage 140k with 60k deposit at around 8%
Total payments 387k House still worth 200k in 25 years (with no House Price Inflation, hardly likely and more like worst case scenario) in 25 years
Total cost 187k (after deducting house proceeds in 25 years time)
Renting same house today for 25 years £750 per month (with no inflation lol...)
Total cost £225k
So still cheaper even at rates of 8%
House worth £200k, or 750pm rent at todays values
Disregard inflation, even thou it plays a HUGE part in HPI and the fixed part of buying a house, etc.
Total cost of mortgage 140k with 60k deposit at around 9%
Total payments 416k House still worth 200k in 25 years (with no House Price Inflation, hardly likely and more like worst case scenario) in 25 years
Total cost 216k (after deducting house proceeds in 25 years time)
Renting same house today for 25 years £750 per month (with no inflation lol...)
Total cost £225k
So still cheaper at 9%
When you get to 10% consistently over the 10 years it doesnt work so well.
NOW
Lets change a couple of other variables
There is 3% HPI over the next 25 years on average
There is 3% CPI inflation over the next 25 years on average
Rents increase in line with CPI inflation
Interest rates mortgage rates stay broadly the same as they are now
Now cost of buying is nothing ... its free, its cost 283k to buy, in physical payment terms over the period, and the house is now worth over 405k so this property was making you a gross profit of 400pm over the term.
Compared to renting, which over the same term, cost 328k averaged over 300 payments is nearly 1,100pm this stays the same regardless
Compare this to 9% rates over the period, and taking into account house value at the end of the period and your still only talking a loss of £30 per month at the end of the 25 years. compared to average rent of £1100 pm, it seems a no brainer to me.
The inflation assumed above is not ... exceptionally high... and the HPI is modest to say the least!!
For all those folk who believe by not buying they are making money, its a false dawn... you need to do simple maths.
Plan
1) Get most competitive Lifetime Mortgage (Done)
2) Make healthy savings, spend wisely (Doing)
3) Ensure healthy pension fund - (Doing)
4) Ensure house is nice, suitable, safe, and located - (Done)
5) Keep everyone happy, healthy and entertained (Done, Doing, Going to do)
1) Get most competitive Lifetime Mortgage (Done)
2) Make healthy savings, spend wisely (Doing)
3) Ensure healthy pension fund - (Doing)
4) Ensure house is nice, suitable, safe, and located - (Done)
5) Keep everyone happy, healthy and entertained (Done, Doing, Going to do)
0
Comments
-
people that [STRIKE]won't[/STRIKE] [STRIKE]refuse[/STRIKE] [STRIKE]can't[/STRIKE] don't see the point you're making think that they are saving each month that a house price index has a negative figure - those same people are ones that discount the house price indexes when they rise in value.
they also see a house on rightmove drop the asking price (not the selling price) by 10% and think they're saving money - these people are lost and confused but they think they're not.0 -
Maintenance.
Where it that in your calc?0 -
In favour of bears you need to add maintenance.
in favour of bulls you need to factor in that once those 25 years have elapsed, the home owner will be paying nothing and the renter will still be paying rent.This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com0 -
In favour of bears you need to add maintenance.
in favour of bulls you need to factor in that once those 25 years have elapsed, the home owner will be paying nothing and the renter will still be paying rent.
Not true, the buyer will still be paying for it indirectly via tax.
If someone is living in rented for 25 years they simply abort working and get someone else to pay for it.0 -
Not everyone will rent for 25 years (or even close to it) and anyone that does obviously doesn't want to buy a house so they couldn't care less about renting v buying0
-
Hi Guys,
Just thought id do a quick calc
House worth £200k, or 750pm rent at todays values
Disregard inflation, even thou it plays a HUGE part in HPI and the fixed part of buying a house, etc.
Total cost of mortgage 140k with 60k deposit at around 3.9%
Total payments 283k House still worth 200k in 25 years (with no House Price Inflation, hardly likely and more like worst case scenario) in 25 years
Total cost 83k (after deducting house proceeds in 25 years time)
Renting same house today for 25 years £750 per month (with no inflation lol...)
Total cost £225k
Big difference
House worth £200k, or 750pm rent at todays values
Disregard inflation, even thou it plays a HUGE part in HPI and the fixed part of buying a house, etc.
Total cost of mortgage 140k with 60k deposit at around 8%
Total payments 387k House still worth 200k in 25 years (with no House Price Inflation, hardly likely and more like worst case scenario) in 25 years
Total cost 187k (after deducting house proceeds in 25 years time)
Renting same house today for 25 years £750 per month (with no inflation lol...)
Total cost £225k
So still cheaper even at rates of 8%
House worth £200k, or 750pm rent at todays values
Disregard inflation, even thou it plays a HUGE part in HPI and the fixed part of buying a house, etc.
Total cost of mortgage 140k with 60k deposit at around 9%
Total payments 416k House still worth 200k in 25 years (with no House Price Inflation, hardly likely and more like worst case scenario) in 25 years
Total cost 216k (after deducting house proceeds in 25 years time)
Renting same house today for 25 years £750 per month (with no inflation lol...)
Total cost £225k
So still cheaper at 9%
When you get to 10% consistently over the 10 years it doesnt work so well.
NOW
Lets change a couple of other variables
There is 3% HPI over the next 25 years on average
There is 3% CPI inflation over the next 25 years on average
Rents increase in line with CPI inflation
Interest rates mortgage rates stay broadly the same as they are now
Now cost of buying is nothing ... its free, its cost 283k to buy, in physical payment terms over the period, and the house is now worth over 405k so this property was making you a gross profit of 400pm over the term.
Compared to renting, which over the same term, cost 328k averaged over 300 payments is nearly 1,100pm this stays the same regardless
Compare this to 9% rates over the period, and taking into account house value at the end of the period and your still only talking a loss of £30 per month at the end of the 25 years. compared to average rent of £1100 pm, it seems a no brainer to me.
The inflation assumed above is not ... exceptionally high... and the HPI is modest to say the least!!
For all those folk who believe by not buying they are making money, its a false dawn... you need to do simple maths.
Can you tell me where you got this size of deposit from?
If you saved £500 a month after all of your outgoings it would take you 10 years to get the deposit together. With your rent figure of £750 thats £1250 a month after tax.:cool:
0 -
Not true, the buyer will still be paying for it indirectly via tax.
If someone is living in rented for 25 years they simply abort working and get someone else to pay for it.
Yea but when the kids have left the buyer will still be living in his nice 3 bed house whereas the renter will have to move to a 1 bed flat.0 -
I've lived in my present house for 25 years and can assure you maintenance has been nowhere near the £60k I paid for it.
I doubt it.
Never changed boiler? If not then you are probably throwing away 200-300 quid a year etc etc.
Never changed the kitchen? Same cooker as 25 years ago?
>25 year old carpets.
Sounds like a lovely home.0
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