House ownership - Selling yourself into a lifetime of servitude

debtistheft

SandC wrote: »

Looking at my ISA right now I'm not so convinced on the investment side of things! But seriously you'd have to be very savvy at the stocks and shares investments to get the same back in recent years as you would have saved in paying off some of the mortgage.

Do you take an active role in your ISA investments? What is your risk profile, what classes have you invested in, what is the capitalisation on your investments?

You dont have to be savvy at all to beat 6%. A crappy, bog standard tracker (http://www.google.co.uk/finance?q=MUTF_GB:BANK_OF_SCOT_1YJQE04) returned 19.28% over the last 12 months in the same time houses have dropped, what, 5%?

ukcarper

debtistheft wrote: »

Mortgage £121,600 @ 5.99% = £606.99 Interest Only
Repayment Part = £121600 / 25 /12 = £405.33

I don't know where you are getting £792 from because even with a 5% deposit I'm seeing a £1012 per month mortgage.

I’ve tried 2 mortgage calculators at 6% BBC and Nationwide BBC gives £792.62 Nationwide gives £793. how do you get £1012

SandC

No, I don't, it's just a cash one.

I haven't been paying 6% on my mortgage though.

debtistheft

SandC wrote: »

No, I don't, it's just a cash one.

I haven't been paying 6% on my mortgage though.

No wonder you are getting a crappy rate, if you have money in cash at the moment you will be losing money due to inflation.

What is the interest rate on your cash isa and what is the interest rate on your mortgage?

SandC

Doesn't matter, I'm not using my ISA for investment purposes, just a bit of petty cash, I realise that was not a good example in terms of investment.

CAN1976

debtistheft wrote: »

Mortgage £121,600 @ 5.99% = £606.99 Interest Only
Repayment Part = £121600 / 25 /12 = £405.33

I don't know where you are getting £792 from because even with a 5% deposit I'm seeing a £1012 per month mortgage.

The interest part declines over the years as the capital declines.

debtistheft

Interesting enough, looking at net house prices for the rental place (Greenstone Avenue), a similar semi detached house sold for £150k on the 20th August 2010. So I can rent a house worth £22k more for £1.07 a month more than someone else is paying on his interest only mortgage.

SandC

But what about if he stays there for 15 years? You'll be paying more rent I daresay, he'll be paying less mortgage.

debtistheft

CAN1976 wrote: »

The interest part declines over the years as the capital declines.

Quite so, and if the tenants investments increase at the same rate then the net effect is zero.

The trouble with these sorts of example are they are not real-world. Very few people in this day and age will buy a house and never move again. My parents started out in a 1 bed flat, moved to a 2 bed terraced house, moved to a 3 bed semi-detached house, moved to another 3 bed semi-detached house in a nicer area, moved to a 3 bed semi deatched bungalow and they werenot even that adventurous. That's 5 moves which will have cost 5x legal costs to buy, 4x legal costs to sell, numerous mortgage arrangement fees (which we forgot to add to our example house purchase above), stamp duty costs (which I did consider for ourexample case but currently first time buyers dont pay it under £250k), redemption fees, 4x estate agent fees for selling.

debtistheft

SandC wrote: »

But what about if he stays there for 15 years? You'll be paying more rent I daresay, he'll be paying less mortgage.

I looked at a rental site that showed average rental in that area and it was static at £600pm for 3 bed semi's over a 10 year period. What if he moves house because he changes his job or gets divorced or any of the numerous other reasons why people move? How do the costs stack up then?