House ownership - Selling yourself into a lifetime of servitude

debtistheft

robmatic wrote: »

Personal debts being paid off, growing deposit, access to a cheap mortgage rate.

'Growing Deposit'. So if you didn't have this deposit to reduce your mortgage payments, you would still have found it cheaper to rent?

chucky

robmatic wrote: »

Did my own research, bought last year, pay less to service (and repay as well actually) my mortgage than I would to rent the equivalent flat.

you've actually got to be very stupid to think that long term and even medium term renting is financially better than buying

robmatic

debtistheft wrote: »

'Growing Deposit'. So if you didn't have this deposit to reduce your mortgage payments, you would still have found it cheaper to rent?

Indeed, I was happy to rent when it was cheaper to do so, but having a big enough deposit gained me access to mortgage rates that were lower than the rental yield on the equivalent property. Surely you've done these sums yourself?

robmatic

chucky wrote: »

you've actually got to be very stupid to think that long term and even medium term renting is financially better than buying

It can be a much better short term option though.

chucky

robmatic wrote: »

It can be a much better short term option though.

absolutely it can, in a falling yes and only maybe in a stagnant market.

unfortunately for many of the people on here they see the ticket price of a house as what they're going to pay for it. it's not...

IveSeenTheLight

IveSeenTheLight wrote: »

First point: -
The interest part of many mortgages is a fraction of the equivalent rent.

Second Point and more pertanent: -
Each month on the repayment mortgage, the interest reduces and more capital is paid off.

Third point: -
Compare point two two rent and over time, the rent increases, meaning less invested compared to the mortgage capital. Indeed, if the mortgage capital was increased in line with rents, then the amortization period would reduce.

debtistheft wrote: »

First Point. Prove it.

I could show anecdotal where I am renting out a property (Originally bought in 2004) where the interest is less than £100 and the rent is in excess of £1100 (rent has been stagnant due to long term tenancy and is under market value).

I could also point out that if rent didn't cover the interest part of the mortgage, then the LL is subsidising the property. I doubt there are in excess of 1.3million LL's subsidising their lets, however this does not proove my point so .....lets look at this from todays point of view.

Here are some 2 bed properties, under offer, circa £110k - £120k
http://www-r.aspc.co.uk/cgi-bin/public/LiveProperty/288619?ID=FBMIOBGD#picture

http://www-r.aspc.co.uk/cgi-bin/public/LiveProperty/288490?ID=FBMIOBGD#picture

http://www-r.aspc.co.uk/cgi-bin/public/LiveProperty/288362?ID=FBMIOBGD#picture

http://www-r.aspc.co.uk/cgi-bin/public/LiveProperty/284992?ID=FBMIOBGD#picture

Indeed there are even some on offer under this value

http://www-r.aspc.co.uk/cgi-bin/public/LiveProperty/288714?ID=FBMIOBGD#picture

http://www-r.aspc.co.uk/cgi-bin/public/LiveProperty/287455?ID=FBMIOBGD#picture

http://www-r.aspc.co.uk/cgi-bin/public/LiveProperty/287367?ID=FBMIOBGD#picture

http://www-r.aspc.co.uk/cgi-bin/public/LiveProperty/286649?ID=FBMIOBGD#picture

Indeed, here is an excellent example £100k, 2 bed property with a tenant already in situ.
http://www-r.aspc.co.uk/cgi-bin/public/LiveProperty/285146?ID=FBMIOBGD#picture

Now let's take the top of those valuations - £120k.
When I purchased a BTL, I had to put down a 20% deposit (not much different to the best rates for owner occupiers nowadays) so the mortgage would be £96k.

http://www.calculator.net/mortgage-calculator-uk.html

A £96k property with a mortgage rate od 5% (you can currently get lower) would represent a capital repayment amount of £7422.35 in the first year of which ££5,713.51 is interest.
this equate roughly as a repayment of £618.53 per month with £476.13 being the interest part.

The second year, the same yearly repayment is made (£7422.35) but the amount of interest is decreased (£5,608.12 or £467.34 per month) and the capital repayment increased (up to £1,814.23 for the year)

The third year and again, the interest decreases and the capital repayment increases

Annual Amortization Schedule

Year beginning balance ___interest ____principle ___ending balance
1 _____£96,000.00 __________£5,713.51 ___£1,708.84 ___£94,291.16
2 _____£94,291.16 __________£5,608.12 ___£1,814.23 ___£92,476.93
3 _____£92,476.93 __________£5,496.22 ___£1,926.13 ___£90,550.80
4 _____£90,550.80 __________£5,377.42 ___£2,044.93 ___£88,505.86
5______£88,505.86__________£5,251.29____£2,171.06____£86,334.80
6______£86,334.80__________£5,117.39____£2,304.97____£84,029.84
7______£84,029.84__________£4,975.22____£2,447.13____£81,582.71
8______£81,582.71__________£4,824.29____£2,598.06____£78,984.64
9______£78,984.64__________£4,664.04____£2,758.31____£76,226.34
10______£76,226.34__________£4,493.92____£2,928.43____£73,297.90
11______£73,297.90__________£4,313.30____£3,109.05____£70,188.85
12______£70,188.85__________£4,121.54____£3,300.81____£66,888.04
13______£66,888.04__________£3,917.95____£3,504.40____£63,383.64
14______£63,383.64__________£3,701.81____£3,720.54____£59,663.09
15______£59,663.09__________£3,472.33____£3,950.02____£55,713.07
16______£55,713.07__________£3,228.71____£4,193.65____£51,519.43
17______£51,519.43__________£2,970.05____£4,452.30____£47,067.13
18______£47,067.13__________£2,695.44____£4,726.91____£42,340.22
19______£42,340.22__________£2,403.90____£5,018.46____£37,321.76
20______£37,321.76__________£2,094.37____£5,327.98____£31,993.78
21______£31,993.78__________£1,765.75____£5,656.60____£26,337.18
22______£26,337.18__________£1,416.86____£6,005.49____£20,331.69
23______£20,331.69__________£1,046.46____£6,375.89____£13,955.79
24______£13,955.79__________£653.21______£6,769.14____£7,186.65
25______£7,186.65___________£235.70______£7,186.65____£0.00

Let's now look at the rental market for the same area / type of property.

£850
http://www-x.aspc.co.uk/cgi-bin/public/LiveProperty/289014?ID=FBMIOBGD#picture

£800
http://www-x.aspc.co.uk/cgi-bin/public/LiveProperty/289089?ID=FBMIOBGD#picture

£800
http://www-x.aspc.co.uk/cgi-bin/public/LiveProperty/289566?ID=FBMIOBGD#picture

£850
http://www-x.aspc.co.uk/cgi-bin/public/LiveProperty/289271?ID=FBMIOBGD#picture

£775
http://www-x.aspc.co.uk/cgi-bin/public/LiveProperty/289205?ID=FBMIOBGD#picture

£900
http://www-x.aspc.co.uk/cgi-bin/public/LiveProperty/288809?ID=FBMIOBGD#picture

£725
http://www-x.aspc.co.uk/cgi-bin/public/LiveProperty/289596?ID=FBMIOBGD#picture

I'm sure you can now agree that the rents received are far in excess of the interest that would be accrued on such properties.

I'm sure you can see from the above, that

debtistheft wrote: »

Remaining points, are reliant on the first point being true.

On the contrary, I think I've shown above my points are extremely valid

FTBFun

wotsthat wrote: »

I think you need to get a grown up to help with your calculations. Otherwise you'll end up paying a lifetime of rent - I'm sure your landlord(s) will be delighted though.

£7k compounded at 6% is £30,000 (as has been pointed out and ignored by you).

Can your carer help?

Also, assuming its not in an ISA (and £7k is more than the annual limit so probably wouldn't be), 20% of that would go in tax.

debtistheft

IveSeenTheLight wrote: »

I could show anecdotal where I am renting out a property (Originally bought in 2004) where the interest is less than £100 and the rent is in excess of £1100 (rent has been stagnant due to long term tenancy and is under market value).

I could also point out that if rent didn't cover the interest part of the mortgage, then the LL is subsidising the property. I doubt there are in excess of 1.3million LL's subsidising their lets, however this does not proove my point so .....lets look at this from todays point of view.

Here are some 2 bed properties, under offer, circa £110k - £120k
http://www-r.aspc.co.uk/cgi-bin/public/LiveProperty/288619?ID=FBMIOBGD#picture

http://www-r.aspc.co.uk/cgi-bin/public/LiveProperty/288490?ID=FBMIOBGD#picture

http://www-r.aspc.co.uk/cgi-bin/public/LiveProperty/288362?ID=FBMIOBGD#picture

http://www-r.aspc.co.uk/cgi-bin/public/LiveProperty/284992?ID=FBMIOBGD#picture

Indeed there are even some on offer under this value

http://www-r.aspc.co.uk/cgi-bin/public/LiveProperty/288714?ID=FBMIOBGD#picture

http://www-r.aspc.co.uk/cgi-bin/public/LiveProperty/287455?ID=FBMIOBGD#picture

http://www-r.aspc.co.uk/cgi-bin/public/LiveProperty/287367?ID=FBMIOBGD#picture

http://www-r.aspc.co.uk/cgi-bin/public/LiveProperty/286649?ID=FBMIOBGD#picture

Indeed, here is an excellent example £100k, 2 bed property with a tenant already in situ.
http://www-r.aspc.co.uk/cgi-bin/public/LiveProperty/285146?ID=FBMIOBGD#picture

Now let's take the top of those valuations - £120k.
When I purchased a BTL, I had to put down a 20% deposit (not much different to the best rates for owner occupiers nowadays) so the mortgage would be £96k.

http://www.calculator.net/mortgage-calculator-uk.html

A £96k property with a mortgage rate od 5% (you can currently get lower) would represent a capital repayment amount of £7422.35 in the first year of which ££5,713.51 is interest.
this equate roughly as a repayment of £618.53 per month with £476.13 being the interest part.

The second year, the same yearly repayment is made (£7422.35) but the amount of interest is decreased (£5,608.12 or £467.34 per month) and the capital repayment increased (up to £1,814.23 for the year)

The third year and again, the interest decreases and the capital repayment increases

Annual Amortization Schedule

Year beginning balance ___interest ____principle ___ending balance
1 _____£96,000.00 __________£5,713.51 ___£1,708.84 ___£94,291.16
2 _____£94,291.16 __________£5,608.12 ___£1,814.23 ___£92,476.93
3 _____£92,476.93 __________£5,496.22 ___£1,926.13 ___£90,550.80
4 _____£90,550.80 __________£5,377.42 ___£2,044.93 ___£88,505.86
5______£88,505.86__________£5,251.29____£2,171.06____£86,334.80
6______£86,334.80__________£5,117.39____£2,304.97____£84,029.84
7______£84,029.84__________£4,975.22____£2,447.13____£81,582.71
8______£81,582.71__________£4,824.29____£2,598.06____£78,984.64
9______£78,984.64__________£4,664.04____£2,758.31____£76,226.34
10______£76,226.34__________£4,493.92____£2,928.43____£73,297.90
11______£73,297.90__________£4,313.30____£3,109.05____£70,188.85
12______£70,188.85__________£4,121.54____£3,300.81____£66,888.04
13______£66,888.04__________£3,917.95____£3,504.40____£63,383.64
14______£63,383.64__________£3,701.81____£3,720.54____£59,663.09
15______£59,663.09__________£3,472.33____£3,950.02____£55,713.07
16______£55,713.07__________£3,228.71____£4,193.65____£51,519.43
17______£51,519.43__________£2,970.05____£4,452.30____£47,067.13
18______£47,067.13__________£2,695.44____£4,726.91____£42,340.22
19______£42,340.22__________£2,403.90____£5,018.46____£37,321.76
20______£37,321.76__________£2,094.37____£5,327.98____£31,993.78
21______£31,993.78__________£1,765.75____£5,656.60____£26,337.18
22______£26,337.18__________£1,416.86____£6,005.49____£20,331.69
23______£20,331.69__________£1,046.46____£6,375.89____£13,955.79
24______£13,955.79__________£653.21______£6,769.14____£7,186.65
25______£7,186.65___________£235.70______£7,186.65____£0.00

Let's now look at the rental market for the same area / type of property.

£850
http://www-x.aspc.co.uk/cgi-bin/public/LiveProperty/289014?ID=FBMIOBGD#picture

£800
http://www-x.aspc.co.uk/cgi-bin/public/LiveProperty/289089?ID=FBMIOBGD#picture

£800
http://www-x.aspc.co.uk/cgi-bin/public/LiveProperty/289566?ID=FBMIOBGD#picture

£850
http://www-x.aspc.co.uk/cgi-bin/public/LiveProperty/289271?ID=FBMIOBGD#picture

£775
http://www-x.aspc.co.uk/cgi-bin/public/LiveProperty/289205?ID=FBMIOBGD#picture

£900
http://www-x.aspc.co.uk/cgi-bin/public/LiveProperty/288809?ID=FBMIOBGD#picture

£725
http://www-x.aspc.co.uk/cgi-bin/public/LiveProperty/289596?ID=FBMIOBGD#picture

I'm sure you can now agree that the rents received are far in excess of the interest that would be accrued on such properties.

I'm sure you can see from the above, that


On the contrary, I think I've shown above my points are extremely valid

I see your calculations quickly broke down when it came to how you funded your deposit. According to the people on here, if you rent then you are unable to actually save a deposit. The story ends here for the housing bears apparently.

However, if you are willing to continue.

You have fallen into the deliberate Bull trap where everyone moves into a house and stays there for 25 years and keeps the same mortgage provider, so there are no estate agency costs, mortgagge arrangement fees, redemption fees, solicitors costs, land registry searches, etc. etc.

Strange how the average person in the UK moves 5 times and yet the Bull Examples on this website always stay put, forever. How odd.

I'm sure if your chap did the usual move up a ladder he would soon be looking at £5k to £10k in just stamp duty alone, let along the 1.5% to 3% estate agency fees he would have to pay. Naturally he would be looking at changing his mortgage every 2 to 5 years and would have arrangement fees of zero to £2k to contend with and he would probably pay a few redemption fees on those house sales or remortgages if he didn't time it right. Plus the usual 'admin' charges that can be anything from £10 to £200.

Of course, in Bull Land, everyone just buys a single house with a single mortgage and thats that. :rotfl:

CAN1976

I find it hard to believe that average person in the UK moves 5 times as a house owner. Where is this figure coming from? I do not know anyone who was not renting who has moved house anything like that many times.

debtistheft

More information on The cost of buying a house (Note, this is the extra costs, not the actual ticket price of a house).

http://www.thisismoney.co.uk/mortgages-and-homes/mortgages-features/article.html?in_article_id=502610&in_page_id=58

"First-time buyers are not taking into account fees and extra costs associated with buying a home, according to a new report.

Nearly a quarter have no idea how many extras there are, says financial adviser website Unbiased.co.uk. And almost one in ten think that costs only add up to £1,000, which can be the price of conveyancing alone.

A small percentage don't even realize there are any additional costs at all. "

I'm guessing that 'nearly a quarter' are all Bulls from the MSE House Price Crash board. :rotfl: