mortgages are dead money!

jonewer

First of all, have a look at this property

http://www.findaproperty.com/displayprop.aspx?edid=00&salerent=0&pid=382284&agentid=04127

I bed terrace on the Thames for £300k

Now have a look at this

http://www.findaproperty.com/displayprop.aspx?edid=00&salerent=1&pid=191491&agentid=04542

Same terrace, about 3 houses further down, rental price of £700pcm

Now lets do some sums!

At 5.25% interest (current base rate), the Interest Only payments would be
300000/12*0.0525=1312.5
Or £1,312.50pcm

So by renting instead of buying you would save 1312.5-700=£612.50pcm!

Why on earth would anyone buy one of these houses at that price when you can rent one and let your landlord subsidise you to such a degree?

Buying is money down the drain!

saxy1

Renting is lining someone elses pocket, buying the property is 'eventually' yours.

F_T_Buyer

The average mortgage rate was is 5.29% at the end of June 2006 according the CreditAction. After the three rate rises, I expect it to be far higher.

Here's the debt stats you all may be interested in:

http://www.creditaction.org.uk/debtstats.htm

saxy1 wrote:

Renting is lining someone elses pocket, buying the property is 'eventually' yours.

You'd be saying that is the average price was a billion quid. Clearly, you don't have an eye for figures.

david69_2

you can't say that don't you know that everyone in this country has an obsession with buying houses and doing them up and acting like sarah beeny .

roswell

Neither are dead money unless you choose the wrong one at the wrong time.

EG as proven above its currently cheaper to rent than to buy in that location,

I purchased my property when renting local cost more than buying.

it is dead money to purchase the above property and sell it next year when you want to move to australia as renting would have been cheaper.

roswell

saxy1 wrote:

Renting is lining someone elses pocket, buying the property is 'eventually' yours.

yes but if you cant afford to buy or need to save a deposit then its not dead money, We ALL need somewhere to sleep the alternative is the cheapest (homeless) but not likely viable.

jonewer

saxy1 wrote:

Renting is lining someone elses pocket, buying the property is 'eventually' yours.

In this case, an additional £612.50 is lining the pocket of your bank manager very nicely thank you.

The figure I gave above is interest only, so the property would not be 'eventually' yours unless additional payments to the tune of £300 grand were to be made to the bank

F_T_Buyer

Kuztardd wrote:

And 10 years down the line, how much would you get back from the rental place?
now do the maths
:-)

I'm not sure what your implying, but i'll do the maths.

By putting that surplus in a savings account, you would be about £95k better off. House prices would need to rise over 30% for the breakeven to be the same.

Obviously, the idea would be to buy someway along that period, when you can put the money you've saved into the purchase.

Guy_Montag

F_T_Buyer wrote:

I'm not sure what your implying, but i'll do the maths.

By putting that surplus in a savings account, you would be about £95k better off. House prices would need to rise over 30% for the breakeven to be the same.

Obviously, the idea would be to buy someway along that period, when you can put the money you've saved into the purchase.

Don't forget you get all your repairs done when renting too. Of course you might want to invest in something more profitable than a savings account. But that increases risk.

jonewer

And building insurance, life insurance, opportunity cost on capital repayments, stamp duty etc etc etc..

MrBen_4

I agree. I can't work out the point of interest only mortgages - there's no point in a falling market where global base rates are rising.

Renting gives you so much more flexibility aswell, and less hassle.