mortgages are dead money!

devils_advocate

Woby_Tide wrote:

Sounds brilliant, so basically you rent a house/flat for 25 years, then you get to stay in it for free for the rest of your life? Where do I sign up?

What I was trying to do, Woby, was to compare like with like. I pointed out that at a point in time 25 years hence the value of the cash investment would be far greater than the house investment. Therefore the person with the house doesn't pay any more housing finance cost, but the person with the large cash sum can either pay a lifetime of rent with the interest on the cash sum, or could even buy a house outright! I didn't say anything about their decision.

(also not wanting to point out the blindingly obvious but if there is no wage or house price inflation then you won't be getting 4.75% on your savings by a long stretch so it's not a valid comparison at all)

I'm sure its so blindingly obvious that you didn't point it out, but if there's no wage or price inflation you wouldn't be paying 5.25% on your mortgage either! Seems like my attempts to level the playing field make my comparison more valid than yours.:D

devils_advocate

Ian_W wrote:

You started this silliness - I was merely joining in!! :rolleyes:

It wasn't silliness - As you can see it's a complex subject, with a vast number of indivifdual factors having an effect. What those factors are, and the strength of the effect, is what is being debated here. All I was trying to do is to make a number of these inputs constant, so we can compare like with like. Any time I've done any financial or economic modelling (and I have done it professionally) the strength of the model derives from the quality of the assumptions going in to it. Also, one can only understand a model if they understand the assumptions.

What detracts from the arguments on here is when someone changes a variable on one side, on the basis of an assumption, and then forgets to change the variable on the other side when doing a comparison.

Anyway, at this point I should withdraw from this debate, as it takes too much time. Most posters probably won't believe me, but when I did the initial number cruching, I didn't know what the end result would show. I'm not one to assume a conclusion and then to use various snippets of fact to justify it!:D

DawnW

"You have forgotten to remove savings tax (20%) from the interest earned so the actual savings asset is only worth £554,350.31."

A side issue, but you wouldn't leave lots of money in an average paying account like that anyway, would you? You would move it around and end up (certainly at the moment) with about the same amount of interest as that quoted after tax (You do the maths, but ICESAVE 5.7%, A&L Direct Saver 5.8% or whatever, to say nothing of the higher paying regular savers). Of course, none of us know what interest rates are going to do over the next 25 years - a bit like house prices, really!

meanmachine_2

I quite like the 300K cottage. Overpriced yes, but much more desirable (on paper) than the one bed renter.

If I had to make a choice now from those two, I'd buy.

Sacreligious, I know, but perhaps not a very good example from the OP.

I could show you 100s of properties round here - 3 bedroom houses that you could rent for 700pcm, but would have to spend 270K to buy one.

Now that's kerazy.

Guy_Montag

That river looks a bit close, sure you'll be able to get insurance?

Addiscomber

Guy_Montag wrote:

That river looks a bit close, sure you'll be able to get insurance?

Just got to :rotfl: :rotfl: :rotfl:

Rick62 wrote:

I think that there is no question that long term buying is better, hopefully you get the mortgage paid off by when you retire and you have stability and you can decorate, fit a new bathroom/kitchen/conservatory etc as you want.

There are some things that just cannot be evaluated in purely money terms, and for me this is the biggest one. You only need to see some of the threads that renters post about the problems that they are having with LLs. Hopefully they are only a small minority of LLs, but you never know which sort you have until it is too late. If you buy you have total control over your HOME. (We do remember that houses are homes first and foremost, rather than investment vehicles, do we?)

losgiganteskid

Guy_Montag wrote:

Don't forget you get all your repairs done when renting too.

That depends on your Landlord I quess - !!

billion25

Over 25 years...

history tells us that houses appreciate more than money kept in cash or cash equivalents. However, if your investment horizon was truly 25 years, then you'd never keep your money in cash.

Over a 25 year period equities outperform house prices and anyone with any investment savvy and a long term investment horizon would put money in equities.

But...I personally would not feel comfortable at all buying in this market if I thought there was any chance I would need to sell in the next 5 years. I'd rather build up my ING Direct balances.

pioneer

billion25 wrote:

But...I personally would not feel comfortable at all buying in this market if I thought there was any chance I would need to sell in the next 5 years. I'd rather build up my ING Direct balances.

Totally agree but reduce 5 years to 5 minutes ! :beer:

pioneer

Have U all gone off to sell your shares ? It only a comment; where have all gone? and why ING balances - there are better.