Is buying really better than renting?

movingforward2010

caravans are nice and you can move home loads of times

Gorgeous_George

My aim is to own my home as soon as possible.

Even without a mortgage, I could consider renting vs owning. If I sold and banked the cash, I would earn X pounds per month. Renting would cost Y pounds per month. If Y was less than X it would be better to rent.

I'd still choose to live in MY home.



GG

joeblack066

As far as I am aware, we are the only nation that places so much importance om home ownership. Other countries have their professional landlords, and most other people rent. My opinion is that if home ownership suits you, then do it, but if not, don't. There is a lot of snobbery about this, people look down on you when you rent, and that is what needs to change. There are advantages to renting, and people should be left to decide which way suits them personally.

rizla01

I must say that without studying the figures, I agree with all of the posts on here regarding home ownership, plus there's one not previously mentioned.

Called ambition.

That is the fact that, carry on paying the Mortgage and one day you wont have either Mortgage or Rent to pay and you wil have something to leave for the kids, something to borrow against or should you prefer, something to sell, bank and live off the interest PLUS your pension(including paying your rent) for the rest of your older years.

Average house today - approx £250,000.00 - gives you approx £1500.00 per month

chant1l

I can't actually figure out the model or the maths here are mine in brief;

purchase price today = £145000
sale price 10 years =£300000
sale price 20 years =£600000
allowing for less than average house price inflation.

Ok £130 per month on repairs....= 1 washing machine per month or 1 boiler per year....too high as costs go.
£60000 mortgage should be costing about £350 interest only, repayment would pay off the initial £60k loan.
You cant deduct the interest rate as this is only an estimated opportunity cost....

Or you could leave the money you have in the bank, £85000 today will be £85000 plus interest in 20 years, compounded this will be about £250k at 5% interest. Effectively this maths leaves you with £400 per month to rent with, in 20 years that should get you a garage in Barnstaple......

Scooby_Man

chant1l wrote:

I can't actually figure out the model or the maths here are mine in brief;

purchase price today = £145000
sale price 10 years =£300000
sale price 20 years =£600000
allowing for less than average house price inflation.

Ok £130 per month on repairs....= 1 washing machine per month or 1 boiler per year....too high as costs go.
£60000 mortgage should be costing about £350 interest only, repayment would pay off the initial £60k loan.
You cant deduct the interest rate as this is only an estimated opportunity cost....

Or you could leave the money you have in the bank, £85000 today will be £85000 plus interest in 20 years, compounded this will be about £250k at 5% interest. Effectively this maths leaves you with £400 per month to rent with, in 20 years that should get you a garage in Barnstaple......

I think your conclusion is along the right lines, but where did you get the £85k from? Assuming a 10% deposit, then the lump sum on day one would be £14.5k, which wouldn't get you a jack in a garage in 20 years. Bear in mind when you are renting, you won't have much scope to save especially if you are renting in a house you would aspire to live in.

Scooby_Man

Another way to look at things is that, certainly in my area, there is not much difference between the monthly rent you pay on a typical house and the monthly mortgage repayment based on the usual 10% deposit. I am experiencing this first hand.

So, if we continue at this rate for 25 year, all other things being equal (e.g. rent rises vs interest rates), then we have 2 scenarios:

1. I own a mortgage free property
2. I don't own a property but continue to pay rent to keep a roof over my head.

Now just looking at some of the practicalities around scenario 1 - yes, I would have put down a deposit and yes I would have incurred costs to do the house up etc. But this would be far exceeded by the value of the house and the absense of the fear of giving up work and losing the roof over your head.

Practical case: My dad bought his house for 90k about 18 years ago, he has almost paid off the mortgage and the house is worth around £650k. There is no way he would have been in this position if he was renting for 18 years as even the savings of not having to maintain a house wouldn't have build up to the level he could afford a £650k house outright now.

I hope this helps.

talksalot81

rizla01 wrote:

I must say that without studying the figures, I agree with all of the posts on here regarding home ownership, plus there's one not previously mentioned.

Called ambition.

That is the fact that, carry on paying the Mortgage and one day you wont have either Mortgage or Rent to pay and you wil have something to leave for the kids, something to borrow against or should you prefer, something to sell, bank and live off the interest PLUS your pension(including paying your rent) for the rest of your older years.

There are two terms finding their way into use - MEWing and SKIing. The two are related and their increase indicated that leaving money to the kids may be the ambition, but the reality is shifting. To MEW is of course to release equity from ones mortgage. To so do is to increase the mortgage debt and the difficulty in paying it off - in some cases to the point it is likely not to be paid off within the MEWers lifetime. As a result, the house has a reasonable chance of not belonging to the parents upon death and hence MEWing has been stealing the kids inheritance - SKIing.

I do agree with the sentiment of your post. Unfortunately when you are talking about 40 year terms, equity release and the likes, the simply inheritance of old becomes decreasingly valid, as of course would the idea of living from capital gain on property in ones later years. Now I honestly believe that many do not appreciate this - MEWing, for instance, has become very popular and I am aware that many see it simply as another form of income which they have earned by living in a house. They conveniently forget that this money is borrowed and will have to be returned.

alared

The basic rule is to work out what mortgage you could get for the same amount as you pay in rent.
When this is done and you`ve got "X" amount

---

what could you buy for X amount,very little I suspect.
So if it`s cheaper to rent than buy,then rent and visa versa.

DawnW

talksalot81 wrote:

There are two terms finding their way into use - MEWing and SKIing. The two are related and their increase indicated that leaving money to the kids may be the ambition, but the reality is shifting. To MEW is of course to release equity from ones mortgage. To so do is to increase the mortgage debt and the difficulty in paying it off - in some cases to the point it is likely not to be paid off within the MEWers lifetime. As a result, the house has a reasonable chance of not belonging to the parents upon death and hence MEWing has been stealing the kids inheritance - SKIing.

I do agree with the sentiment of your post. Unfortunately when you are talking about 40 year terms, equity release and the likes, the simply inheritance of old becomes decreasingly valid, as of course would the idea of living from capital gain on property in ones later years. Now I honestly believe that many do not appreciate this - MEWing, for instance, has become very popular and I am aware that many see it simply as another form of income which they have earned by living in a house. They conveniently forget that this money is borrowed and will have to be returned.

Some people have to sell their property in their old age, in order to pay for care, or course. With all of us expecting to live longer, this I guess will happen to more and more people...