stupid beliefs about finance

grey_gym_sock

is buying food dead money? when it's gone, it's gone. do smart ppl never buy a pint of milk, but instead buy a cow?

racing_blue

grey_gym_sock wrote: »

is buying food dead money? when it's gone, it's gone. do smart ppl never buy a pint of milk, but instead buy a cow?

On one hand, no. On the other hand, I don't know any poor farmers!

JimmyTheWig

Hooloovoo wrote: »

During the period you're paying a repayment mortgage I agree the interest is "rent to the bank" and as such is "dead money".

However, the massive difference is that after 25 years of paying a repayment mortgage you own a house you can live in and never pay rent or a mortgage again.

After 25 years of paying rent you own the privilege of continuing to pay rent.

That's why renting really is dead money.

Ok, rent gets you a place to live until you can afford to buy one outright.
Mortgage interest gets you a place to live until you can afford to buy one outright.

Paying mortgage interest and more on top of this (i.e. the repayment part of a mortgage) means that in 25 years you'll own a home and so won't have to pay mortgage interest or rent any more.
Paying rent and more on top of this into a savings account can mean that in 25 years you'll have enough money to own a home and so won't have to pay mortgage interest or rent any more.

So they are both as dead as each other. You can call them both dead if you want. You can call them both live if you want. It doesn't matter.
If you can get a mortgage and rent is more than your mortgage interest and house prices are rising then a mortgage sounds like a better option.
If you can't get a mortgage or rent is less than your mortgage interest would be and house prices are falling then renting sounds like a good option.

In my experience, a mortgage seems to be better. Not because one is more or less "dead" than the other, just because it seems to be cheaper, at least in the long run as house prices tend to rise over time.

black_taxi_2

except now---to rent is as expensive as a mortgage

Hooloovoo

JimmyTheWig wrote: »

Paying rent and more on top of this into a savings account can mean that in 25 years you'll have enough money to own a home and so won't have to pay mortgage interest or rent any more.

And that's where your argument falls down.

Lets say your rent is £600 per month and you can afford to put an additional £200 per month into a savings account. That's equivalent to paying an £800 mortgage.

In 25 years your £200 a month would get you £60k + interest. If we assume an optimistic 8% growth per year that nets you just under £200k.

Do you seriously think you'll be able to buy even a run down one bedroom flat for £200k in 25 years time? Never mind the large family home you could well need.

Ah, but of course you'll have pay rises over those 25 years so you'll gradually be able to save more than £200 per month. Except you wont. Because your rent will probably keep going up at the same rate giving you the same percentage disposable income. Compare that with mortgage payments that are effectively fixed for the whole term aside for interest rate fluctuations. Mortgage payments are always going down in real terms. The monthly payments you struggle with in the first year will be peanuts in the final year.

Renting is dead money. There really is only two reasons people rent and that's because either they don't think they are going to live in a certain location for more than a year or two, or they simply don't have the money for the deposit required.

bankhater_1965

Hooloovoo wrote: »

And that's where your argument falls down.

Lets say your rent is £600 per month and you can afford to put an additional £200 per month into a savings account. That's equivalent to paying an £800 mortgage.

In 25 years your £200 a month would get you £60k + interest. If we assume an optimistic 8% growth per year that nets you just under £200k.

Do you seriously think you'll be able to buy even a run down one bedroom flat for £200k in 25 years time? Never mind the large family home you could well need.

Ah, but of course you'll have pay rises over those 25 years so you'll gradually be able to save more than £200 per month. Except you wont. Because your rent will probably keep going up at the same rate giving you the same percentage disposable income. Compare that with mortgage payments that are effectively fixed for the whole term aside for interest rate fluctuations. Mortgage payments are always going down in real terms. The monthly payments you struggle with in the first year will be peanuts in the final year.

Renting is dead money. There really is only two reasons people rent and that's because either they don't think they are going to live in a certain location for more than a year or two, or they simply don't have the money for the deposit required.

i believe how things are and will carry on i reckon , renting may work out cheaper in the long run and is cheaper than a mortgage and you are able to afford to put money aside but not for the reason above ,and would guess that 25 years of mortgage payments could easily end up as 50 years rent money, i myself am a homeowner with a small mortgage but then i have been paying it for 25 years , the cost of maintanance and many other things that are included in the rent payments unlike a mortgage , also when we get older and have to have care the house will pay for it there will be nothing left for family wealth to pass on, there alot going for renting today , owning your own home will become meaningless unless to raise credit which this whole site is about !!

JimmyTheWig

Hooloovoo wrote: »

In 25 years your £200 a month would get you £60k + interest. If we assume an optimistic 8% growth per year that nets you just under £200k.

Do you seriously think you'll be able to buy even a run down one bedroom flat for £200k in 25 years time? Never mind the large family home you could well need.

No I don't. Which is why we have a mortgage.

What I said was "if ... rent is less than your mortgage interest would be and house prices are falling then renting sounds like a good option".

bigfreddiel

the biggest belief is that you can pick a fund or share that will beat the market

get real - no one beats the market

just think about it from a fund managers pov - they all want to beat the market - well thats impossible only one will be the best then 2nd best, 3rd best and so on, so you may as well just buy the market itself - and will beat any managed fund

once you've accepted that little gem you'll realise what a load of old tosh these tables are of the best performing funds are over 1,2,3,5,7 years. its all totally irrevalent

we're even told its irrevalent, you know what i mean, previous performance is no indication of future performance. so even tho' we're told we all still try to hunt out the market beaters - totally deluded behaviour

cheers

fj

bankhater_1965

Hooloovoo wrote: »

During the period you're paying a repayment mortgage I agree the interest is "rent to the bank" and as such is "dead money".

However, the massive difference is that after 25 years of paying a repayment mortgage you own a house you can live in and never pay rent or a mortgage again.

After 25 years of paying rent you own the privilege of continuing to pay rent.

That's why renting really is dead money.

i disagree on that if you payed rent on a house of £650 pcm which is prob worth in the region of £200,000 for 25 years you would pay £180000 and maintanance free , to purchase the same house over a 25 year period would be a mortgage of £180,000 plus a 10% deposit of £20,000 and a monthly mortgage payment in the region of £1100 per month plus manintance costs over a 25 year period witha limited increase profit from house prices going upbut can also go down ,
so over a 25 year year period
rent =£180.000
mortgage =£ 330.000 plus £20,000 deposit plus maintance at a guess the same would cost you £360,000
this adds upto 50 years rent,,but then you will have to pay for your old age care by prob selling the protery to pay for it as the goverment is intending to close this privalidge to passing on wealth to the family by such meens,
i am a homeowner and i reckon the above has alot going for it by putting the diff of rent and mortgage £s into a savings account !!

Uncle_Ben

Never completely pay off your mortgage.

Your house is an asset.

Inflation is rising prices.

Stocks are a hedge against inflation.

Index-linked Share Certificates or index-linked gilts are a hedge against inflation.

Stocks always outperform bonds and cash.

Commodities are more dangerous than stocks.

You MUST, you MUST improve your bust....I mean take out a pension.

Cut losses and let profits run.

Tax avoidance is immoral.