Never buying a home

Perelandra

One of the big advantages not mentioned above about buying property is the tax saving- the equity you have saved in a home (not BTL) is effectively tax-free interest (probably easiest to see what I mean if you consider an ISA). Your savings/investment after tax need to beat the effective interest (tax-free) of the home equity- and this is actually quite hard to do.

It's much easier, of course, if your savings/investment are in a tax wrapper.

bigadaj

Wise move to post on here rather than the housing board as you are looking at an investment and not a home.

I would carry on saving if I were you, if you are a us citizen then I guess you get taxed on worldwide income anyway which s a consideration for investment and tax.

Ultimately be pragmatic as your feelings now may well change in five or ten years, recent history in the uk has been very damaging in relation to the idea of the property ladder and trading up every five years, there are significant costs in this subsided by unsustainable house price inflation ending five years ago, apart from central London I can't see uk prices increasing above inflation, and possibly falling, for a number of years.

cashbackproblems

At the end of the day your view point is not very financially rational for 99% of the population, rent prices are now similar to mortgages and you pay rent all your life with nothing to show for it whereas with a mortgage you pay for 20 years and you then live free and an asset worth 100k's to pass on...how does it make sense to not buy?!

Austin_Allegro

cashbackproblems wrote: »

At the end of the day your view point is not very financially rational for 99% of the population, rent prices are now similar to mortgages and you pay rent all your life with nothing to show for it whereas with a mortgage you pay for 20 years and you then live free and an asset worth 100k's to pass on...how does it make sense to not buy?!

Erm...vastly overinflated prices coupled with restricted mortgage lending? The distinct possibility of interest rates rising and wiping you out? Maintenance costs, upkeep, insurance, etc paid for by you instead of your landlord...?

cashbackproblems

Austin_Allegro wrote: »

Erm...vastly overinflated prices coupled with restricted mortgage lending? The distinct possibility of interest rates rising and wiping you out? Maintenance costs, upkeep, insurance, etc paid for by you instead of your landlord...?

These overinflated prices are based on supply and demand and what people will pay for them, with population figures still set to increase massively properties will be high in demand. You pay an inflated price you get back an even "inflated price".

Maintenance costs are overrated for a property in good condition, in my property over 15years iv changed my combi boiler and thats it, everything else has been cosmetic i.e. a lick of paint and new carpets.

Plus you dont seem to understand you are paying into a pot which is yours not your landlords when you sell/pass on, as a LL myself i should be grateful to people with your views!

bigadaj

Overinflated prices based on negative interest rates currently.

guitarman001

Reaper wrote: »

Let's look at it another way. Not sure what assumptions you are making in the above so I will pick some:
£100,000 with 100% mortgage (for simplicity) at 5% average interest rate over the term on a repayment basis.
That comes to £660pm or £158,400 over the term and you end up with a house worth £200,000.

Now consider an alternative. Put that same money monthly into a S&S ISA. At the end of the term you will have put in £158,400. Hopefully it too will have doubled in value too and instead of having £200,000 you will now have over £300,000.
Even if you used a boring old savings account paying 3% it would still match the house value, and without the risk of house price drops.

Of course the figures change drastically depending on your assumptions on interest rates, house prices, whether you use an ISA or a pension etc. So the decision will depend on what your outlook is.

Unfortunately the poster wouldn't be able to put the same amount of money into a S&S ISA as he'd be paying rent rather than mortgage.

Don't get me wrong, I'm not some housing fanatic!

The thought of not paying rent in older age appeals greatly.

My situation is that at some point I'd like to work in Europe, but my girlfriend owns a flat here. Letting it out sounds like a nightmare. We're not married so she can't sell (it's her security). So what on Earth are we meant to do? European experience would be greatly beneficial but how can we make it work. Failing that, I could stay where I am (at home) for another couple years and my savings would balloon. I'd then be able to get just a £40-50k mortgage on a 4-bed detached house and pay it off prior to the age of 35! VIEWS??

guitarman001

cashbackproblems - supply and demand is a fallacy here. Demand was near infinite during the boom when lending was vast. Now that it's cut down to sensible levels demand has massively dropped. The link: bank lending! Too many people were 'buying' places they couldn't afford. It's all down to lending.

Catherine_Johnson_2

Nottoobadyet wrote: »

Hi all,

This may be better placed on the mortgages board, but I suspect that I know the answer that crowd would give me!

I'm wondering what people here think about never including a property in your life financial plan. Like many working /lower middle class people, I was raised to believe that home ownership was an essential part of adulthood. I've been looking at various ways of buying and taking out a mortgage, but when I take off the rose coloured glasses its obviously not worth it financially or logistically.

I have an internationally mobile career, mostly in the developing world, and in the foreseeable future would only be able to buy in a stable market as an investment to let, which means the extra costs of having it managed, and though it's seductive to think of someone else paying off my mortgage most of it is going on interest to the bank, not to my equity. Rental costs on assignment in my sector are almost always covered by employers, so owning wouldnt effect my outgoings except to leave me vulnerable to shortfalls.

What do others think about reaching retirement with all cash / investment assets rather than a paid off house? Obviously there would be nothing stopping me from buying a house in cash at that point if it made sense, and I suspect that if I look at it rationally any gains I would have made in the house value would have been drowned out in what I'd have paid in interest.

I am in my mid 20s, currently all my savings are in cash (GBP) or pensions but I will be looking into diversification very soon. I have no consumer or student debt.

NTBY

You seem to be a bit confused. You say...

'I was raised to believe that home ownership was an essential part of adulthood'

That is completely different to what you are proposing, which is viewing property as an investment.

The vast majority of people, and I suspect your parents among them, view property purchase as buying a home rather than an investment. The fact that they could, usually, make money out of it is a bonus but first and foremost they are buying a home.

From what you have written, you don't need a home in the UK. The question is though, is investment in property a good idea for you? Personally, I would say no, and you have already been given some reasons why.

I found your post somewhat confusing as, surely, you must know the difference between an investment in property and buying a home to live in?

JimmyTheWig

A very interesting question, OP.
A few comments on what has been said...

Reaper wrote: »

Now consider an alternative. Put that same money monthly into a S&S ISA. At the end of the term you will have put in £158,400. Hopefully it too will have doubled in value too and instead of having £200,000 you will now have over £300,000.

Do you think that the whole of the amount invested will have doubled? Remember that this is being invested gradually.

CLAPTON wrote: »

if you buy a house now that establishes yourself in the UK property market that you can be sure when you return you can find somewhere suitable to live

I think that this is a very good point. While, for you, buying a house could be seen as a risky investment, it is actually the safe option if you want to own a house in the UK at some point in time.

Perelandra wrote: »

One of the big advantages not mentioned above about buying property is the tax saving- the equity you have saved in a home (not BTL) is effectively tax-free interest.

cashbackproblems wrote: »

you pay rent all your life with nothing to show for it

guitarman001 wrote: »

Unfortunately the poster wouldn't be able to put the same amount of money into a S&S ISA as he'd be paying rent rather than mortgage.

People seem to be forgetting that the OP would be buying the house as an investment rather than somewhere to live. So (a) he would have to pay CGT on it and (b) he wouldn't be paying rent if he doesn't buy it.


So what do I think?
I think it all depends on house price inflation.
Roughly speaking I think it is fair to say that rental income should approximately cover mortgage interest plus fees and expenses. Which means all you would gain (or lose) would be from the change in value of the property.
I, personally, don't think house prices are going to be doing much in the near future.

You've also said that you are not an ideal candidate for getting a mortgage. And we are in difficult times in terms of getting a mortgage.

So I'd say hold off for now.
Put money aside for this, probably in a savings account.
In a few years time (3-5, maybe?) there is a fair chance that the following three things will be true...
1. House price inflation will be back on the agenda.
2. Mortgages will be easier to get.
3. You will have a bigger deposit.
That, to me, would then be the right time to buy to ensure you could afford somewhere whatever happens when you come back here to live.