why is a mortgage such a normal thing?

DannyboyMidlands

tylerjames wrote: »

yes but you could be a lodger if you were single, or rent a one bedroom place if you are a couple. this would only be about £300 per person and you could still save a lot every month.

I used to rent a room for £300pcm. I then bought a house with a mortgage. £230pcm interest, £770pcm repayment. In 10 years I will own the place outright and have paid a total of £13k in interest.

If I'd continued to rent that room and say it took 10 years to save the money to buy and the asking price didn't increase, I'd have spent £36k on rent. Even if I saved the purchase price in 5 years, I'd have still spent £18k on rent. And I'd be living in a depressing single room and probably moving every other year. Grim.

vacheron

It depends if you are a head or heart person.

Some people just want to own their house regardless.

For us we rented for a few years between 2006-2010 in a furnished £260k house. At the time the rent was £700/month. To buy the same place at the interest rates then would have cost £1000+ per month in interest alone. Meanwhile my savings were earning 7%+ too.

Move on to 2009-10, world changes, interest rates crash now getting next to nothing on savings, rent has increased to £750/month and the value of the house we were renting has dropped to 210k. To buy this house now will cost £400/month in interest.

That was the financially prudent point to buy... so we did. Remember that renting is only dead money if it costs less than the interest on an equivalent mortgage.

sammyjammy

Personally I think its a lot to do with the legislation in this country towards renters, short term tenancies make people feel insecure and quite rightly. In Germany where renting is much more common place once you sign a tenancy agreement it is for life as long as you pay the rent or your landlord goes bankrupt/declares financial difficulties.

Some relatives of mine rented for 5+ years with three very young children, they moved 7 times in those five years until the council housed them permanently. They will never be in a position to buy there own house where they live.

AwesomeMcTawesome

I have recently purchased my first house, which I honestly intend to live in for the rest of my life (unless of a massive life changing reason).

Upto this point as a serving member of the RAF I found little or no value in owning my own home (mainly due to postings and time detatched away from the UK). I also did not want to invest into a house (BTL) as quite honestly I did not want the burden and hearing some horror stories.

The last 4 years I have been in a fixed tour (apart from a 4 month stint away) and have rented out a modest 2 bedroom terraced house for £350 a month (with my wife and step-son), which equates to £16800 in rent, money down the drain, NO, a roof over my head for a relitivly small ammount of money that allows me to pay off exsisting debt and save a small deposit for my first home, YES.

Got a 3 Bedroom Semi that ticks all boxes and is in a great state of repair, for £87500 - 10% deposit on 2 years fixed at £504 per month then onto the SVR (or another fix re-mortgage depending on rates).

I only decided to buy now as I have managed to get another job in the same location for another 4 years fixed (including an other 4 month out of area), otherwise I would have continued to save to have a greater deposit for the future.

As it has happend this way I will overpay the 10% per year that I'm allowed and bank the rest (ISA), until the 2 year point at which i will smash a chunk off to access better rates (smaller LTV).

So is it an acceptable debt, no its a NESSECARY debt, you rent and put a roof over you and your families head or you buy and have a 'home' to call your own and a bit of something for the kids inheritance (or a re-mortgage and massive blow-out in Vegas for my 60th ).

I intend to pay off this house within 12 years (the current point my RAF carrear will finish) so I will be 41 with no debt and a home that will be MINE (and the OH's). I specifically went for a lower priced home so I would not be in any financial strain if the rates are to sky rocket or a big change in financial circumstances (having a baby).

This is only from my point of view, one which is, that this will be probably my first and last house purchase.

neverdespairgirl

It's very fact sensitive.

For a while, we rented - the rent was less than the interest would have been on the mortgage, and our savings were getting a nice rate of interest - 7 to 8%. So we were quids in, renting. We were also paying a rent that was a fair bit lower than market rent, as we'd lived there for some time.

We bought our flat last year, and moved here in December 2011. It is now a much better financial deal for us to own rather than rent. The interest rate we were getting on our savings had fallen dramatically as fixed-rate savings terms ended, and rents were rising fast while house prices were static or gently falling.

We now pay £1,050 on the interest-only part of our mortgage, whereas renting a similar flat would cost us more like £2,500 a month. We also have to pay the service charge, of course, which we didn't when we rented - approx £1.5k per year, and we pay for the maintanence rather than the landlord. It's still better for us to pay our mortgage now, rather than rent.

We have an interest-only mortgage because we are self-employed, and without a definite income each month it's a better idea for us. Most months we pay the interest only, but twice since Christmas one of us has had a big cheque in and we've made a significant overpayment.

wymondham

tylerjames wrote: »

why is this? i have a mortgage, but looking back i think i would have been better off just saving money and buying a property outright once i had enough.

it would take you quite a while to save £200k (or thereabouts), and by the time you've saved up, prices would be £300k!

barbarawright

wymondham wrote: »

it would take you quite a while to save £200k (or thereabouts), and by the time you've saved up, prices would be £300k!

This is the crux of the problem. There's a thread somewhere (DFW ?) for people who are trying to do this very thing but I've never understood the logic of paying for accommodation twice - rent *and* mortgage savings - every month.

opinions4u

We bought using a mortgage.

It seemed more sensible to own our own house, albeit with debt, to provide a secure home for our unborn kids.

If we hadnt bought, we could have rented and then struggled to save. But we'd have got there in the end and been able to buy for cash.

But by then my wife's fertility may have dropped somewhat ...