Remind me why it's better to buy than rent?

moneyistooshorttomention

UsernameAlreadyExists wrote: »

Someone posted on another thread once a very important point about buying that I'd never really considered before. When you're retired and mortgage free - you have somewhere to live.

It hit home for me when I encountered an old"ish" guy that did some plumbing for me. He's 69 years old, self employed, and rents. His partner is now quite ill and unable to work. He, himself, cannot afford to stop working (and care for her) all the while he wants to keep the same roof over his head (he's lived there 14 years and made it "his" home as much as he can within the rental terms).
I think it's sad that if illness strikes him too ... he'll lose the house and have to rely purely on the govt/council to accomodate him etc.
He has no assets as such and nothing at all to fall back on.
Quite sad really

This sort of example is exactly why its better to own than rent.

In my own life, if I had carried on renting, then I would have had to wait any time between a few years and rather more years than that before I could retire. If indeed I was ever able to do so. As it is, I retired as per plan at 60 (even though my State Pension Age is older than that).

Though, being in the generation I am in, (ie Baby Boomer) I would have found it difficult to live with myself if I hadnt been able to buy ever (as that is what most of us expected to do) and I would wonder how come I had missed out if I hadn't been able to do so. That's just my personal take on things, which came from having grown up knowing I would own my own house at some point - the only question (and that was a big one for a poorly-paid single person) was how the heck I was supposed to manage to do so.

plarka

Thanks everyone! This will keep me going.

We could maaaaybe rent out this place and rent a house, I even viewed some nice ones, but the money we'd pay for the difference between what we'd make off the rent on ours, and what we'd pay to rent a house, is alllll my money I make from my small business. So it's a choice to either use that little money to save for a house, or to rent someone else's. I'd really really rather save it and buy my own. It's hard, but I think it will be worth it, I keep telling myself! Don't get annoyed with me if I have to keep coming back and asking this every couple months!

I'd like to keep this flat to rent out, and own our own house. The idea is, someday this flat will be paid off and we can keep the rental money, right?

yoyoegg

It's nice as far as council estates go. But we have two little kids

I can understand why you want to move before their education goes to h3ll in a bog-standard comprehensive and they fall in the wrong crowd bunking off school, smoking, shop-lifting etc.

franklee

I think the rent vs buy question depends on where in life you are. Long term if you're not planning on moving then buying is a good plan. During boom years buying asap is the way to go. However in a stagnant or falling market then I think missing out buying a starter home or two, renting, saving and then buying the long term home is better.

plarka wrote: »

And our flat is valued lower than when we bought it of course, so we can't sell and buy something bigger.

If you had rented first you could be buying the bigger home now unencumbered by the above. Having got into that position I can only see waiting it out while saving towards moving is what I'd do. If you rent somewhere bigger how will your owned flat be paid for? Even if letting it out you cannot count on rental income every month to pay the mortgage as sooner or later there will be voids, maybe a non paying tenant, repairs etc.

plarka wrote: »

I just don't want to part with my money to pay someone's mortgage

Think of rent vs mortgage interest plus loss if interest on any deposit savings.

plarka wrote: »

Rent v. buy: always better to save your money up and buy, right? Keep my mind fixed on the future?

Always buy got you where you are now. I think you would have been better off waiting to buy the bigger long term home skipping the buying the 2 bed flat in a council estate.

franklee

plarka wrote: »

I'd like to keep this flat to rent out, and own our own house. The idea is, someday this flat will be paid off and we can keep the rental money, right?

I think the tax man will be poking his nose in. What landlords usually do is keep a large mortgage on the rental and pay off the mortgage on their own home. The rental's mortgage interest can be deducted from the taxable income from the rental property so you're better off with the mortgage on that property given the choice.

jackomdj

franklee wrote: »

I think the tax man will be poking his nose in. What landlords usually do is keep a large mortgage on the rental and pay off the mortgage on their own home. The rental's mortgage interest can be deducted from the taxable income from the rental property so you're better off with the mortgage on that property given the choice.

So long as the mortgage is to enable you to have the rental property it does not matter if the mortgage is on your house, the rental or a mix of both.

We do the third option as we took out a larger mortgage on our main residence and just put a small mortgage on the rental property as the interest rate on our residential mortgage is so much better than the BTL mortgage rate

sandsni

sinbad182 wrote: »

If you have to save up to buy an extractor fan and kitchen light you probably shouldn't have bought a house in the first place

I never said I bought a house. I said I own a house. I was making the comparison about the ongoing costs of owning compared to renting.

embob74

If you run a business is it essential to have a permanent address? Most people choose buying over renting to ensure some security of tenure - theoretically when renting you could have to move every 6 months.
The pensioner scenario makes me wonder why they can't give up work? Surely there is pension credit which guarantees a weekly income and housing benefit can be claimed, not if you have a mortgage though.

My mum sold her house and rented after working in nursing homes and seeing those who had worked and struggled all their life to pay off a mortgage were having to pay for their care (selling their house) while those who had no assets received exactly the same care and attention.

Mortgage payments would hopefully decrease in real terms while rent will no doubt always rise but how do you work out which is better in the long run when you can only guesstimate?

sandsni

embob74 I was just thinking the same thing regarding my elderly parents. Yes, they own their own home, but many they know of a similar age seem to get everything paid for by the state while my parents get the state pension and not a whole lot else (but are still responsible for the maintenance of their house). So where's the incentive to work hard, pay your taxes, employ people, buy your own home?

ukcarper

sandsni wrote: »

embob74 I was just thinking the same thing regarding my elderly parents. Yes, they own their own home, but many they know of a similar age seem to get everything paid for by the state while my parents get the state pension and not a whole lot else (but are still responsible for the maintenance of their house). So where's the incentive to work hard, pay your taxes, employ people, buy your own home?

Your house is not included when working out your benefits and if you are not in social housing as a couple you will only get LHA for a 1 bed flat and that will soon be the case for social housing.