UK Households wealthier than ever before

Graham_Devon

IveSeenTheLight wrote: »

Graham, lets not go back over again the Rental Yield calculations

If you are comparing against rent, you have to compare against mortgage interest only.
That's the equivalent

ONLY if you are considering it as a BTL investment.

If you are considering it as a home, then you won't even get an interest only mortgage, so the calculations are pointless.

If were looking at the investment angle again, then apologies, but I thought he was talking about a home.

marathonic

Looking at it from an overly simplified point of view:

If a BTL landlord can afford to buy a property via a mortgage with interest rates and charges higher than what would be available to you on a residential mortgage, pay a management company to manage it, pay the government income tax and still make a profit, how on earth could buying a home, for yourself to live in, be a poor decision?

Note: The above ignores maintenance because, although you have to pay them as a homeowner, the landlord also has to pay them (and still makes a profit).

IveSeenTheLight

Graham_Devon wrote: »

I'm glad for you.. But my point was about the calculations laid out. Which, having noticed they include no mortgage repayment aspect, only leaves me believing they are skewed further.

Be interesting to see how the figures change when actually including repayment of the balance.

If you can get a 13% or more return on an invested sum, whilst retaining an asset as collateral for the invested sum, let me know.

If your interested in amortisation calculations, try this link
http://www.calculator.net/mortgage-calculator-uk.html

If you want to calculate roughly the difference between buying and renting go here
http://www.greengem.co.uk/Rent_V_Buy/rent_v_buy.php

Happy figure playing

Graham_Devon

IveSeenTheLight wrote: »

Graham, lets not go back over again the Rental Yield calculations

If you are comparing against rent, you have to compare against mortgage interest only.
That's the equivalent

ONLY if you are considering it an investment.

If you are considering it as a home, then you won't even get an interest only mortgage, so the calculations are pointless.

Secondly, I don't understand why you would compare the cost of renting vs the cost of buying a BTL? One you are buying as an investment. The other you are buying to live in.

If you are buying a BTL why would you consider how much it would cost you personall to rent a house? It doesn't make any sense. In Marathonics calculations it seems he's definately comparing the cost of buying to the cost of renting hence the inclusion of council tax. BUT he's ignored the repayment of the balance on the mortgage.

The only time rent vs buying calculations make sense is when looking at it as a home, as you don't make the choice otherwise. When buying a home and calculating the difference between renting and mortgages, you HAVE to look at repaying the balance. To not do so will not only skew the calculations massively, but also make the exercise completely pointless.

IveSeenTheLight

Graham_Devon wrote: »

ONLY if you are considering it as a BTL investment.

If you are considering it as a home, then you won't even get an interest only mortgage, so the calculations are pointless.

If were looking at the investment angle again, then apologies, but I thought he was talking about a home.

See my link above which you can compare renting to owning.

Nothing to do with investment, but nonetheless as Marathonic states, if it's profitable for the BTL LL, then surely it even without the calculations to back it up infers the renters are paying more than it costs to own.

IveSeenTheLight

Graham_Devon wrote: »

ONLY if you are considering it an investment.

If you are considering it as a home, then you won't even get an interest only mortgage, so the calculations are pointless.

Secondly, I don't understand why you would compare the cost of renting vs the cost of buying a BTL? One you are buying as an investment. The other you are buying to live in.

If you are buying a BTL why would you consider how much it would cost to rent a house? It doesn't make any sense.

1. Your repeating yourself
2. Your starting to muddle the points.

There's enough information out there Graham, go do some research.

IveSeenTheLight

Graham_Devon wrote: »

The only time rent vs buying calculations make sense is when looking at it as a home, as you don't make the choice otherwise. When buying a home and calculating the difference between renting and mortgages, you HAVE to look at repaying the balance. To not do so will not only skew the calculations massively, but also make the exercise completely pointless.

As I said.....

IveSeenTheLight wrote: »

If you want to calculate roughly the difference between buying and renting go here
http://www.greengem.co.uk/Rent_V_Buy/rent_v_buy.php

Happy figure playing

marathonic

Graham_Devon wrote: »

I'm glad for you.. But my point was about the calculations laid out. Which, having noticed they include no mortgage repayment aspect, only leaves me believing they are skewed further.

Be interesting to see how the figures change when actually including repayment of the balance.

You obviously don't understand the fundamentals when making these calculations.

Let's do another example because it's possible that talking about housing clouds your judgement:

• it costs £1,000 per year to lease a £10,000 classic car (value doesn't change) over five years after which, you give it back
• I can loan £10,000 from the bank and buy the car. The interest rate is 5% - or £500 per year on the initial balance
• I can get a repayment loan of £10,000 from the bank at a cost of £2,309 per year for the five years

Which is the better option - lease (because the repayments on the repayment loan are more expensive) or buy (because the additional £6,545 paid out over 5 years results in you owning the £10,000 car?

Which is the most valid comparison between leasing and buying - obviously, the interest only loan compared against the cost of leasing.

Graham_Devon

ISTL. You are talking about investments.

Marathonic is calculating the financial difference between buying or renting a home.

He has ignored the balance of the mortgage. No calculations for repayment and no sum set aside to pay it off.

It's a flawed calculation. I know we disagree on almost everything, but surely this we can agree on. The calculations have ignored 80 odd thousand pounds.

I understand what you are talking about when looking at investments, but that's not what the calculations were about.

As for repeating myself, I know, my laptop went mental and seemed to go back and forward several pages. Seems it added my posts again.

Graham_Devon

marathonic wrote: »

You obviously don't understand the fundamentals when making these calculations.

Let's do another example because it's possible that talking about hosing clouds your judgement:

• it costs £1,000 per year to lease a £10,000 classic car (value doesn't change) over five years after which, you give it back
• I can loan £10,000 from the bank and buy the car. The interest rate is 5% - or £500 per year on the initial balance
• I can get a repayment loan of £10,000 from the bank at a cost of £2,309 per year for the five years

Which is the better option - lease (because the repayments on the repayment loan are more expensive) or buy (because the additional £6,545 paid out over 5 years results in you owning the £10,000 car?

Which is the most valid comparison between leasing and buying - obviously, the interest only loan compared against the cost of leasing.

I do understand. Please stop saying I don't understand.

However:

1. You will really struggle to get an interest only loan. It's quite likely that you'll find it almost impossible. So what really is the point in calculating on this basis?
2. You will still need to repay the balance at some point - it simply cannot be ignored.

Doing calculations to show that renting is more expensive, and ignoring the repayment aspect of owning altogether is fanciful. It will obviously give you an answer that renting is more expensive. Either way, at some point you are going to have to pay the balance you owe, so you have to include it in the sums. Ignoring it doesn't make it go away.

Again, I can't quite believe this is being argued about. It seems ludicrous to ignore the repayment of the debt. In essence you are calculating figures which are impossible to achieve.