Coming off the property ladder?

want2bmortgage3

I am probably going to sell my property due to not wanting to live there and not wanting to rent it out anymore.

Trying to decide whether to buy elsewhere, somewhere I do want to live, or to sell and then just rent and save.

I don't want the hassle of maintaining property and would like the freedom of being able to move easily. I like the idea of not being trapped by a mortgage as well.

However, I do want to have a plan where one day I could buy a place outright, so I would commit to saving say £500 a month and putting it away to buy a property one day (or with a small mortgage) when I actually need to buy (marriage/kids maybe).

Is this a real alternative, or should I keep the mortgage?

monty-doggy

There are pros and cons to both. A few I can think of.....

Renting cons
Renting is dead money
A LL can potentially evict you at some point if he wants to sell up or move someone else in (I understand there are tenancy dates but in general, they can)
A LL has to maintain the property, but might not do it to the standard you would like
Rent could go up after initial rental period

Renting pros
Not tied down to an area
If you lose job you can claim benefits to cover rent
LL pays if something goes wrong
No real responsibility

Buying cons
Expensive maintenance(sometimes)
Tied to house unless sell or rent out
Interest rates can rise
Lot of responsibility

Buying pros
Investment for the future
It's yours, you can do as you please with it


If it was me, and I could save £500 a month, I'd keep the house, live in it myself and overpay the mortgage to clear it off quicker, save money on all the interest, and then use the equity/whole house price as a deposit for somewhere better!

I_have_spoken

Is this a real alternative

Kind of, depends where you want to buy. Right now, prices in 'hot spots' like MK, York, Aberdeen are increasing way faster the the 2%-3% you'd get on a fixed term savings plan so your purchasing power is going backwards but you'd probably lose capital if you bought in Hartlepool.

Not sure if they are still widely available, by you could protect yourself against a house price bubble by buying a spread-bet on house prices in 5 years time, say, as well as making steady savings or use an ISA to get exposure to retail housing.

SG27

I_have_spoken wrote: »

Kind of, depends where you want to buy. Right now, prices in 'hot spots' like MK, York, Aberdeen are increasing way faster the the 2%-3% you'd get on a fixed term savings plan so your purchasing power is going backwards but you'd probably lose capital if you bought in Hartlepool.

Not sure if they are still widely available, by you could protect yourself against a house price bubble by buying a spread-bet on house prices in 5 years time, say, as well as making steady savings or use an ISA to get exposure to retail housing.

I wouldn't recommend spread betting unless you fully understand it. It's very easy to lose money. And if prices fall you will lose money which can be more than you initially bet with.

Thrugelmir

monty-doggy wrote: »

Investment for the future

This is something with which the British public have an obsession. Over the next 20 years may be extremely disappointed with the returns. When something becomes an investment you know that there's a bubble that will eventually burst.

lincroft1710

If you rent for say £400 pcm over 10 yrs you will have spent £48K. But as you can save £500 pcm then at the end of 10 yrs you will have £60K.

However on these figures you could pay a mortgage of £900 pcm and at end of 10 yrs paid off £108K.

My maths and logic may be completely wrong but I don't see the point of going into renting if you are intending to buy again in the future.

Thrugelmir

lincroft1710 wrote: »

However on these figures you could pay a mortgage of £900 pcm and at end of 10 yrs paid off £108K.

At what rate of interest?

want2bmortgage3

lincroft, you say you would have paid off £108k? that's not true, that's the total amount you would have paid, so you are talking about zero interest?!

MaxTheCat

monty-doggy wrote: »

There are pros and cons to both. A few I can think of.....

Renting cons
Renting is dead money
A LL can potentially evict you at some point if he wants to sell up or move someone else in (I understand there are tenancy dates but in general, they can)
A LL has to maintain the property, but might not do it to the standard you would like
Rent could go up after initial rental period

Renting pros
Not tied down to an area
If you lose job you can claim benefits to cover rent
LL pays if something goes wrong
No real responsibility

Buying cons
Expensive maintenance(sometimes)
Tied to house unless sell or rent out
Interest rates can rise
Lot of responsibility

Buying pros
Investment for the future
It's yours, you can do as you please with it


If it was me, and I could save £500 a month, I'd keep the house, live in it myself and overpay the mortgage to clear it off quicker, save money on all the interest, and then use the equity/whole house price as a deposit for somewhere better!

The cost of renting the money from the bank is also dead money so in working out the dead money portion of your expenditure look at how much is capital and how much is interest. If you are interest only then obviously you're renting from the bank.

monty-doggy

Didn't think of that. Good point!

lincroft1710

If the mortgage payment is £900 pcm, then at the end of ten years you would have paid £108K off the total mortgage payment (whatever that may be).