Time to sell to rent?

jubblyjimbo

2 years ago we bought a typical 3 bed victorian terrace for just under £250k. Now houses are selling in our street for well over £300k depending on condition, and ours was recently valued at £330k, by about 3 to 4 different agents. So on paper an £80k gross profit. Fine.

However, consider this:

If one were to buy today for £330k, borrowing £300k at 5.5% then a repayment mortgage would be £1,845 per month, and an interest only at £1,361. Rental properties are £1,200 per month. So, if you are buying with a repayment mortgage you are paying £645 per month 'over the odds'. Over the life of a 25 year mortgage thats approximately £193k. Thats an awful lot of money.

One other small factor - LIBOR 3 month sterling rate, as at 7th September is 6.8%. Now it seems to me if banks think they will be lending to one another at this rate why are they going to lend to you and I for less? At 7% a repayment becomes £2,145, and interest only £1,750. Again over 25 years that becomes £283k. Thats even more money.

So, is it time to sell and start renting?

Biggie

many flaws with this but couple that stick out are:-

Rents will increase overtime your mortage will remain stable in comparison.

Also with repayment you are reducing your mortgage so not only will you have equity from paying the capital but you also have an apreciating assert. Your monthly intreast payments will also be reducing each month....

so in 25years your mortage will be 0 and you'll have a house worth x amount but your rent will be god knows what figure.....

You say you made 80k in two years.......

so i'm sure you'll make well over 193k over 25 years even if growth does slow down....

nollag2006

These House Price Crash muppets make me laugh !!!

Has history not taught them that its impossible to gauge what the market will do.

Even the list of archive predictions on thier own website shows that any talk of a crash isn't valid:
http://www.housepricecrash.co.uk/predictions-archive.php

Biggie

nollag2006 wrote: »

These House Price Crash muppets make me laugh !!!

Has history not taught them that its impossible to gauge what the market will do.

Even the list of archive predictions on thier own website shows that any talk of a crash isn't valid:
http://www.housepricecrash.co.uk/predictions-archive.php

But nobody mentioned a crash

obsessed_saver

First small mortgage lender went into adminstration today... is it a start? :P

http://news.bbc.co.uk/1/hi/business/6987620.stm

keeperbear

obsessed_saver wrote: »

First small mortgage lender went into adminstration today... is it a start? :P

http://news.bbc.co.uk/1/hi/business/6987620.stm

A sub-prime lender goes under. No surprise. They only had 50 staff and a small number of customers, so hardly worth reporting. No news here.

benb76

jubblyjimbo wrote: »

If one were to buy today for £330k, borrowing £300k at 5.5% then a repayment mortgage would be £1,845 per month, and an interest only at £1,361. Rental properties are £1,200 per month. So, if you are buying with a repayment mortgage you are paying £645 per month 'over the odds'. Over the life of a 25 year mortgage thats approximately £193k. Thats an awful lot of money.

Re-read what you have written, you answer your own question. Over a 25 year repayment mortgage you pay £193K more than if you rented the same property. However at the end of it you own 100% of the property, i.e. no more mortgage, no rent and in 25 years the property will be worth 2x what it is worth now (assuming average annual house price rise of 3%).

Unknown1234_2

Biggie wrote: »

Rents will increase overtime your mortage will remain stable in comparison.

....

:rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl:

granville_2

dont' feed the troll...

Dithering_Dad

benb76 wrote: »

Re-read what you have written, you answer your own question. Over a 25 year repayment mortgage you pay £193K more than if you rented the same property. However at the end of it you own 100% of the property, i.e. no more mortgage, no rent and in 25 years the property will be worth 2x what it is worth now (assuming average annual house price rise of 3%).

I guess this depends on what you do with the £193k you've saved by not paying a mortgage. If you invest it wisely it could end up being worth more than the house you sold to rent (even with house price inflation).

I'm not condoning the STL approach, but there are benefits with having a comparable house to live in while using the mortgage savings to fund investments.

I think I'll stick to the traditional approach of paying off my mortgage though as I'm not much of a speculator/risk taker, but good luck to anyone who tries an alternative approach

pinkshoes

Getting a mortgage for £300k... you'd have to earn around £100k salary for this, so I would seriously hope you'd managed to muster more than a poxy £30k deposit!!

realistically (i.e. not overstretching oneself and being stupid!) it would be more like someone borrowing £230k who had saved a £100k deposit (equity from previous property or savings), so repayment would be more like £1430... can't be bothered to do the maths...

Life is one big gamble. If you wanna rent, then rent, if you wanna stay in your property, then stay.