Probably dumb question about whether buying a house is worthwhile

cherryduck

Hi everyone, I'm in the process of buying my first house but wondering if it's actually worth it.


Everyone older than me keeps saying it's a great investment but is it really? I'm probably fundamentally misunderstanding something but let's say you buy a house, the value goes up, you sell it. On the surface yes you've made money but you still need somewhere to live, so what are you going to do? Buy a house.


What kind of house can you afford? Well, one worth the same you sold your first house for. Which by rights is going to be about as good as your first house surely? So what then is the point in selling? How is this an "investment"?

datlex

My reason for buying rather than continuing to rent was quite simply how much pension I would likely need to keep renting. Buying means lower bills in retirement once the mortgage is paid. Whether or not the property is a good investment is irrelevant as I probably won't see the money back, unless in future I do equity release (no depends).

oystercatcher

The value is that I have now paid off my mortgage so I get to live in my house for just the cost of maintaining it. Meanwhile the people next door in an identical house pay £1200 a month in rent !

The house has more than trebled in value since I bought it almost 20 years ago. I won't see that increase in value but my children might when I die. I certainly wouldn't have been able to save that much had we been renting.

I guess I also have the option of moving to a cheaper area or smaller house and then using some of the equity for something else.

worried_jim

In most cases if you can afford to buy and choose not to you are bonkers.

babyblade41

I suppose the fundamental way of looking at it is rent is forever and a house will be paid off .

I think if you have children you would always strive to buy

cherryduck

Some interesting responses, so it doesn't seem like an investment in terms of something that's going to make me more money directly, but I can see the logic in getting to a point where my only costs are maintenance. I guess that means I'll have more money when I've paid off the mortgage so long term it seems to make sense.



Me and my partner are both dead set against kids so that doesn't come into the equation.

babyblade41

cherryduck wrote: »

Some interesting responses, so it doesn't seem like an investment in terms of something that's going to make me more money directly, but I can see the logic in getting to a point where my only costs are maintenance. I guess that means I'll have more money when I've paid off the mortgage so long term it seems to make sense.



Me and my partner are both dead set against kids so that doesn't come into the equation.

Also factor in you have to move when the owner decides, you could stay in a property for years if privately renting, then out of nowhere you get 2 months notice

Now as much as you can hang on with a S21 eventually you will still need to move.

I like to decide when/where I'm going to move

AdrianC

You buy a £120k house. You borrow £100k and put £20k of your own in.
In some years, you sell that house for £150k, and buy another, bigger one for £200k. You've repaid £10k of the mortgage, so you only owe £90k, and your £20k equity has grown to £60k. You borrow £140k.
Rinse, repeat.

Then, when you get to later middle age, you realise that you've repaid all your mortgage. You now have a house that you own outright, and your monthly outgoings plunge.

You don't say how old you are, where you are in your careers, what your attitudes to the future are. But I'm guessing you're mid 20s at the oldest? Maybe career opportunities will take you to a different area. Maybe you fancy travelling. Maybe, maybe, maybe. There's a lot of variables in life - and they all affect the answer to "Should I buy a house".

But one thing's for sure - in your 50s, living in a house you own with no mortgage will be a lot better than living in a rented place.

AnotherJoe

You are "fundamentally missing" that once you've paid the mortgage off you no longer need to pay a mortgage or rent again. Ever.

If you rent you'll always be renting. Always.

When i started with a mortgage my mortgage payments were the same as rent, or even less. Now Ive paid it off, and i dont pay rent. Or a mortgage.

letitbe90

cherryduck wrote: »

Some interesting responses, so it doesn't seem like an investment in terms of something that's going to make me more money directly, but I can see the logic in getting to a point where my only costs are maintenance. I guess that means I'll have more money when I've paid off the mortgage so long term it seems to make sense.



Me and my partner are both dead set against kids so that doesn't come into the equation.

You could buy a secondary house which you almost definitely would profit from long term (as well as getting your mortgage subsidised by tenants).

Also, a lot of people may buy a property near the city for their career and find after they sell up for quite a bit, not needing to be near commute lines etc means they can buy a house for quite cheap.

There is also the fact that you can become mortgage free as others have mentioned, so no rent burden (say you live for 85 years, if you are mortgage free by 50, that’s 35 years of rent free living!).

If you own a home, at old age, you can use some equity release schemes to cover your retirement as an option too.

Best thing about buying a house isn’t investment though, it is not having to be at the mercy of a landlord.

AnotherJoe

Ps there's a second thing you've missed.

Let's say you buy a house for £100k and 30 years later it's worth £400k, your mortgage payments though are linked to the price of the house at the start. They don't rise.
Your rent, were you to rent it, is related to the cost of the house over time. So when you started its related to £100k but when you get to 30 years it's related to £400k. And of course with rent it doesn't stop there, it will continue for the next 30 if you live that long. Whereas the mortage it goes to zero at 30 years.