Amount of rent paid

IveSeenTheLight

Just wondering on a rent versus mortgage topic what everyone who has held off buying have paid in rent and how long they have been renting.
Also be good to know how much a mortgage you are looking to get when you do buy (note, not what mortgages are now, but what you are willing to get as a mortgage)

I have made C&I mortgage payments of approx 37,400 reducing the outstanding mortgage by approx 14,000 over a 3 year 8 month period.

It has dawned on me that effectively the Interest part of my C&I mortgage is rent and that the Capital goes to reducing that monthly interest and lowering the outstanding mortgage.

Effectively I have been paying 531.81 per month rent to the mortgage company. The fact is however I know that the same property rents out for more than double the interest I pay to the mortgage company

IveSeenTheLight

Hhhhhmmmmm......
No-one willing to reply and put figures on how much rent they have paid and for how long.

It's a pity as I thought this could be a very interesting discussion

antronella

HI, I've been renting since july at £550/month after separating from hubby. It just feels like I'm throwing money away but I don't think I am in a position to buy at the moment. Once the financial side of things is sorted, I will be in a better position, but I really don't think this is going to be for the forseeable future. I earn £1500 month and I really resent throwing this money away every month.

IveSeenTheLight

antronella wrote: »

HI, I've been renting since july at £550/month after separating from hubby. It just feels like I'm throwing money away but I don't think I am in a position to buy at the moment. Once the financial side of things is sorted, I will be in a better position, but I really don't think this is going to be for the forseeable future. I earn £1500 month and I really resent throwing this money away every month.

Hi Antronella, thanks for replying.

Sorry to hear of your situation.
I understand your philosophy of throwing the money away, I did the same for 3 1/2 years when I first left home, but this gave me a good understanding of the outgoings I had. I'm sure the last 6 months has helped you with a bit of stability

It recently occured to me that even with a mortgage, there is a proportion you are throwing away (interest) never to see again. Normally this is outweighed by the fact that eventually the house will be yours (assuming repayment mortgage) and that any capital payments reduce the interest (rent form mortgage company) each month.

Until your financial situation is sorted out, maybe you could factor in a theoretical capital payment to your rent, say £550 per month to rent and £200 a month into a savings account to reflect the capital payment. Set up this as a direct debit from one account to another and forget about it till you need it for a mortgage. Obviously if you can save additional above this then it only helps to reduce the mortgage you need, increase your deposit or allow you to get a place a little higher in your budget

Good luck Antronella

antronella

Thanks! yes you're right I really need to organise some regular savings. Its been difficult beacause I came here with no furniture etc and had to start from scratch..using savings I brought with me (these were divided up when we separated). The family home is paid for and therefore my husband has no mortgage to pay, but is paying for 2 kids in uni. I think this is going to be a very long drawn out process (years) and I am still being asked to contribute to house maintenance etc. Anyway thanks for the advice...I've gone a bit off topic!!

beingjdc

When I lived in the Midlands the interest portion of my mortgage was £430, and ground rent / service charges £55 a month. I had been renting for £390 a month, so by buying I was 'throwing away' £95 a month in 'dead money'. The place was a bit nicer and closer to my office, however, and I made money overall as prices went up in that time.

Since moving to London I have paid about £21,750 in rent. To have bought a 1-bed flat in the same area would have been possible for probably around £26,000 in interest, plus stamp duty. Not sure what service charges etc are like on flats round here.

So I'm roughly £8000 better off in cash terms. Up to now, the increase in house prices would certainly have more than made up that difference, but the tide seems to have turned (and the big wedge taken by an estate agent if I actually needed to sell would have messed that up good anyway).

IveSeenTheLight

Thanks for replying beingjdc.

I was trying to work out how long you have been renting for but there is no way to tell.
I see you made a profit in the Midland as a result of HPI, but have effectively sold that profit against time the mortgage was paid off.

How long have you been renting in London for? I'm guessing almost 2 years
If this is the case then I would assume you have been paying approx £900 per month (21750/24) where the interest only would have been approx £1100 (26000/24) and a C&I payment of approx £1425 per month(worked out as a 1100 interest initial payment over a 25 year 6.01% C&I mortgage).

This would mean you had the oppertunity to save and extra £200 per month on an interest only mortgage or £2400 per year or £4800 over the two years.

**NOTE** I understand that the interest payment is effectively rent to a mortgage company as opposed to rent to a landlord

I understand house prices and annual HPI varies over different parts of London, however in the last two years London on average has increased 11% in 2006 and 14% in 2007.

This means that the £220,000 mortgage (required for a £1100 per month interest at 6.01%) would on paper have increased on paper to approx £278,000.
This means you need a 21% drop in prices in order to just return the same level they were 2 years ago and a 23% drop in price to return to the level 2 years ago minus the £4,800 you had the oppertunity to save)

If you were to step in at this point, you would still assumably be paying the mortgage off in the same amortization period, meaning your £900 per month rent was never to be seen again (approx 21,750 pounds in your estimation)

I work out you would need a 29% drop in current prices just to equate to the level you started renting two years to incorporate rent paid, savings accrued (due to rent savings versus Interest payments)

Now to be clear, the above figures are roughly calculated out, we could add in or take away a lot of small detail but just a rough outline of what you need prices to drop by to be even over the longer period.

Sure you may have more cash available now, but will you pay more in the long term?

moyilla

Hi
I have been renting since May 2005 and I am on my 4th private rental
.
I am currently paying £900 a month. I cannot afford to buy, there is no local authority housing available.

I have no spare income to put aside each month to save for a deposit. I have 6 children the eldest of which is severely disabled, so I need specific help.

I feel so trapped, I need a roof over my head and feel that I have no choice in paying over and above rental prices.

I moved to my current house from literraly across the street my rent went from £795 to £900.

beingjdc

IveSeenTheLight wrote: »

Thanks for replying beingjdc.

I was trying to work out how long you have been renting for but there is no way to tell.

How long have you been renting in London for?

Since late April 2005. I was paying £155 a week for a 1-bed flat, and now I'm paying £700 a month for a room in a 2-bed flat.

Sure you may have more cash available now, but will you pay more in the long term?

If London prices don't fall significantly, I will move out of London (I will probably move out of London anyway. Otherwise, your maths is about right, though in the longer term I think you need to factor in the investment income from the money I'm saving, and also the legal and estate agency costs of buying and selling.

I do regret not buying the 3-bed ex-council gutted repossession which came up for £115k the month I moved to London, but I wasn't in a position to do that given my money was all tied up in the old flat - ironically if I'd carried on renting in the Midlands, it might have been possible. Even if I had though, I would have done it up, sold it, and gone back to renting by now.

Lavendyr

We rent a two-bed terrace for £750 per month. A house next door to us, much the same as ours inside and out, has recently sold for £220k. Assuming our 10% deposit, we would have to borrow £198k to buy a house of that value. Over 25 years at 6.5%, interest-only would be £1072.50.

Our landlords bought this house in 2004 for £175k. If they only had a 10% deposit they'd still be paying ~£853.12 per month on an interest-only mortgage given the same figures as above.

For us, renting makes financial sense as we can save a lot of money towards a bigger deposit, thus actively bringing down the amount we will have to borrow - and the interest we will have to pay.

IveSeenTheLight

Lavendyr wrote: »

We rent a two-bed terrace for £750 per month. A house next door to us, much the same as ours inside and out, has recently sold for £220k. Assuming our 10% deposit, we would have to borrow £198k to buy a house of that value. Over 25 years at 6.5%, interest-only would be £1072.50.

Our landlords bought this house in 2004 for £175k. If they only had a 10% deposit they'd still be paying ~£853.12 per month on an interest-only mortgage given the same figures as above.

For us, renting makes financial sense as we can save a lot of money towards a bigger deposit, thus actively bringing down the amount we will have to borrow - and the interest we will have to pay.

I can agree, that for you, you are saving for the time being (short term) and that borrowing less money means you pay less interest.

However, take your figures, work out how much you are saving extra per month, add on any interest you make on your savings and then deduct the total amount of rent you will have paid.

Also, work out how much your mortgage would be when you are prepared to step onto the ladder (and also how much of a price drop this would need to be). What also is the drop required for you to make back the money you have paid out in rent.

I think you may find the results interesting.