£200k inheritance, property ladder or not?

Herzlos

ReadySteadyPop said:

newsgroupmonkey_ said:

Murphybear said:

Devongardener said:

Definitely buy a property, you really don’t want the high cost and insecurity of renting once you reach retirement age and have only pension income.
We didn’t buy until our mid forties, and worked hard to pay off the mortgage before we retired, and feel so thankful that we have the security of a paid off house, not at the whim of a landlord.

If you are living in rented accommodation when retired and only have a pension income you will be eligible for some/all of your rent and council tax to be paid.  It’s not as dire as people make out.  Plus with renting you have no maintenance charges.  

Most landlords want good long term tenants and few tenants have to rely on “the whim of a landlord”.

Having worked in the business for years I had hundreds of landlords/properties and thousands of tenants to deal with so have a lot of experience.  If the new landlord/tenant rules actually come into being tenants will have more security.  

That's true if you're on the bottom of the ladder with no private pension, relying entirely on the state pension.

If on the other hand, you've got a private pension, as the OP said they have, you'd not be entitled to any housing benefit.

You'll certainly not be entitled to a 3-4 bedroom detached house in Devon.

If you have been using the 200k to build interest/dividends over a period of time you won`t care about benefits, on the other hand if you take some of the advice earlier in the thread and throw the 200k into property then MEW when things get tight! you will be headed straight for benefit street. I would have thought all the negative press about MEWing would have made most people aware of how bad a plan this is but you never can tell.

Can you back up this idea that somehow the stock market is a safer bet than houses? So much safer, in fact, that you can cover the rental costs.

How much better off are you now after your plan?

Herzlos

ReadySteadyPop said:

Read the comments here to underline how bad an idea trying to "take cash out of a house" can be, surprised posters have been recommending it, people with 200k in the bank should not be going this route.

https://www.moneysavingexpert.com/mortgages/equity-release/

Equity release is terrible, no-one has claimed otherwise. It's disengenuous to claim that's the only way to take cash out of the house though. You can always re-mortgage (if young enough to qualify for a mortgage) or downsize. You'll never get any of that rent money back.

london21

Buy your main residence first.

BTL not as good as it used to be.

ReadySteadyPop

200k in a money market fund wouldn`t be a bad idea in my opinion.

https://uk.finance.yahoo.com/news/uk-10-yield-nears-highest-115153550.html

Herzlos

ReadySteadyPop said:

200k in a money market fund wouldn`t be a bad idea in my opinion.

https://uk.finance.yahoo.com/news/uk-10-yield-nears-highest-115153550.html

Of course that's your opinion, but your opinion has ruined you financially and no-one else agrees with it.

All I can see in that article is that the base rate is predicted to stay the same and not rise like you claim.

ManuelG

I would buy, keeping enough back for a new roof if needed etc.

If nothing else chances are your mortgage will be less than rent, so you'll also be able to save!

ReadySteadyPop

Herzlos said:

ReadySteadyPop said:

200k in a money market fund wouldn`t be a bad idea in my opinion.

https://uk.finance.yahoo.com/news/uk-10-yield-nears-highest-115153550.html

Of course that's your opinion, but your opinion has ruined you financially and no-one else agrees with it.

All I can see in that article is that the base rate is predicted to stay the same and not rise like you claim.

 I said that mortgage rates are going to rise, base rate isn`t really relevant, bond markets dictate the price of debt. I also predict that it is going to kick off in the markets tonight so any traders/investors with 200k not locked in a property, good luck! And for what it`s worth anyone on the internet pretending that they know the financial position of other strangers on the internet would be totally ignored by me regarding any financial advice, I hope newbies are aware.

ReadySteadyPop

thegreenone said:

I think it all depends on the cost of the sort of house you are looking for in your chosen area.

Remember, investments can go up and ..... down.  And down.  You could lose a lot. Or you could gain a lot.  It's a total gamble.  One gamble I wouldn't want to take with the size of your inheritance and the impact it could have on your future.

My thoughts would always be to buy a property.   

But over the longer term investments have outperformed property?

ReadySteadyPop

ManuelG said:

I would buy, keeping enough back for a new roof if needed etc.

If nothing else chances are your mortgage will be less than rent, so you'll also be able to save!

Early in the thread the OP said this....

"We are currently paying £1400 a month to rent in Devon. We've looked at mortgage options with putting down a deposit of £150k, which leaves us with monthly mortgage repayments of between £1,800 and £2,200 a month, depending on the house price. So not cheaper than renting "

If interest rates spike again for any number of reasons related to an increasingly unstable global outlook buying now could be a total disaster.

Herzlos

If mortgage rates spike, what do you think it's going to happen to rents?

Plus, the signs are that mortgage rates are coming down again. Though I'll concede the Trump presidency will likely make the world financial market worse eventually since the deregulation took a while to collapse last time.

You're also missing that the OP is looking for a much bigger house than the flat they are in currently, so not comparing apples to apples. The mortgage will still likely be less than the equivalent rent would be:

To clarify the house cost/size. We would be looking to move up in size, as the £1,400/month rental is getting smaller with two growing kids. We wouldn't want to stay renting here. The houses we are looking at buying are around 500k.

ReadySteadyPop said:

Herzlos said:

ReadySteadyPop said:

200k in a money market fund wouldn`t be a bad idea in my opinion.

https://uk.finance.yahoo.com/news/uk-10-yield-nears-highest-115153550.html

Of course that's your opinion, but your opinion has ruined you financially and no-one else agrees with it.

All I can see in that article is that the base rate is predicted to stay the same and not rise like you claim.

 I said that mortgage rates are going to rise, base rate isn`t really relevant, bond markets dictate the price of debt. I also predict that it is going to kick off in the markets tonight so any traders/investors with 200k not locked in a property, good luck! And for what it`s worth anyone on the internet pretending that they know the financial position of other strangers on the internet would be totally ignored by me regarding any financial advice, I hope newbies are aware.

I'm not going to argue about mortgage rates. You should know.

https://www.google.com/search?q=are+mortgage+rates+tied+to+base+rate+uk

As for your financial situation, I'm making an educated guess from details you bragged about in your plan which seems to have backfired spectacularly. If it'd worked out at all you'd be shouting about it.

What we do know is that you were sure house prices were going to crash, so sold a house in 2003 and have rented a tiny, horrible bedsit since. We can assume that your rent was at least a bit lower than the mortgage was, given you went for the cheapest you could find. It's a safe assumption that in those 21 years you'd have paid off your mortgage entirely given longer mortgages weren't really a thing, and that the house price in Edinburgh has likely doubled.

Presumably you put the different between mortgage and rent into the stock market. The S&P 500 has grown 345% in that time so you've definitely made money from the cash you saved by downsizing, but I'm not convinced it's enough to beat the growth in house prices and it's certainly not enough to cover the rent you've still got to pay for the rest of your life (or until you buy).

To put really rough guesses on it based on Edinburgh. If you'd kept the house you'd be sitting in a house worth presumably £300-400k with £0 "rent" payments.
Assuming you saved £200/month by downsizing and put it into S&P 500 with 7.7% annual growth, you'd be sitting on about £106k in assets and still be paying about £1000/month for life (~10.6 years worth of savings).

I reckon for you to buy back the house you sold, assuming it'd cost £350k + stamp duty, you'd need to have saved £675/month, every month, for 21 years. And that's only in financial terms, you'd have to have lived in a much worse house living super frugally just to stand a chance of getting back to where you started.

So yeah, I think you've done terribly and shouldn't be giving anyone advice beyond being a model for how not to do it. Feel free to prove me wrong.