£200k inheritance, property ladder or not?

horsewithnoname

kempiejon said:

I've rented my homes for decades, I was always able to afford it. I believe around 60% of homes in the UK are owner occupiers so although in the majority there are plenty of us affording rent. Owning is not the only game in town surely we can all see that?

I know people who gave the keys back to the mortgage company in negative equity so in their instance they lost the house and all the money up to that point they paid in mortgage and still had a debt to the mortgage company.
I never bought any white goods or paid for property maintenance or had to pay the mortgage company to rent the money they used to buy my house, I lived in a dozen homes in as many years in a dozen new places. Imagine buying a house every year. Changing rentals is fairly easy, sorted in a month or so with very little extra costs buying is not like that.

Renting suits some people, and clearly it suits you. However a friend of mine was renting, the rent was increasing at a much faster rate than their pay, and though they wanted to move (issues with neighbours) they were unable to because rents in the area had gone up so much, and their pay hadn’t, no one would consider them as a potential tenant, never mind they’d paid rent for twenty years without trouble. And they could be evicted at a month notice and be homeless. 

My home is paid for; I couldn’t afford to rent it, and I hope to retire one day, which I couldn’t do if renting. 

Of course renting suits some, and when it is a choice, fine. But so few people can afford to buy now it’s often not a choice. 

jimbog

kempiejon said:

I've rented my homes for decades, I was always able to afford it. I believe around 60% of homes in the UK are owner occupiers so although in the majority there are plenty of us affording rent. Owning is not the only game in town surely we can all see that?
Definitively. There are many circumstances where renting is a better option like when I was a student or when work required me to move about the country

I know people who gave the keys back to the mortgage company in negative equity so in their instance they lost the house and all the money up to that point they paid in mortgage and still had a debt to the mortgage company.
However they had somewhere to live to call home. By your reasoning it could be argued that renters have 'lost' all their money too

I never bought any white goods or paid for property maintenance or had to pay the mortgage company to rent the money they used to buy my house, I lived in a dozen homes in as many years in a dozen new places. 

You helped the landlord pay his/her mortgage instead

Imagine buying a house every year.
Why would anyone do that? I do it every 15 to 20 years

Changing rentals is fairly easy, sorted in a month or so with very little extra costs
Really???

There are many instances where renting is the best option and at other times buying is. It all depends to your circumstances 

kempiejon

horsewithnoname said:

My home is paid for; I couldn’t afford to rent it, and I hope to retire one day, which I couldn’t do if renting. 

Of course renting suits some, and when it is a choice, fine. But so few people can afford to buy now it’s often not a choice. 

I don't follow the narrative that so few people can afford to buy now but that is the mood music.THe majority of homes are owner occupiers and about million houses are sold each year.
Good luck with your hopes and expectations to retire, if you start now to escalate your provisions you'll get there earlier. I was able to take a break from work several times to enjoy my life before I got too old as I wasn't tied to a mortgage payment.

kempiejon

jimbog said:

There are many instances where renting is the best option and at other times buying is. It all depends to your circumstances 

That looks like some understanding then thank you, I mostly feel people suggesting anything other than buying and then being mortgage free is the be all of the conversation. Of those owning reassure themselves they are right, much like I do on the alternative.

ian1246

kempiejon said:

jimbog said:

There are many instances where renting is the best option and at other times buying is. It all depends to your circumstances 

That looks like some understanding then thank you, I mostly feel people suggesting anything other than buying and then being mortgage free is the be all of the conversation. Of those owning reassure themselves they are right, much like I do on the alternative.

I think the issue is the discussion is about whats financially most beneficial.

A certain poster in this thread has been arguing investing the money will net a greater return than if the money is invested in housing - which is true, on the face of it. I believe a well balanced investment can average around 8% - so £16,000 return.

The issue is the same poster has failed to acknowledge that if the £££ are invested rather than going on housing, there is the additional cost of renting to factor into the above equation - namely, the average UK rent is now £1284 a month - https://homelet.co.uk/homelet-rental-index#:~:text=The average rent price in,prices decrease since last month - that's £15408 a year, leaving less than £600 of the investment returns.

On the flip side, the average household price increase was 1.9% last year - https://www.zoopla.co.uk/discover/property-news/house-price-index/ -  so your £200,000 becomes £203800. Typically house price rises have averaged 5%+ a year....

Of course, then there is the additional impact using a mortgage on top of the £££ deposit can have - you could get a £400,000 house with a £200,000 mortgage & £200,000 deposit, paying £1170 a month (5% interest) & be paid off in 25 years. You would benefit, using last year's figures, from the 1.9% uplift on not just your initial £200,000, but also the additional £200,000 mortgaged value- £407,600 value (£7600 profit).... whilst living in a much nicer house than what the average rental cost - £1284 a month - can get you.

Incidentally, on a £200,000 mortgage 5% interest equates to £10,000 interest, so the cost of actually living in that house on year 1 will only be £2400 net loss (£10,000 minus £7600 increased value) to your overall wealth. Over a couple of years the net loss flips around as house value continues to go up whilst your mortgage amount & interest paid shrinks.

Renting though? That £600 net profit a year has no hope of competing over the same 25 year period to the above figures, especially given rents will rise year on year.

You'll also note I ve been very unfair in my comparison- I ve compared a average 8% investment returns (average rate over the last decade) to any below average hpuse price rise (2024 - 1.9%).

The average is infact 56% over 10 years in the lowest performing region (Wales) - so 5%+ average yearly return. If we run the above figures again that £400,000 house becomes £420,000 - a £20,000 increase in value, whilst the interest paid on year 1 is £10,000 - so a net wealth gain of £10,000 vs. £600 investments.

https://www.zoopla.co.uk/discover/property-news/house-price-index/

And of course... you benefit from a nicer house in the meantime & being mortgage free in 25 years, with no associated housing costs.

Simply put - investing *in this context* (whilst not owning your own house) is financially illiterate.

kempiejon

ian1246 said:

Simply put - investing is financially illiterate.

Sorry, I can't see that.

ReadySteadyPop

horsewithnoname said:

ReadySteadyPop said:

With the media now latching onto the possibility of a debt crisis I would just stick 50k in premium bonds and drip the rest into a money market fund held in an ISA until things become clearer, much too risky to pay kite flying prices at the moment.

Please don’t anyone plan their life on the basis of what the media say!

The media are just reporting facts about how exposed the UK now is to the bond market, anyone ignoring these facts in their financial planning (especially in how much debt they are taking on) would be very reckless in my opinion.

ReadySteadyPop

Herzlos said:

ReadySteadyPop said:

Herzlos said:

ReadySteadyPop said:

Herzlos said:

ReadySteadyPop said:

confusedfreelancer said:

SadieO said:

This is ridiculously simplistic but if I put all my money into buying a house and its value tanks to zero, I've still got a house to live in. If all my money is in stocks and shares and they tank to zero then I've got nothing. Right?? 

Bingo. I reckon that even if my house value drops to zero, it's still going to be cheaper than renting once you factor in the decades of living rent free. It's such a stupid thing to be arguing against.

This is how I feel too. I feel a bit sick when I think of everything I've spent on rent.

Imagine how people coming off fixes just now feel when they realise how much they will be paying the bank for the use of their house loan?

"Wow this is expensive, but still less than rent! At least I can stop paying in a few years! Thank God I bought when I did".

Not that I need to imagine because I'm in exactly that category. My rate is about to go from 2% to 5%, meaning my mortgage will go from about £800 to £1000. Bad, eh? Well the only rental I can see in my town with the same number of bedrooms is £1400/month, but is a smaller house. So I think I'll be fine.  I'm not happy about paying more for mortgage, but I'm still so glad I've got a mortgage and not rent.

I'm sure you'll try and say that the only reason it's the only one for rent is because it's overpriced, any maybe it is, but if I needed to rent and had a choice of 1, what else do I do?

You can`t generalise the whole UK market from one town with a lack of rentals, if you expand your search area you will find more/cheaper rentals for sure, landlords can`t just bail out of the market the same way someone with stocks or a money market fund can, they have to wait for a buyer and in the meantime need to try to keep the property occupied to avoid double council tax etc. there are good deals out there if you look for them.

I'm comparing like for like, based on the actual house I'm sitting in right now, to provide my perspective as to why I, the sort of person you were targeting in your claim, don't agree with your claim.

Pick any other city and property type you wish and I can hash out numbers but the results will be the same.

The point your trying to dodge is that an equivalent rental is still 50% more than my mortgage *after* the rate hike.

I can`t see that being something that is sustainable going forward to be honest.

Absolutely. I've no idea how anyone can afford to rent long term. At least my Mortgage will go down.

The sad reality is that outside of social rents, which we need much more of, private rental rates are going to be based on the landlords mortgage, allowing for profit after tax. So the 2 are intrinsically linked but there's no way market rate will be less than an equivalent mortgage or the landlord will lose money.

The reality is that rents are based on wages and your mortgage debt is based on bond/credit markets (specifically the "10 Year Yield") no amount of a landlord needing, wishing, demanding that their debt costs be met by a tenant changes the fact that they are liable for the debt, and an empty property is going to cost them double council tax AND their debt tax to the bank, many landlords are VERY financially exposed now, and how many would dream of having 200k in a safe liquid place to cover their costs!

horsewithnoname

ReadySteadyPop said:

horsewithnoname said:

ReadySteadyPop said:

With the media now latching onto the possibility of a debt crisis I would just stick 50k in premium bonds and drip the rest into a money market fund held in an ISA until things become clearer, much too risky to pay kite flying prices at the moment.

Please don’t anyone plan their life on the basis of what the media say!

The media are just reporting facts about how exposed the UK now is to the bond market, anyone ignoring these facts in their financial planning (especially in how much debt they are taking on) would be very reckless in my opinion.

Media reporting facts?! Never 😂

ReadySteadyPop

horsewithnoname said:

ReadySteadyPop said:

horsewithnoname said:

ReadySteadyPop said:

With the media now latching onto the possibility of a debt crisis I would just stick 50k in premium bonds and drip the rest into a money market fund held in an ISA until things become clearer, much too risky to pay kite flying prices at the moment.

Please don’t anyone plan their life on the basis of what the media say!

The media are just reporting facts about how exposed the UK now is to the bond market, anyone ignoring these facts in their financial planning (especially in how much debt they are taking on) would be very reckless in my opinion.

Media reporting facts?! Never 😂

I know, I switched off to bbc/sky etc. years ago, but the 10 Year Yield doesn`t lie, it is one of the most truthful things in our culture and it affects most people (especially people with large debt loads) to one extent or another!