£200k inheritance, property ladder or not?

Herzlos

ReadySteadyPop said:

Herzlos said:

ReadySteadyPop said:

silvercar said:

ReadySteadyPop said:

Myci85 said:

We have just bought our first house, and borrowed into retirement age to make the monthly payments more manageable due to also being older and needing a family home with 2 children. I was a bit worried about the longterm implications of doing so, but then figured that over the years that monthly amount will seem less due to inflation and earnings going up so can hopefully start to overpay, and the alternative was to keep renting. If we kept renting, that monthly rent would have increased steadily, we wouldn't have the security of our own home, and we'd be paying rent for life rather than maybe a few years into retirement. 

The monthly amount isn`t fixed for the full term of the debt though, you can`t fix for 20 or 30 years in the UK, if interest rates go up in future your monthly payments will rise, this has happened to a lot of people recently, rents eventually hit the ceiling of wages, if there was a recession for example rents would fall but mortgage debt payments would still be governed by movements in the bond markets.

The problem with renting is the need to move. You can fix a mortgage for 20 years, but you also can’t take a tenancy for 20 years. I wouldn’t want the hassle factor of frequently moving at inconvenient times or in old age.

Frequently moving? When was the last time you rented?

How many posts are on here along the lines of "Rented a house for 15 years, landlord is selling, can't afford rent anywhere else, what do I do?"

Can`t say I have seen many to be honest, but are you saying that moving after 15 years is "moving frequently"?

You should have a look at the whole forum and not just the posts you can go on about house price crashing.
Though you're right, I was highlighting how the situation can change, not how often you need to move. The new rules at least rule out having to move annually as contracts expire, but it's safe to assume you'll move more as a renter than a buyer, and as a renter you're absolutely at the mercy of the landlord.

FreeBear

ReadySteadyPop said: Rents will crash in a recession, and that would be a great time to have 200k in liquid cash sitting in a high interest bank account or money market fund not tied up in a mortgaged house that is falling in value.

I claim my £25 for spotting CrashyTime

During the last recession, rents continued to climb. OK, in some areas, house values dropped a little, but quickly rose again across most parts of the country. (currently sitting in a home that has nearly doubled in value over the last 10 years).

ReadySteadyPop

Herzlos said:

ReadySteadyPop said:

Herzlos said:

ReadySteadyPop said:

silvercar said:

ReadySteadyPop said:

Myci85 said:

We have just bought our first house, and borrowed into retirement age to make the monthly payments more manageable due to also being older and needing a family home with 2 children. I was a bit worried about the longterm implications of doing so, but then figured that over the years that monthly amount will seem less due to inflation and earnings going up so can hopefully start to overpay, and the alternative was to keep renting. If we kept renting, that monthly rent would have increased steadily, we wouldn't have the security of our own home, and we'd be paying rent for life rather than maybe a few years into retirement. 

The monthly amount isn`t fixed for the full term of the debt though, you can`t fix for 20 or 30 years in the UK, if interest rates go up in future your monthly payments will rise, this has happened to a lot of people recently, rents eventually hit the ceiling of wages, if there was a recession for example rents would fall but mortgage debt payments would still be governed by movements in the bond markets.

The problem with renting is the need to move. You can fix a mortgage for 20 years, but you also can’t take a tenancy for 20 years. I wouldn’t want the hassle factor of frequently moving at inconvenient times or in old age.

Frequently moving? When was the last time you rented?

How many posts are on here along the lines of "Rented a house for 15 years, landlord is selling, can't afford rent anywhere else, what do I do?"

Can`t say I have seen many to be honest, but are you saying that moving after 15 years is "moving frequently"?

You should have a look at the whole forum and not just the posts you can go on about house price crashing.
Though you're right, I was highlighting how the situation can change, not how often you need to move. The new rules at least rule out having to move annually as contracts expire, but it's safe to assume you'll move more as a renter than a buyer, and as a renter you're absolutely at the mercy of the landlord.

Why would a landlord want tenants to "move annually as contracts expire"? That doesn`t make any sense.

Herzlos

ReadySteadyPop said:

Why would a landlord want tenants to "move annually as contracts expire"? That doesn`t make any sense.

I said it's no longer a thing. Back when I last rented, we moved every year because there was no shortage of renters and they could sting us on a deposit every time. I think that was around the time you sold your flat to start renting to try and cash in on a crash that was never going to happen.

Of course since then I've gained about £80k in equity (after weathering 2 recessions where rents didn't go down) instead of paying £200k towards someone elses mortgage without anything to show for it except a happy landlord.

Have you been in the same bedsit for the whole time? That's kind of impressive, but I don't think that's the norm.

Anyway, short term a mortgage may be a bad deal if you buy at the wrong time. Like when I bought about a week before the 2007 crash and was in negative equity almost immediately. But over the long term it's really hard to lose out, like the aforementioned £80k in equity and becoming rent free when I hit 65.

I was a bit upset about having bought come 2008 but now I'm happy that I did. I dread to think what the rent would be on my current house, but the mortgage on my last house was almost certainly less than your rent.

Herzlos

FreeBear said:

ReadySteadyPop said: Rents will crash in a recession, and that would be a great time to have 200k in liquid cash sitting in a high interest bank account or money market fund not tied up in a mortgaged house that is falling in value.

I claim my £25 for spotting CrashyTime

During the last recession, rents continued to climb. OK, in some areas, house values dropped a little, but quickly rose again across most parts of the country. (currently sitting in a home that has nearly doubled in value over the last 10 years).

Alas he was spotted months ago now, so the the bounty is long gone!

ReadySteadyPop

Herzlos said:

ReadySteadyPop said:

Why would a landlord want tenants to "move annually as contracts expire"? That doesn`t make any sense.

I said it's no longer a thing. Back when I last rented, we moved every year because there was no shortage of renters and they could sting us on a deposit every time. I think that was around the time you sold your flat to start renting to try and cash in on a crash that was never going to happen.

Of course since then I've gained about £80k in equity (after weathering 2 recessions where rents didn't go down) instead of paying £200k towards someone elses mortgage without anything to show for it except a happy landlord.

Have you been in the same bedsit for the whole time? That's kind of impressive, but I don't think that's the norm.

Anyway, short term a mortgage may be a bad deal if you buy at the wrong time. Like when I bought about a week before the 2007 crash and was in negative equity almost immediately. But over the long term it's really hard to lose out, like the aforementioned £80k in equity and becoming rent free when I hit 65.

I was a bit upset about having bought come 2008 but now I'm happy that I did. I dread to think what the rent would be on my current house, but the mortgage on my last house was almost certainly less than your rent.

Why would a landlord want different tenants every year, that still doesn`t make any sense?

ReadySteadyPop

When the 200k goes into a house you can no longer spend it, and you may lose some or all of it, you won`t lose any of it in a high interest savings account and you may be able to grow a much bigger pot by investing the interest wisely, gambling that a house will give a big pay out at some random point in the future isn`t sensible financial planning, just look at the number of houses on the market now for months even years?

FreeBear

ReadySteadyPop said:

When the 200k goes into a house you can no longer spend it, and you may lose some or all of it, you won`t lose any of it in a high interest savings account and you may be able to grow a much bigger pot by investing the interest wisely, gambling that a house will give a big pay out at some random point in the future isn`t sensible financial planning, just look at the number of houses on the market now for months even years?

Owning a house is not about growing investments. For the majority, it is all about providing long term security which is something you just can't get with a rental. And after 25 years (or how ever long the mortgage term is), the property is yours which can never be achieved with a rental.

ReadySteadyPop

Herzlos said:

ReadySteadyPop said:

Why would a landlord want tenants to "move annually as contracts expire"? That doesn`t make any sense.

I said it's no longer a thing. Back when I last rented, we moved every year because there was no shortage of renters and they could sting us on a deposit every time. I think that was around the time you sold your flat to start renting to try and cash in on a crash that was never going to happen.

Of course since then I've gained about £80k in equity (after weathering 2 recessions where rents didn't go down) instead of paying £200k towards someone elses mortgage without anything to show for it except a happy landlord.

Have you been in the same bedsit for the whole time? That's kind of impressive, but I don't think that's the norm.

Anyway, short term a mortgage may be a bad deal if you buy at the wrong time. Like when I bought about a week before the 2007 crash and was in negative equity almost immediately. But over the long term it's really hard to lose out, like the aforementioned £80k in equity and becoming rent free when I hit 65.

I was a bit upset about having bought come 2008 but now I'm happy that I did. I dread to think what the rent would be on my current house, but the mortgage on my last house was almost certainly less than your rent.

You are assuming that the future will be like the past, classic investing mistake, overpaying for a house now could potentially mean big losses in future depending on interest rates/inflation, jobs etc. I am not saying don`t buy a house, I am just saying don`t automatically assume that any money that comes your way should be immediately thrown into property because it is a one way bet (as most of the advice here seems to assume?) the 200k should be treated separately as money that didn`t exist before, wasn`t part of your planning on whether to rent or borrow a house, and has the potential to create a very strong cash cushion that makes you financially independent, again, once the money is "in a house" that financial independence is gone. Being "rent free" maybe 30 years in the future if you manage to pay your mortgaged debt off isn`t being financially independent, having 200k saved or invested and growing NOW is.

Herzlos

ReadySteadyPop said:

Herzlos said:

ReadySteadyPop said:

Why would a landlord want tenants to "move annually as contracts expire"? That doesn`t make any sense.

I said it's no longer a thing. Back when I last rented, we moved every year because there was no shortage of renters and they could sting us on a deposit every time. I think that was around the time you sold your flat to start renting to try and cash in on a crash that was never going to happen.

Of course since then I've gained about £80k in equity (after weathering 2 recessions where rents didn't go down) instead of paying £200k towards someone elses mortgage without anything to show for it except a happy landlord.

Have you been in the same bedsit for the whole time? That's kind of impressive, but I don't think that's the norm.

Anyway, short term a mortgage may be a bad deal if you buy at the wrong time. Like when I bought about a week before the 2007 crash and was in negative equity almost immediately. But over the long term it's really hard to lose out, like the aforementioned £80k in equity and becoming rent free when I hit 65.

I was a bit upset about having bought come 2008 but now I'm happy that I did. I dread to think what the rent would be on my current house, but the mortgage on my last house was almost certainly less than your rent.

Why would a landlord want different tenants every year, that still doesn`t make any sense?

I thought I already answered it. Back in the days of yore you'd claim some repair and refuse to give a deposit back.

Alternatively, now you can bump the rent up by a hefty sum.

Why are you fixating on *that* bit and not the rest of the discussion?