What’s wrong with this property

GDB2222

Maybe, we are at cross purposes? 

Earlier you said “Say you buy for a £400k and sell 10 years later for £400k. You've made nothing, right? No. Because in those 10 years your mortgage has probably been less than equivalent rent.”

 I don’t think that is a completely foregone conclusion. Does that mean landlords are making a loss? Not necessarily if, for example, they bought some time ago and don’t have much mortgage left. They may be reluctant to sell, as that could generate a large tax bill. 

ReadySteadyPop

Herzlos said:

ReadySteadyPop said:

Would interest payments on the debt taken to buy the house (potential to spike over the 30 year terms that are normal now) be "wasted money"? Rent is a "cost" it is a payment for a service, a payment for a service that you want/need and receive can`t be wasted money, a mortgage is a debt and continues even if you don`t live in the house (the house is repo`d for example) two very different things, the "rent is wasted money" meme must be responsible for countless bad debt decisions on houses that won`t hold their "value" ( especially if you include interest)

Why would rent be a cost for a payment for a service but interest isn't? It's the cost for payment for the loan? At the end of the day the only thing to factor in is money out and money back in. With rent its 100% out, with a mortgage you'll get some money back at the end (assuming capital repayment). 

Unless the house is repo'd very early on or you're over leveraged, you're still likely to get some money back on it. For example, I owe about £150k on a £250k house. Even it got repo'd and they sold it for way under market, I'd still not owe anything. But in reality it's not going to get repo'd and if I fell behind I could sell for market rate and use the equity to buy something smaller.

Because in accounting terms one is a "cost" and the other is a "debt maintenance payment" two very different things with different legal obligations attached, it isn`t good to blur the two and confuse people who may be financially inexperienced, you can walk away from a "cost" or reduce it, you can`t (legally) walk away from a debt obligation without penalty, and depending on market conditions there can be increases to the debt maintenance payment that you can only avoid by making overpayments on your debt (for which there might be a financial penalty)

A recent buyer, or someone thinking about buying has to pay interest on a 250k loan even if the house becomes worth 200k or 150k.

newsgroupmonkey_

ReadySteadyPop said:

Herzlos said:

ReadySteadyPop said:

Would interest payments on the debt taken to buy the house (potential to spike over the 30 year terms that are normal now) be "wasted money"? Rent is a "cost" it is a payment for a service, a payment for a service that you want/need and receive can`t be wasted money, a mortgage is a debt and continues even if you don`t live in the house (the house is repo`d for example) two very different things, the "rent is wasted money" meme must be responsible for countless bad debt decisions on houses that won`t hold their "value" ( especially if you include interest)

Why would rent be a cost for a payment for a service but interest isn't? It's the cost for payment for the loan? At the end of the day the only thing to factor in is money out and money back in. With rent its 100% out, with a mortgage you'll get some money back at the end (assuming capital repayment). 

Unless the house is repo'd very early on or you're over leveraged, you're still likely to get some money back on it. For example, I owe about £150k on a £250k house. Even it got repo'd and they sold it for way under market, I'd still not owe anything. But in reality it's not going to get repo'd and if I fell behind I could sell for market rate and use the equity to buy something smaller.

Because in accounting terms one is a "cost" and the other is a "debt maintenance payment" two very different things with different legal obligations attached, it isn`t good to blur the two and confuse people who may be financially inexperienced, you can walk away from a "cost" or reduce it, you can`t (legally) walk away from a debt obligation without penalty, and depending on market conditions there can be increases to the debt maintenance payment that you can only avoid by making overpayments on your debt (for which there might be a financial penalty)

A recent buyer, or someone thinking about buying has to pay interest on a 250k loan even if the house becomes worth 200k or 150k.

And on the other hand, if you were to rent a bedsit for 25 years, you'll still be paying for that bedsit in 25 years time. And if rents go up, you can't suddenly downsize.

jimbog

newsgroupmonkey_ said:

ReadySteadyPop said:

Herzlos said:

ReadySteadyPop said:

Would interest payments on the debt taken to buy the house (potential to spike over the 30 year terms that are normal now) be "wasted money"? Rent is a "cost" it is a payment for a service, a payment for a service that you want/need and receive can`t be wasted money, a mortgage is a debt and continues even if you don`t live in the house (the house is repo`d for example) two very different things, the "rent is wasted money" meme must be responsible for countless bad debt decisions on houses that won`t hold their "value" ( especially if you include interest)

Why would rent be a cost for a payment for a service but interest isn't? It's the cost for payment for the loan? At the end of the day the only thing to factor in is money out and money back in. With rent its 100% out, with a mortgage you'll get some money back at the end (assuming capital repayment). 

Unless the house is repo'd very early on or you're over leveraged, you're still likely to get some money back on it. For example, I owe about £150k on a £250k house. Even it got repo'd and they sold it for way under market, I'd still not owe anything. But in reality it's not going to get repo'd and if I fell behind I could sell for market rate and use the equity to buy something smaller.

Because in accounting terms one is a "cost" and the other is a "debt maintenance payment" two very different things with different legal obligations attached, it isn`t good to blur the two and confuse people who may be financially inexperienced, you can walk away from a "cost" or reduce it, you can`t (legally) walk away from a debt obligation without penalty, and depending on market conditions there can be increases to the debt maintenance payment that you can only avoid by making overpayments on your debt (for which there might be a financial penalty)

A recent buyer, or someone thinking about buying has to pay interest on a 250k loan even if the house becomes worth 200k or 150k.

And on the other hand, if you were to rent a bedsit for 25 years, you'll still be paying for that bedsit in 25 years time. And if rents go up, you can't suddenly downsize.

To be fair, there’s always the option of HMOs or living with parents (if still alive). However, not what people aspire to especially those who have a family 

Emmia

jimbog said:

newsgroupmonkey_ said:

ReadySteadyPop said:

Herzlos said:

ReadySteadyPop said:

Would interest payments on the debt taken to buy the house (potential to spike over the 30 year terms that are normal now) be "wasted money"? Rent is a "cost" it is a payment for a service, a payment for a service that you want/need and receive can`t be wasted money, a mortgage is a debt and continues even if you don`t live in the house (the house is repo`d for example) two very different things, the "rent is wasted money" meme must be responsible for countless bad debt decisions on houses that won`t hold their "value" ( especially if you include interest)

Why would rent be a cost for a payment for a service but interest isn't? It's the cost for payment for the loan? At the end of the day the only thing to factor in is money out and money back in. With rent its 100% out, with a mortgage you'll get some money back at the end (assuming capital repayment). 

Unless the house is repo'd very early on or you're over leveraged, you're still likely to get some money back on it. For example, I owe about £150k on a £250k house. Even it got repo'd and they sold it for way under market, I'd still not owe anything. But in reality it's not going to get repo'd and if I fell behind I could sell for market rate and use the equity to buy something smaller.

Because in accounting terms one is a "cost" and the other is a "debt maintenance payment" two very different things with different legal obligations attached, it isn`t good to blur the two and confuse people who may be financially inexperienced, you can walk away from a "cost" or reduce it, you can`t (legally) walk away from a debt obligation without penalty, and depending on market conditions there can be increases to the debt maintenance payment that you can only avoid by making overpayments on your debt (for which there might be a financial penalty)

A recent buyer, or someone thinking about buying has to pay interest on a 250k loan even if the house becomes worth 200k or 150k.

And on the other hand, if you were to rent a bedsit for 25 years, you'll still be paying for that bedsit in 25 years time. And if rents go up, you can't suddenly downsize.

To be fair, there’s always the option of HMOs or living with parents (if still alive). However, not what people aspire to especially those who have a family 

But how do you downsize from an HMO? A smaller HMO room? A tent?

ReadySteadyPop

GDB2222 said:

Maybe, we are at cross purposes? 

Earlier you said “Say you buy for a £400k and sell 10 years later for £400k. You've made nothing, right? No. Because in those 10 years your mortgage has probably been less than equivalent rent.”

 I don’t think that is a completely foregone conclusion. Does that mean landlords are making a loss? Not necessarily if, for example, they bought some time ago and don’t have much mortgage left. They may be reluctant to sell, as that could generate a large tax bill. 

Can`t see the next ten being like the last ten for mortgage rates to be honest.

RHemmings

ReadySteadyPop said:

Herzlos said:

ReadySteadyPop said:

Would interest payments on the debt taken to buy the house (potential to spike over the 30 year terms that are normal now) be "wasted money"? Rent is a "cost" it is a payment for a service, a payment for a service that you want/need and receive can`t be wasted money, a mortgage is a debt and continues even if you don`t live in the house (the house is repo`d for example) two very different things, the "rent is wasted money" meme must be responsible for countless bad debt decisions on houses that won`t hold their "value" ( especially if you include interest)

Why would rent be a cost for a payment for a service but interest isn't? It's the cost for payment for the loan? At the end of the day the only thing to factor in is money out and money back in. With rent its 100% out, with a mortgage you'll get some money back at the end (assuming capital repayment). 

Unless the house is repo'd very early on or you're over leveraged, you're still likely to get some money back on it. For example, I owe about £150k on a £250k house. Even it got repo'd and they sold it for way under market, I'd still not owe anything. But in reality it's not going to get repo'd and if I fell behind I could sell for market rate and use the equity to buy something smaller.

Because in accounting terms one is a "cost" and the other is a "debt maintenance payment" two very different things with different legal obligations attached, it isn`t good to blur the two and confuse people who may be financially inexperienced, you can walk away from a "cost" or reduce it, you can`t (legally) walk away from a debt obligation without penalty, and depending on market conditions there can be increases to the debt maintenance payment that you can only avoid by making overpayments on your debt (for which there might be a financial penalty)

A recent buyer, or someone thinking about buying has to pay interest on a 250k loan even if the house becomes worth 200k or 150k.

If you mention the 'financially inexperienced', then as before your own actions are relevant. I don't think you're in a position, given your own property-related choices, to be lecturing others. Your own choices, which you appear to be doubling down on, are a model for people to learn from in that you made a huge financial mistake that others should take as a cautionary tale. 

Most people who have a mortgage debt can effectively walk away from it or downsize. By selling the property, which pays off the debt. This is harder than simply giving notice and leaving a rented property, but people do this every day. Most people with mortgages are not in negative equity, and therefore when they sell will have their equity to do what they want with. Those who have rented have no financial return when they sell a property. So, there's that bonus for people who actually own and then want to 'walk away' from that debt. A mortgage or other debt on an asset is very different from a straightforward debt which can't be walked away from. 

ReadySteadyPop

RHemmings said:

ReadySteadyPop said:

Herzlos said:

ReadySteadyPop said:

Would interest payments on the debt taken to buy the house (potential to spike over the 30 year terms that are normal now) be "wasted money"? Rent is a "cost" it is a payment for a service, a payment for a service that you want/need and receive can`t be wasted money, a mortgage is a debt and continues even if you don`t live in the house (the house is repo`d for example) two very different things, the "rent is wasted money" meme must be responsible for countless bad debt decisions on houses that won`t hold their "value" ( especially if you include interest)

Why would rent be a cost for a payment for a service but interest isn't? It's the cost for payment for the loan? At the end of the day the only thing to factor in is money out and money back in. With rent its 100% out, with a mortgage you'll get some money back at the end (assuming capital repayment). 

Unless the house is repo'd very early on or you're over leveraged, you're still likely to get some money back on it. For example, I owe about £150k on a £250k house. Even it got repo'd and they sold it for way under market, I'd still not owe anything. But in reality it's not going to get repo'd and if I fell behind I could sell for market rate and use the equity to buy something smaller.

Because in accounting terms one is a "cost" and the other is a "debt maintenance payment" two very different things with different legal obligations attached, it isn`t good to blur the two and confuse people who may be financially inexperienced, you can walk away from a "cost" or reduce it, you can`t (legally) walk away from a debt obligation without penalty, and depending on market conditions there can be increases to the debt maintenance payment that you can only avoid by making overpayments on your debt (for which there might be a financial penalty)

A recent buyer, or someone thinking about buying has to pay interest on a 250k loan even if the house becomes worth 200k or 150k.

If you mention the 'financially inexperienced', then as before your own actions are relevant. I don't think you're in a position, given your own property-related choices, to be lecturing others. Your own choices, which you appear to be doubling down on, are a model for people to learn from in that you made a huge financial mistake that others should take as a cautionary tale. 

Most people who have a mortgage debt can effectively walk away from it or downsize. By selling the property, which pays off the debt. This is harder than simply giving notice and leaving a rented property, but people do this every day. Most people with mortgages are not in negative equity, and therefore when they sell will have their equity to do what they want with. Those who have rented have no financial return when they sell a property. So, there's that bonus for people who actually own and then want to 'walk away' from that debt. A mortgage or other debt on an asset is very different from a straightforward debt which can't be walked away from. 

 You are liable for your mortgage debt whether you find a buyer or not, increasingly people can`t find buyers willing or able to pay the price they need to get out from under their mortgage debt.

ReadySteadyPop

GDB2222 said:

Maybe, we are at cross purposes? 

Earlier you said “Say you buy for a £400k and sell 10 years later for £400k. You've made nothing, right? No. Because in those 10 years your mortgage has probably been less than equivalent rent.”

 I don’t think that is a completely foregone conclusion. Does that mean landlords are making a loss? Not necessarily if, for example, they bought some time ago and don’t have much mortgage left. They may be reluctant to sell, as that could generate a large tax bill. 

I believe quite a lot of landlords are now making a loss, and a prolonged void period now means double council tax making the loss worse.

MeteredOut

ReadySteadyPop said:

GDB2222 said:

Maybe, we are at cross purposes? 

Earlier you said “Say you buy for a £400k and sell 10 years later for £400k. You've made nothing, right? No. Because in those 10 years your mortgage has probably been less than equivalent rent.”

 I don’t think that is a completely foregone conclusion. Does that mean landlords are making a loss? Not necessarily if, for example, they bought some time ago and don’t have much mortgage left. They may be reluctant to sell, as that could generate a large tax bill. 

I believe quite a lot of landlords are now making a loss, and a prolonged void period now means double council tax making the loss worse.

Do you have any data to back up this "belief"?

Your beliefs don't have a good track record.