I've been researching mortgages for weeks and only just realised this.

GingerTim

SneakySpectator said:

DullGreyGuy said:

SneakySpectator said:

The principle amount you borrow remains the same through the length of the mortgage and doesn't increase with inflation... Rent will always increase with inflation. 

Yes I'm subject to interest rate fluctuations but since 1992 the interest rates have remained below 6% and assuming we don't have another covid situation on our hands and interest rates don't go back to the 10% - 12% figures seen in the 70's and 80's. It means my mortgage payments (rent) decreases in real terms over time, as my salary increases. 

I don't have a high flying job but on average my salary increases by about 6% per year, but the mortgage I'm looking at is 3.99% fixed for 5 years, then after the 5 years I'll remortgage for another fixed term.

But when renting, you are virtually guaranteed to have ever increasing rent costs and you're building no equity in your home at all... It feels like wasted money.

Assume you get a 5 year fixed 4% interest rate mortgage, well my salary will increase *roughly* by 6% each year, that's an increase of 33.82% (compounded) increase in salary but my mortgage is still the same in pounds.

I feel like I've just had a light bulb moment... Here I am renting social housing which goes up 5% per year instead of just getting a mortgage, paying less and building equity... !!!!!! am I doing 🤔

That depends. 

Mortgage is only one component of the cost of owning a property as you will also be taking on maintenance, service charges (if leasehold), insurance, fixtures & fittings (which may or may not be covered in rented) etc. Living in central London moving from rented to mortgage increased the monthly cost when comparing rent to mortgage alone plus we have a £3k service charge and have to pay to replace the roof etc. 

Certainly the general idea is renting is "dead money" and ownership is better, but it's more complex. Our neighbour paid £750,000 for their home a few years ago, they are trying to sell now and have it on the market for £675,000 and have had no offers. So in addition to the £75k in property value loss, there was also the £27k or so of Stamp duty, plus legal and removal costs. No idea what their mortgage is but they are down £100k even before that whereas you can just hand in your notice and walk away from your rental.

Also the flat is located close to a university so is very popular among the buy to let folk so 20+ years down the line when I come to resell it it probably won't be too hard and there's a near constant supply of easy tenants coming into the area wanting student accommodation type flat. 

Which university? I work in higher education and the sector is an absolute financial binfire at the moment, barring a handful of the biggest unis. The sector is facing mass redundancies, course closures, and likely institutional mergers/closures.

If it's a post-92 or even some Russell Group unis, don't assume it will always be there...

SneakySpectator

GingerTim said:

SneakySpectator said:

DullGreyGuy said:

SneakySpectator said:

The principle amount you borrow remains the same through the length of the mortgage and doesn't increase with inflation... Rent will always increase with inflation. 

Yes I'm subject to interest rate fluctuations but since 1992 the interest rates have remained below 6% and assuming we don't have another covid situation on our hands and interest rates don't go back to the 10% - 12% figures seen in the 70's and 80's. It means my mortgage payments (rent) decreases in real terms over time, as my salary increases. 

I don't have a high flying job but on average my salary increases by about 6% per year, but the mortgage I'm looking at is 3.99% fixed for 5 years, then after the 5 years I'll remortgage for another fixed term.

But when renting, you are virtually guaranteed to have ever increasing rent costs and you're building no equity in your home at all... It feels like wasted money.

Assume you get a 5 year fixed 4% interest rate mortgage, well my salary will increase *roughly* by 6% each year, that's an increase of 33.82% (compounded) increase in salary but my mortgage is still the same in pounds.

I feel like I've just had a light bulb moment... Here I am renting social housing which goes up 5% per year instead of just getting a mortgage, paying less and building equity... !!!!!! am I doing 🤔

That depends. 

Mortgage is only one component of the cost of owning a property as you will also be taking on maintenance, service charges (if leasehold), insurance, fixtures & fittings (which may or may not be covered in rented) etc. Living in central London moving from rented to mortgage increased the monthly cost when comparing rent to mortgage alone plus we have a £3k service charge and have to pay to replace the roof etc. 

Certainly the general idea is renting is "dead money" and ownership is better, but it's more complex. Our neighbour paid £750,000 for their home a few years ago, they are trying to sell now and have it on the market for £675,000 and have had no offers. So in addition to the £75k in property value loss, there was also the £27k or so of Stamp duty, plus legal and removal costs. No idea what their mortgage is but they are down £100k even before that whereas you can just hand in your notice and walk away from your rental.

Also the flat is located close to a university so is very popular among the buy to let folk so 20+ years down the line when I come to resell it it probably won't be too hard and there's a near constant supply of easy tenants coming into the area wanting student accommodation type flat. 

Which university? I work in higher education and the sector is an absolute financial binfire at the moment, barring a handful of the biggest unis. The sector is facing mass redundancies, course closures, and likely institutional mergers/closures.

If it's a post-92 or even some Russell Group unis, don't assume it will always be there...

Oh that's interesting, may explain why several of the properties have sold in the last 2 years. I won't name the uni but it's not a Russell group, it's a slightly above average one according to the rankings.

GingerTim

SneakySpectator said:

GingerTim said:

SneakySpectator said:

DullGreyGuy said:

SneakySpectator said:

The principle amount you borrow remains the same through the length of the mortgage and doesn't increase with inflation... Rent will always increase with inflation. 

Yes I'm subject to interest rate fluctuations but since 1992 the interest rates have remained below 6% and assuming we don't have another covid situation on our hands and interest rates don't go back to the 10% - 12% figures seen in the 70's and 80's. It means my mortgage payments (rent) decreases in real terms over time, as my salary increases. 

I don't have a high flying job but on average my salary increases by about 6% per year, but the mortgage I'm looking at is 3.99% fixed for 5 years, then after the 5 years I'll remortgage for another fixed term.

But when renting, you are virtually guaranteed to have ever increasing rent costs and you're building no equity in your home at all... It feels like wasted money.

Assume you get a 5 year fixed 4% interest rate mortgage, well my salary will increase *roughly* by 6% each year, that's an increase of 33.82% (compounded) increase in salary but my mortgage is still the same in pounds.

I feel like I've just had a light bulb moment... Here I am renting social housing which goes up 5% per year instead of just getting a mortgage, paying less and building equity... !!!!!! am I doing 🤔

That depends. 

Mortgage is only one component of the cost of owning a property as you will also be taking on maintenance, service charges (if leasehold), insurance, fixtures & fittings (which may or may not be covered in rented) etc. Living in central London moving from rented to mortgage increased the monthly cost when comparing rent to mortgage alone plus we have a £3k service charge and have to pay to replace the roof etc. 

Certainly the general idea is renting is "dead money" and ownership is better, but it's more complex. Our neighbour paid £750,000 for their home a few years ago, they are trying to sell now and have it on the market for £675,000 and have had no offers. So in addition to the £75k in property value loss, there was also the £27k or so of Stamp duty, plus legal and removal costs. No idea what their mortgage is but they are down £100k even before that whereas you can just hand in your notice and walk away from your rental.

Also the flat is located close to a university so is very popular among the buy to let folk so 20+ years down the line when I come to resell it it probably won't be too hard and there's a near constant supply of easy tenants coming into the area wanting student accommodation type flat. 

Which university? I work in higher education and the sector is an absolute financial binfire at the moment, barring a handful of the biggest unis. The sector is facing mass redundancies, course closures, and likely institutional mergers/closures.

If it's a post-92 or even some Russell Group unis, don't assume it will always be there...

Oh that's interesting, may explain why several of the properties have sold in the last 2 years. I won't name the uni but it's not a Russell group, it's a slightly above average one according to the rankings.

Have a look on here to see if/how badly it's been affected:

https://qmucu.org/qmul-transformation/uk-he-shrinking/

The big issue is government policies reducing the number of international masters students whose fees subsidise home students - in other words, demand for student housing is falling (outside London and big cities).

SneakySpectator

GingerTim said:

SneakySpectator said:

GingerTim said:

SneakySpectator said:

DullGreyGuy said:

SneakySpectator said:

The principle amount you borrow remains the same through the length of the mortgage and doesn't increase with inflation... Rent will always increase with inflation. 

Yes I'm subject to interest rate fluctuations but since 1992 the interest rates have remained below 6% and assuming we don't have another covid situation on our hands and interest rates don't go back to the 10% - 12% figures seen in the 70's and 80's. It means my mortgage payments (rent) decreases in real terms over time, as my salary increases. 

I don't have a high flying job but on average my salary increases by about 6% per year, but the mortgage I'm looking at is 3.99% fixed for 5 years, then after the 5 years I'll remortgage for another fixed term.

But when renting, you are virtually guaranteed to have ever increasing rent costs and you're building no equity in your home at all... It feels like wasted money.

Assume you get a 5 year fixed 4% interest rate mortgage, well my salary will increase *roughly* by 6% each year, that's an increase of 33.82% (compounded) increase in salary but my mortgage is still the same in pounds.

I feel like I've just had a light bulb moment... Here I am renting social housing which goes up 5% per year instead of just getting a mortgage, paying less and building equity... !!!!!! am I doing 🤔

That depends. 

Mortgage is only one component of the cost of owning a property as you will also be taking on maintenance, service charges (if leasehold), insurance, fixtures & fittings (which may or may not be covered in rented) etc. Living in central London moving from rented to mortgage increased the monthly cost when comparing rent to mortgage alone plus we have a £3k service charge and have to pay to replace the roof etc. 

Certainly the general idea is renting is "dead money" and ownership is better, but it's more complex. Our neighbour paid £750,000 for their home a few years ago, they are trying to sell now and have it on the market for £675,000 and have had no offers. So in addition to the £75k in property value loss, there was also the £27k or so of Stamp duty, plus legal and removal costs. No idea what their mortgage is but they are down £100k even before that whereas you can just hand in your notice and walk away from your rental.

Also the flat is located close to a university so is very popular among the buy to let folk so 20+ years down the line when I come to resell it it probably won't be too hard and there's a near constant supply of easy tenants coming into the area wanting student accommodation type flat. 

Which university? I work in higher education and the sector is an absolute financial binfire at the moment, barring a handful of the biggest unis. The sector is facing mass redundancies, course closures, and likely institutional mergers/closures.

If it's a post-92 or even some Russell Group unis, don't assume it will always be there...

Oh that's interesting, may explain why several of the properties have sold in the last 2 years. I won't name the uni but it's not a Russell group, it's a slightly above average one according to the rankings.

Have a look on here to see if/how badly it's been affected:

https://qmucu.org/qmul-transformation/uk-he-shrinking/

The big issue is government policies reducing the number of international masters students whose fees subsidise home students - in other words, demand for student housing is falling (outside London and big cities).

Yep, it's on the list.