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Should I buy or rent?
sashapet_02
Posts: 3 Newbie
Hi all, I'm hoping a few of you are able to offer me advice.
I'm 26, renting a 'granny-annexe' from my parents for £200 pcm (including all bills - bargain, I know!)
Obviously the best thing would be to stay where I am, but I am going slowly stir-crazy being so close to my parents! So lets assume that's not an option...
I also invested in a house up north with my brother about 3 years ago. We have an outstanding mortgage of about £63,000, but due to some renovation work the house is probably worth about £100k.
The house will be finished in about 6 months, and our options are as follows:
1) Sell the house, split the money and each put down a deposit on our own houses. (I would probably be looking at houses around the £135k mark.)
2) Remortgage the house with a buy-to-let for about £90k, and use the freed-up capital to put a deposit down on our own houses.
3) Both rent for about £400pcm, also rent out the joint house, and reduce the term on the mortgage to try to pay it off as quickly as possible.
To explain option 3 - if I were to get myself a mortgage for £125,000, my monthly payments would be around £760. If I rent for £400, I could put an extra £360 into the joint mortgage. Hopefully my brother could do something similar. If both my brother and I were paying in an extra £360 to the mortgage, and we were able to rent it for about £400, we should be able to pay off the joint mortgage in 5 or 6 years.
So, what to do? In theory, option 3 means we'll have £100k to split between us in 5 or 6 years. I can't see options 1 or 2 giving me that sort of return!
I know renting is 'dead money', but in the first 5 years of a new mortgage I would be paying more interest on the mortgage that I would be spending on rent, so surely that is equally 'dead money'?
I'm also ignoring the fact that even if I did get a new mortgage for £760pcm, I would probably get a lodger as well. Therefore my monthly payments would probably be cheaper if I got a mortgage, rather than renting and trying to pay an extra £360 off the joint mortgage.
Aargh! Help! x
I'm 26, renting a 'granny-annexe' from my parents for £200 pcm (including all bills - bargain, I know!)
Obviously the best thing would be to stay where I am, but I am going slowly stir-crazy being so close to my parents! So lets assume that's not an option...
I also invested in a house up north with my brother about 3 years ago. We have an outstanding mortgage of about £63,000, but due to some renovation work the house is probably worth about £100k.
The house will be finished in about 6 months, and our options are as follows:
1) Sell the house, split the money and each put down a deposit on our own houses. (I would probably be looking at houses around the £135k mark.)
2) Remortgage the house with a buy-to-let for about £90k, and use the freed-up capital to put a deposit down on our own houses.
3) Both rent for about £400pcm, also rent out the joint house, and reduce the term on the mortgage to try to pay it off as quickly as possible.
To explain option 3 - if I were to get myself a mortgage for £125,000, my monthly payments would be around £760. If I rent for £400, I could put an extra £360 into the joint mortgage. Hopefully my brother could do something similar. If both my brother and I were paying in an extra £360 to the mortgage, and we were able to rent it for about £400, we should be able to pay off the joint mortgage in 5 or 6 years.
So, what to do? In theory, option 3 means we'll have £100k to split between us in 5 or 6 years. I can't see options 1 or 2 giving me that sort of return!
I know renting is 'dead money', but in the first 5 years of a new mortgage I would be paying more interest on the mortgage that I would be spending on rent, so surely that is equally 'dead money'?
I'm also ignoring the fact that even if I did get a new mortgage for £760pcm, I would probably get a lodger as well. Therefore my monthly payments would probably be cheaper if I got a mortgage, rather than renting and trying to pay an extra £360 off the joint mortgage.
Aargh! Help! x
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