How much to rent?

pickledpink

How much in savings would you need for the interest to cover your rent? I know rents differ around the country, but where I am the average rent on a 2-bed flat is approx £1000 pm. Some studios could be as low as £600pm.

So to make £1000 pm interest each month how much in savings would you need?

P

pinkshoes

If you had £240k in your bank, at 5% interest, that would get you £12k a year in interest, which would cover your rent at £1000/month.

barnaby-bear

pinkshoes wrote: »

If you had £240k in your bank, at 5% interest, that would get you £12k a year in interest, which would cover your rent at £1000/month.

Not so simple:

With that level of savings - likely to be a higher band tax payer so
£12k reduced to £7.2k (basic rate £9.6k) after tax (offset mortages attractive to higher band tax payers over savings for this reason - plus if made redundant and all savings in an offset - can claim benefits rather than use savings)

If taking all the interest to pay the rent then next year your money is only worth (take inflation 5%) = 240/1.05 = £228.57k and rent liable to rise while capital savings depreciate over several years

pickledpink

Well you'll need a huge amount of savings for the interest to cover your rent then! According to a lot of renters they seem to cover the cost of their rent by the interest on their savings - must be quarter millionaires then! Strange they sold up with THAT amount of equity in their homes!;)

carolt

Why strange? Sensible, to lock in their profits before prices crash.

That way, they'll be able to buy two properties in a couple of years for your one!

Kez100

barnaby-bear wrote: »

Not so simple:

With that level of savings - likely to be a higher band tax payer so
£12k reduced to £7.2k (basic rate £9.6k) after tax (offset mortages attractive to higher band tax payers over savings for this reason - plus if made redundant and all savings in an offset - can claim benefits rather than use savings)

If taking all the interest to pay the rent then next year your money is only worth (take inflation 5%) = 240/1.05 = £228.57k and rent liable to rise while capital savings depreciate over several years

Although you could say, if your cash was there to buy property in the future and a crash was happening then the general inflation rate is irrelevant and the relevant rate to use is the index of house prices which may see the value of your money rise not fall!

That level of savings if from equity sale does not necessarily mean a higher rate taxpayer. So, could be basic rate taxpayer. Will lose some CTC though!

Needs to be calculated per individual really as everyone is different.

PasturesNew

barnaby-bear wrote: »

Not so simple:

With that level of savings - likely to be a higher band tax payer

That is presumptuous of you..... I'm nowhere NEAR a higher band tax payer. Probably about half way there in fact

PasturesNew

My interest pays my rent and all my bills and pays for my life too. Beer, pizza, days out, hair cuts, keeps the car on the road and filled with petrol. Oh, and I've still got some left over.

Except I don't touch it. I use my small earnings to pay that lot and live.

And I save some of that too, which joins my main savings.

Generali

It's complex. There's tax, changes in RPI and base rates to consider just to start.

Then what's going to happen tomorrow or the day after.

Hmm. I think PP just wants to make a couple of assumptions and end up answering his/her own questions.

PasturesNew

Generali wrote: »

It's complex. There's tax, changes in RPI and base rates to consider just to start.

Then what's going to happen tomorrow or the day after.

Hmm. I think PP just wants to make a couple of assumptions and end up answering his/her own questions.

Got some odd issues going on there... never stalked her/it to work out what they are. But some anger to work through somewhere.

Assumption Maker tends to be par for the course as far as I've seen it.

ManAtHome

Or to put it another way - how much better would the economy be if people were spending £500 a month on housing and the other £500 somewhere else..?

Ooops, sorry, forgot - we are well-placed and stable and all that.