Is Renting Really Dead Money?

edited 30 November -1 at 1:00AM in House Buying, Renting & Selling
87 replies 13.2K views
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  • To put a slightly different spin on things, my husband and I are paying interest only on our mortgage (for various reasons which I won't go into) which is on a fixed rate for 5 years. At the moment, to stop us panicking about the mortgage not being paid off we are looking at it as if we are renting but with an interest in the property, so if prices increase, when we sell we will have made a profit, but if prices decrease then we just have to love there for longer. At the moment we are very happy where we are and for a 3 bedroom 3 storey house we are paying £30 per month less than is being asked for rent on a 2 bedroom apartment opposite so we figure if we rented our house we would be paying a lot more and its ours so we can do whatever we like with it. We are happy with this at the moment due to the things going on in our lives at the moment and the plan is to save as much as we can over the next five years (but still living a little) so when the fixed rate ends we can re-evaluate and decide what we want to do depending on the interest rates at the time.

    We see this as a good balance (for us....I'm sure its not for everyone) between buying and renting.
    Current Debt - [strike]£38000[/strike] [strike]£32000[/strike] [strike]£28500[/strike] [strike]£22000[/strike] [strike]£16000[/strike] [strike]£10000[/strike] [STRIKE]£1500[/STRIKE] £14000:eek:
  • Jobs and location.

    1) Mobility. Buying a house costs. If we factor in fees what is the minimum amount of time you have to be at an address to break even before remortgaging?

    I guessed it was about 5 years but that's only a guess.

    This is important because that period is the time you are tied down in your job and so less free to compete in the job market, so that's a hidden cost.


    2) Also, there's the gap between the market rent price and house price. The smaller this is the less incentive to mortgage.


    It should be possible to put all these complicated variables into a formula to make an economic decision based on what we do know rather than guessing on the future.
    Order of events: Banks lose our money -> get bailed out -> were inflating GBP to cover it -> now taxing us -> next will grab your funds direct -> things get really desperate to balance the books. What should have happened?: banks go bust and we lost our money much quicker
  • pigeonpiepigeonpie Forumite
    1.2K Posts
    I've done both and psychologically, owning your own place is better, esp if freehold. Depends where you are too, as in parts of London, if you don't buy soon, you may never be able to. An interest-only mortgage we are looking at is half the monthly cost of our rent (for the same 2 bed flat). Property has been a far better investment than anything else for years now, certainly in London. We've lived abroad and will have no UK pension entitlement; we reckon if we keep renting and investing our money, we will be very poor OAPs (assuming with our stress levels we make it that far!). At least if we buy a flat, we will get something back when can finally move out of London to somewhere less crazy price wise. Prices around here are climbing more than 10% per year, there's a huge shortage of property to sell and rents are on average £1200 per month for 2 bed flats, a bit less if you go pb.
    We can get a nicer flat for that than we can buy and theoretically the landlord has to fix everything (doesn't always work out quite like that), plus we would be buying leasehold where you need permission to breathe from the freeholder, so in the end it comes down to finances and personal circumstances - and only you know your individual needs long-term.
    What I would say is rent rather than buy something that has such a big mortgage that you have no money left at all.

    But once before we decided to rent in an area and got priced out of that area for buying. So, depends where you are too. I think I wouldn't mind renting if the place was def long term and property prices in the area weren't zooming ever upwards. And if the bloody landlord allowed me to personalise it as a 'home'. We aren't even allowed to hang pictures!
  • TomthumbTomthumb Forumite
    1.1K Posts
    Another point to think about with having cash savings as opposed to a mortgage over 25 years is that if you become ill or unable to work for some reason then I don't think you would get certain benefits because you have too many savings, ie - if you have £50,000 in the bank but applied for housing benefit I don't think you would get it.

    I'm not absolutely sure if this would be the case, does anyone know?
  • lynzpowerlynzpower Forumite
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    tom thumb

    YEs you are right there in principle. it depends, AFAIK where the money is stored. If for example I had money tied into a with notice investment bond or some such, I expect that they might be safe? I dunno really. But the savers are always penalised by the DWP, but then again I dont know what the alternative to this is?

    On the flip sie though if you have a mortgage and you are too sick to work, then benefits only kick in after 9 months, whereas if you are renting & too sick to work, housing benefit contributions can happen much more easily & quickly (
    :beer: Well aint funny how its the little things in life that mean the most? Not where you live, the car you drive or the price tag on your clothes.
    Theres no dollar sign on piece of mind
    This Ive come to know...
    So if you agree have a drink with me, raise your glasses for a toast :beer:
  • Gorgeous_GeorgeGorgeous_George Forumite
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    I love owning my own place but I sometimes envy those who rent.

    It's great to know you won't be evicted anytime soon at the whim of a landlord. It's not so great paying stamp duty and all the other fees involved in buying/selling property.

    It's great being able to do as you wish with your decor. It's not so great having to pay for a boiler to be fixed or stamed up double glazing to be replaced.

    Renting would haver been even more attractive if the Tories hadn't sold council houses to buy votes.

    The best thing about owning is that I choose where to live and I live next door to other owners. In rented accommodation, where next door is also rented, you never know who your next neighbours might be.

    In short, renting is best if you rent near similar people to yourselves.

    :)

    GG
    There are 10 types of people in this world. Those who understand binary and those that don't.
  • F_T_BuyerF_T_Buyer Forumite
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    Some good comments on this thread. But I do hear "renting is dead money" far far too often.

    If anyone says that, answer:

    "Is £1 a month rent Dead Money?" Obviously, the answer is no.

    "So where would you draw the line? £10? £100? £1,000?"

    Hopefully it will spur the inherited thinker to think for themselves!
  • The best thing about owning is that I choose where to live and I live next door to other owners. In rented accommodation, where next door is also rented, you never know who your next neighbours might be.

    This is an odd comment. I find in the current market I have a greater choice on places to rent than places to buy. Also (having experienced noisy neighbours) renting gives you the opportunity to just up sticks and leave. Selling can take months and years. It is a much greater risk when you buy and you don't know who your neighbours are (they can seem nice to start with), than when you rent.

    It is a good debate.
  • gallygirlgallygirl Forumite
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    JohnInDebt wrote:
    if you put the savings into an ISA or other savings account you could almost be just as well off after 25 years.
    This surely is the flaw in the argument - I know a lot of people who rent - NONE of them save any money. Or if they do it's for holidays etc. They will end up forever renting, with no savings, whereas a mortgage WILL be paid for.
    A positive attitude may not solve all your problems, but it will annoy enough people to make it worth the effort
    :) Mortgage Balance = £0 :)
    "Do what others won't early in life so you can do what others can't later in life"
  • ollyshawollyshaw Forumite
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    Good thread.
    I rent, very cheap, lovely flat. If I bought something i would be paying £500 extra than I don now on a mortgage. However if the market changed I might consider buying. most people I talk to just cant understand my attitude, its all "get on the ladder now while you still can!"

    Olly
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