Frizzers Posted January 22, 2006 Share Posted January 22, 2006 About two thirds of the value of my house is mortgage. My monthly interest repayments are about two thirds of what the monthly rent would be. In other words the monthly repayments if I had a 100% mortgage paying say 5% interest would be about the same as the monthly rent. Does this mean my house is over-valued? Given the risks involved at the moment, can I conclude from those figures that I may as well be renting? Quote Link to comment Share on other sites More sharing options...
apom Posted January 22, 2006 Share Posted January 22, 2006 (edited) About two thirds of the value of my house is mortgage. My monthly interest repayments are about two thirds of what the monthly rent would be. In other words the monthly repayments if I had a 100% mortgage paying say 5% interest would be about the same as the monthly rent. Does this mean my house is over-valued? Given the risks involved at the moment, can I conclude from those figures that I may as well be renting? If you are paying of your mortgage then you shouldn't be renting. If you are not paying of the mortgage, and you are only paying interest.. You have to look at 1: the equity in your home 2: the chance that you have of moving to a re-payment. But if a repayment mortgage is the same cost as rent would be.. then you are doing better then renting. looking to ride the market and doing a STR.. Personally I would think "why take a risk with your home." I would keep going.. Its cheaper then renting.. Use the rest of your money for better investments.. Edited January 22, 2006 by apom Quote Link to comment Share on other sites More sharing options...
paradox Posted January 22, 2006 Share Posted January 22, 2006 The way I understand it you are on the cusp of the cheaper to rent position. As it stands you are EXACTLY at the point where renting and paying mortgage are equal. This means that (on the basis of your own valuation of your house) you are probably better of paying off your mortgage (assuming that you have a repayment mortgage). I Sold to Rent because I felt that the value of my flat would not increase much more and because I had hopes of "trading up" to a house. It has been pointed out many times that increases in property values make it more difficult to trade up because you have to get an even bigger mortgage to make that leap up. This is what happened to me in the first place when I moved from my 1 bed to a 2 bed at the time of booming prices. I sold the one bed for a fortune and then had to take out a loan for an even bigger fortune to buy the two bed. We needed a house - so now we are renting one. Freeing myself from my mortgage has also opened up new horizons for me anyway, so it was a good move. If you are happy where you are and not planning to move then I would NOT do what I have done. On the other hand if you do not have a repayment mortgage or if you are thinking or moving in the future etc then all options are open. Each case is different and only you know your own situation. Quote Link to comment Share on other sites More sharing options...
Frizzers Posted January 22, 2006 Author Share Posted January 22, 2006 I'm not paying off any of the debt. It's an interest-only mortgage. If rates went up to say 6 % it would be cheaper to rent it than pay the interest on a 100% mortgage. Which, financially at least, answers the question. I've always liked renting. I like the flexibility of it. If I STR I'll have a load of capital to invest, which I quite like the idea of too. (If I invest it well and don't spunk it). And the house even now seems to be creeping up in value - it ticks all the boxes at the level it's offered, so it should always sell. So at the moment I'm inclined to STR. Quote Link to comment Share on other sites More sharing options...
Casual Observer Posted January 22, 2006 Share Posted January 22, 2006 I'm not paying off any of the debt. It's an interest-only mortgage. If rates went up to say 6 % it would be cheaper to rent it than pay the interest on a 100% mortgage. Which, financially at least, answers the question. I've always liked renting. I like the flexibility of it. If I STR I'll have a load of capital to invest, which I quite like the idea of too. (If I invest it well and don't spunk it). And the house even now seems to be creeping up in value - it ticks all the boxes at the level it's offered, so it should always sell. So at the moment I'm inclined to STR. As an owner you also have the cost of repair and maintenance. If you rented, you wouldn't Quote Link to comment Share on other sites More sharing options...
Guest muttley Posted January 22, 2006 Share Posted January 22, 2006 I would argue against STR in your case.You would not be saving any money by renting,but you would be landing yourself with costs. If you sell you will have Ea fees,solicitors fees,removal fees,deposit on rental property not to mention the hassle. Then you've got the stamp duty when you buy back in. There are risks involved with STR too.I'm not convinced that interest rates won't come down.If they did then your equation tips in favour of owning,as your mortgage would come down and so would the earnings on your savings. If your house is as desirable as you say it is,then it will sell even in a falling market.Wait and see. Quote Link to comment Share on other sites More sharing options...
Michael Posted January 22, 2006 Share Posted January 22, 2006 About two thirds of the value of my house is mortgage. My monthly interest repayments are about two thirds of what the monthly rent would be. In other words the monthly repayments if I had a 100% mortgage paying say 5% interest would be about the same as the monthly rent. Does this mean my house is over-valued? Given the risks involved at the moment, can I conclude from those figures that I may as well be renting? Although it varies depending on location and type of property 5% yields are typical right now........... but before the boom 12%was the norm..... If you can buy as cheaply as renting you should generally do so unless you think low IRs are a temporary blip and even if they are you can sometimes (eg now) lock into low IRs thropuhg fixed rate products.... Quote Link to comment Share on other sites More sharing options...
Without_a_Paddle Posted January 22, 2006 Share Posted January 22, 2006 I'm not paying off any of the debt. It's an interest-only mortgage. If rates went up to say 6 % it would be cheaper to rent it than pay the interest on a 100% mortgage. Which, financially at least, answers the question. I've always liked renting. I like the flexibility of it. If I STR I'll have a load of capital to invest, which I quite like the idea of too. (If I invest it well and don't spunk it). And the house even now seems to be creeping up in value - it ticks all the boxes at the level it's offered, so it should always sell. So at the moment I'm inclined to STR. Are you for real? The reason I ask is that you sound like a 'STR' salesman and you already seem to know the anwer to your question. How do I know this? I just clicked on your wepage link It has the following line on the homepage: The price of gold is rising. Sell your house, buy gold. That's my advice. Quote Link to comment Share on other sites More sharing options...
Frizzers Posted January 22, 2006 Author Share Posted January 22, 2006 Are you for real? The reason I ask is that you sound like a 'STR' salesman and you already seem to know the anwer to your question. How do I know this? I just clicked on your wepage link It has the following line on the homepage: No, I'm just the most indecisive person in the whole world and one minute I think one thing, then the wind changes direction and so does my mind. Plus it's easy to dish out advice to other people, as I have done there. Then when you have to do it yourself, things blur. Quote Link to comment Share on other sites More sharing options...
Without_a_Paddle Posted January 22, 2006 Share Posted January 22, 2006 No, I'm just the most indecisive person in the whole world and one minute I think one thing, then the wind changes direction and so does my mind. ....are you sure about that? Quote Link to comment Share on other sites More sharing options...
khali Posted January 22, 2006 Share Posted January 22, 2006 No, I'm just the most indecisive person in the whole world and one minute I think one thing, then the wind changes direction and so does my mind. Plus it's easy to dish out advice to other people, as I have done there. Then when you have to do it yourself, things blur. Must make a note to ignore anything you have to say in the way of advice. Quote Link to comment Share on other sites More sharing options...
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