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Hello guys,

Everywhere you find a property boom you will also find a nation that hates to rent. A nation that thinks renting is a waste of money - that money spent on rent is 'dead money.' Look the phrase' dead money' up on the internet and you'll find it in every discussion of property purchase by a first time buyer - 'everywhere we wanted to buy was a bit too expensive…we had to really stretch ourselves. The house isn't quite what we wanted… but it is better than renting. Rent is just dead money.'

But can buying property in these dangerous times be dead money what do yu think i am eager to hear opinions on this topic, please reply with your views.

cheers

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In a flat or falling market the interest part of a morgage + running repairs on a property is 'dead money'.... compare IO morgage to rent, if rent is cheaper and the market is in the correct part of the cylcle it is sensible to rent, as its less 'dead money'....

a group of people on this forum, STR (sell to rent) have sold there properties, put the money in the bank and are renting until property values drop back down to long term trends....

Edited by moosetea

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I'd rather my money died than I was forced into economic slavery just to keep the rain off my head.

And incidentally, when house prices are falling, like now, buying is dead money. You pay less in rent, and you dont suffer capital depreciation.

Renting is only dead money when house prices are rising faster than the discounted tax/inflation balanced relationship between other savings methods and localised property inflation is greater than the term-specific costs of ownership minus equivalent property rent costs over the same period.

Clear?

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Hello guys,

Everywhere you find a property boom you will also find a nation that hates to rent. A nation that thinks renting is a waste of money - that money spent on rent is 'dead money.' Look the phrase' dead money' up on the internet and you'll find it in every discussion of property purchase by a first time buyer - 'everywhere we wanted to buy was a bit too expensive…we had to really stretch ourselves. The house isn't quite what we wanted… but it is better than renting. Rent is just dead money.'

But can buying property in these dangerous times be dead money what do yu think i am eager to hear opinions on this topic, please reply with your views.

cheers

Depends where you rent and what you rent I suppose - I share a house with one other tennant, it costs me £270pm, £3240pa. A 100K mortgage would cost me £5K in interest pa, + house insurance, maintainence etc etc, and I'd be in a 1 bed place in a ropey part of Swindon, instead of a decent sized house in a village 1 mile from work. So unless house prices rise by a good bit in real terms, I gain. Situation is probably different for those who need to rent a whole house for a family. Someone will do the maths for you on this thread, I shouldn't wonder....

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I'm still confused on the maths!!. We rent for 1k a month and can purchase (offer accepted) for

say a 10 year repayment fixed at 5% for £993 a month. Yes, renting we are getting interest on our

savings but this is also eaten away by inflation. Putting down a 50% deposit.

Do I keep renting for say the next 5-8 years until this thing bottoms out or buy now and just keep paying off the mortgage.!!!! I really hate this bubble!!!

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Situation is probably different for those who need to rent a whole house for a family. Someone will do the maths for you on this thread, I shouldn't wonder....

Average smallish family property goes for what? Say about £225,000? I/O mortgage at 5.75% equals £12,900 per year or approx £1,050 per month.

Around me 3 bed semis are going for 800-900 pcm so that's £150-250 per month saving without the risk of losing your shirt in a crash.

Just goes to show how far prices are out of line with reality. Renting should be significantly more expensive than buying to cover void periods, agents fees and repairs as well as the risk premium. From an investment point of view these £225,000 houses shouldn't go for much more than £100,000.

I'm still confused on the maths!!. We rent for 1k a month and can purchase (offer accepted) for

say a 10 year repayment fixed at 5% for £993 a month. Yes, renting we are getting interest on our

savings but this is also eaten away by inflation. Putting down a 50% deposit.

Do I keep renting for say the next 5-8 years until this thing bottoms out or buy now and just keep paying off the mortgage.!!!! I really hate this bubble!!!

Are you saying that even after putting down a 50% deposit your monthly repayments are the same as renting?

I realise that you are repaying over 10 years, what would the cost be for a 100% I/O mortgage?

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Average smallish family property goes for what? Say about £225,000? I/O mortgage at 5.75% equals £12,900 per year or approx £1,050 per month.

Around me 3 bed semis are going for 800-900 pcm so that's £150-250 per month saving without the risk of losing your shirt in a crash.

Just goes to show how far prices are out of line with reality. Renting should be significantly more expensive than buying to cover void periods, agents fees and repairs as well as the risk premium. From an investment point of view these £225,000 houses shouldn't go for much more than £100,000.

Are you saying that even after putting down a 50% deposit your monthly repayments are the same as renting?

I realise that you are repaying over 10 years, what would the cost be for a 100% I/O mortgage?

Around £1350 a month.!

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Around £1350 a month.!

So you would be paying 35% per month extra to buy rather than rent.

I realise that the monthly repayments are reduced because of the large deposit but to appraise the investment you still need to look at the cost of using your own money (being the interest foregone).

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So you would be paying 35% per month extra to buy rather than rent.

I realise that the monthly repayments are reduced because of the large deposit but to appraise the investment you still need to look at the cost of using your own money (being the interest foregone).

Thanks, that helps. I have a slight twist though, house has potential to extend. Its the smallest house on the street and the only one that has not been developed. All surrounding houses are in this market around £100 to £150k more!. Its in the best area in town. If we spent say £25k on an extension we could increase value and thus would take it into a higher property bracket. If we did this would it help compensate paying 35% more now but nominal prices may well fall over the next 10 years...

Am I trying to work out the impossible!!. Thanks for any input, I am quite stressed about this!

Lou

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It depends on your own personal circumstances and what you think will happen to house prices.

It's sounds like you're toying with borrowing around £100K to buy a £200Kish property?

If this is the case then I can only assume that you a renting a property that is more substantial than the one you intend to buy?

If this is the case then I suspect you may well be better off buying, or alternatively downsizing to a smaller rental.

Getting a £160k mortgage on a £325k house. House we are renting is a bit cheaper in price to the one we are buying but the one we are buying is in a slightly better location and has potential to extend.

Both 4 bed detached houses. Mortgage is twice joint income, presently.

I'm anxious as you can probably tell!. If we moved into this property we would probaby never move again!

Any advice much appreciated.

Lou

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Thanks, that helps. I have a slight twist though, house has potential to extend. Its the smallest house on the street and the only one that has not been developed. All surrounding houses are in this market around £100 to £150k more!. Its in the best area in town. If we spent say £25k on an extension we could increase value and thus would take it into a higher property bracket. If we did this would it help compensate paying 35% more now but nominal prices may well fall over the next 10 years...

Am I trying to work out the impossible!!. Thanks for any input, I am quite stressed about this!

Lou

You need to drop that stress right now, before somebody preys on it.

If you let that happen then you will be fecked.

Surely you can see you would be paying too much? And taking on more risk?

Would this make you more or less stressed?

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I'm still confused on the maths!!. We rent for 1k a month and can purchase (offer accepted) for

say a 10 year repayment fixed at 5% for £993 a month. Yes, renting we are getting interest on our

savings but this is also eaten away by inflation. Putting down a 50% deposit.

Do I keep renting for say the next 5-8 years until this thing bottoms out or buy now and just keep paying off the mortgage.!!!! I really hate this bubble!!!

Don't forgot to figure in all the other expenses associated with owning a home.

Keeping a house in good shape costs money--much more than most people budget for. You can't just equate a mortgage payment to a rent payment. There's taxes, insurance, and repairs. Endless repairs.

I'm always amazed when people brag about how much equity they've built up in their homes--without deducting the tens of thousands they've spent on a new roof, modernized kitchen, updated electrical workings, etc. I keep track of that money, so I'm a bit more humble about how much money I've "made" on my home. ;)

Isn't there an old Cary Grant movie called "The Money Pit"?

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You need to drop that stress right now, before somebody preys on it.

If you let that happen then you will be fecked.

Surely you can see you would be paying too much? And taking on more risk?

Would this make you more or less stressed?

mme I know.! I suppose I will know when its the right time to buy - when I don't think about it and just buy!.

Looks like might be in rented for many years to come, hubby will probably retire before he gets me to buy a house!!!

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Don't forgot to figure in all the other expenses associated with owning a home.

Keeping a house in good shape costs money--much more than most people budget for. You can't just equate a mortgage payment to a rent payment. There's taxes, insurance, and repairs. Endless repairs.

I'm always amazed when people brag about how much equity they've built up in their homes--without deducting the tens of thousands they've spent on a new roof, modernized kitchen, updated electrical workings, etc. I keep track of that money, so I'm a bit more humble about how much money I've "made" on my home. ;)

Isn't there an old Cary Grant movie called "The Money Pit"?

It does need an alarm for a start!!! and I suppose thats around £700 plus..Maybe just do what we did last year and book a fab holiday!!!

I see. So the mortgage you were thinking of wouldn't be paid off after 10 years - it was just a 10 year fix.

I can understand why it's a close call for you. If you've found the house that you really, really want and you're comfortable and happy with the repayments then it all really just boils down to whether the extra financial cost of buying today outweighs the emotional cost of waiting.

Whatever you do, don't let houses rule your life - whether you're buying or renting.

Its hard, I go to my younger sisters homes and just wish I had a home to put my own stamp on a place, wish I could paint my daughters bedroom pink etc but on the other hand they cannot afford to have holidays and we have no mortage at the moment. I'm very torn, so is hubby.!!

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It does need an alarm for a start!!! and I suppose thats around £700 plus..Maybe just do what we did last year and book a fab holiday!!!

Its hard, I go to my younger sisters homes and just wish I had a home to put my own stamp on a place, wish I could paint my daughters bedroom pink etc but on the other hand they cannot afford to have holidays and we have no mortage at the moment. I'm very torn, so is hubby.!!

I think you’re more jealous of your sister and worried about others stigmatising you, to the point your prepared to jump into a financial situation you know is bad.

If you were really serious you would not be talking about "a fab holiday!!!"

I am beginning to believe you are endemic of the sort of person who has perpetuated this buy now pay later bubble.

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I'm still confused on the maths!!. We rent for 1k a month and can purchase (offer accepted) for

say a 10 year repayment fixed at 5% for £993 a month. Yes, renting we are getting interest on our

savings but this is also eaten away by inflation. Putting down a 50% deposit.

Do I keep renting for say the next 5-8 years until this thing bottoms out or buy now and just keep paying off the mortgage.!!!! I really hate this bubble!!!

Your renting is cheaper than buying .....as from what you've said buying on a 100% interest only mortgage would be a lot more than you're currently paying in rent......(although i have no idea how the 2 properties compare)

It is the amount it costs to service a 100% interest only mortgage that should be compared with rent........as even if you have a lump sum in the bank as a deposit................the interest foregone on that deposit if you use it to buy should be taken into consideration......

That interest might be eroded by inflation but this is small beer compared to what you could save if you waited for the crash.....even if the crash only manifests itself as people who have to sell accepting 10% discounts.

the £325k house you're buying would be £1350 a month to buy on an interest only 5% mortgage or about £1620 if you took out a 15 fixed rate to insure yourselves against IR rises..............

If a similar property can rented for £1000 I would rent for the time being at least as prices cannot rise any further and should fall 10% if you're prepared to wait........and get £8000 a year in interest on your STR money........

Edited by Michael

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I think you’re more jealous of your sister and worried about others stigmatising you, to the point your prepared to jump into a financial situation you know is bad.

If you were really serious you would not be talking about "a fab holiday!!!"

I am beginning to believe you are endemic of the sort of person who has perpetuated this buy now pay later bubble.

My family are all very bullish on house prices and its hard to go against the tide.

I am very serious, im 39 years old and feel its the most important decision of my life!.

I have been married for 8 years and in that time, started a business, liquated a business,! had a baby with no maternity leave! ie locked up office Friday night at 7pm, had baby saturday and back in the office Monday - no time off!. I'm a hard worker, no honeymoon, no holiday since we married and then last year had a fab one as I think we deserved it. I'm not materalistic hence have been renting for 2 years in a small flat before we moved last July. The family do "laugh" at us and think we are mad.

Its just when a property comes up, in what you feel is a good price for the current market, we looked and liked! thats all and Im very cautious about making the right choice.

Your renting is cheaper than buying .....as from what you've said buying on a 100% interest only mortgage would be a lot more than you're currently paying in rent......(although i have no idea how the 2 properties compare)

It is the amount it costs to service a 100% interest only mortgage that should be compared with rent........as even if you have a lump sum in the bank as a deposit................the interest foregone on that deposit if you use it to buy should be taken into consideration......

That interest might be eroded by inflation but this is small beer compared to what you could save if you waited for the crash.....even if the crash only manifests itself as people who have to sell accepting 10% discounts.

the £325k house you're buying would be £1350 a month to buy on an interest only 5% mortgage or about £1620 if you took out a 15 fixed rate to insure yourselves against IR rises..............

If a similar property can rented for £1000 I would rent for the time being at least as prices cannot rise any further and should fall 10% if you're prepared to wait........and get £8000 a year in interest on your STR money........

Thanks Michael.

Lou

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My family are all very bullish on house prices and its hard to go against the tide.

I am very serious, im 39 years old and feel its the most important decision of my life!.

I have been married for 8 years and in that time, started a business, liquated a business,! had a baby with no maternity leave! ie locked up office Friday night at 7pm, had baby saturday and back in the office Monday - no time off!. I'm a hard worker, no honeymoon, no holiday since we married and then last year had a fab one as I think we deserved it. I'm not materalistic hence have been renting for 2 years in a small flat before we moved last July. The family do "laugh" at us and think we are mad.

Its just when a property comes up, in what you feel is a good price for the current market, we looked and liked! thats all and Im very cautious about making the right choice.

Sorry don't mean to offend. But it is the market itself that is wrong. You should not compare any price to current prices because current prices are WAY OFF THE SCALE.I believe you know this.

I can simpethise that the rest of your family think you're mad and they will probably think you are LUCKY! When you buy at the right time and get the easily affordable house you deserve.

To continue on your tidal theme. Don't wade into the estuary just as the tide starts going out, else you will never get back to dry land.

Stick around you will soon learn

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Sorry don't mean to offend. But it is the market itself that is wrong. You should not compare any price to current prices because current prices are WAY OFF THE SCALE.I believe you know this.

I can simpethise that the rest of your family think you're mad and they will probably think you are LUCKY! When you buy at the right time and get the easily affordable house you deserve.

To continue on your tidal theme. Don't wade into the estuary just as the tide starts going out, else you will never get back to dry land.

Stick around you will soon learn

Thanks.

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There are other considerations....If you rent you are always flexible in that you can move more easily. You can also be moved more easily which can be a big downside. If you buy and there is a slump you will potentially be in a negative equity position dependent on your deposit. It could of course not come down and stay flat or even go up. I'm not as bearish as most folks on here but having experienced Neg Equity before and beings stuck for 3 years I'm a bit gun shy about getting caught again, spending 3 years in a house I didn't want was not nice.

Don't get caught up in emotional statements like Renting is DEAD Money, interest is ALSO Dead money. Capital loss due to house price crash,erosion or whatever is a potential disaster that is MORE likely to happen than its not likely to happen. No one knows if it will in any specific case though.

Do the arithmetic on the Mortgage versus rent cost and then weigh up the other factors, some of which i mention here. However just because everyone else has a mortgage doesn't make it the right thing for you now. Remember most of them will have a much bigger Equity buffer than you.

See a house you like today for 112K, buy it in a year for 100K, you're saving 12K. Its real money :ph34r:

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Guy in his mid-twenties at my work has just bought a one bed flat at a ridiculous price - he was just so desperate to get out of his parents house. When i suggested renting somewhere, the same 'it's dead money' mantra was quoted to me. I did try to explain how he could lose more if (or when??) the market started taking a serious nosedive - he wasn't interested in the slightest.

It could get very messy very quickly here in the East Midlands! In last weeks property guide one estate agent had EVERY single house (about 25) advertised with 'No Chain'. Hmmmmmmm, something tells me these people know what dead money is.

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My father said to my last week, renting is dead money, you might as well be paying a mortgage.!

I think what is hard is that the sensible, head-screwed on people are few hence we have this huge bubble!

My hubby is also worried that if bird flu hits us his business would be wiped out overnight, the flexibility with renting is that we can move and downsize overnight!!!. I just needed to thrash my thoughts out as getting "caught up" with it all again!

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My father said to my last week, renting is dead money, you might as well be paying a mortgage.!

I think what is hard is that the sensible, head-screwed on people are few hence we have this huge bubble!

My hubby is also worried that if bird flu hits us his business would be wiped out overnight, the flexibility with renting is that we can move and downsize overnight!!!. I just needed to thrash my thoughts out as getting "caught up" with it all again!

Would you be happy repaying a £150,000 mortgage + interest, after spending your deposit on a house only to find out after five years it's worth £90,000?

If your husband is self employed I would concentrate on keeping all your commited out goings to an absolute minimum, there is some potentially serious credit tightening on the horizon.

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  • 337 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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