If You Are Over 45...rent..do Not Buy

[VacantPossession]

Actually I would say don't buy anyway, but especially so if you are middle aged and have some spare cash. The last thing I would do is blow my reasonable savings on a deposit for vastly inflated mortgage on a vastly inflated capital cost of housing.

Currently I am renting a very comfortable place....not luxurious but comfortable. To attain the same degree of comfort I would have to let go of all my hard earned savings, then pay an enormous sum per month...in fact nearly DOUBLE what I am paying in rent, in order to carry on in the same place.

This makes absolutely zero sense.

Which is why when the crash comes....and it still will, it is going to be violent.

The only possible reason why 90% of the population has been prepared to mortgage themselves to insane levels, and the only reason others let them do it, is pure personal greed. But, at last, every indication is that the party really is over now.

125% mortgages are an invitation to lemmings to throw themselves off Beachy Head. The party would have been over three years ago if the idiocy of the British Property Buying Population had not been taken in by the myth that not buying puts you into the gutter. On the contrary, there has never been a better time to rent.

Landlords are going to be falling over themselves to attract buyers, failing which they will kill for a reliable tenant, failing which many of them, overstretched and under-brained, will shortly "market" their "portfolios" in ever increasing desperation.

Pick the right area and you can live in rented at around HALF "owning" will cost you.

VacantPossession

Edited November 8, 2006 by VacantPossession

[Guest Charlie The Tramp]

The only possible reason why 90% of the population has been prepared to mortgage themselves to insane levels, and the only reason others let them do it, is pure personal greed. But, at last, every indication is that the party really is over now.

90% of the population are prepared to mortgage to insane levels ?

[DaggaDagga]

Can you give some figures about the rent/buy costs? i.e. what do you pay per month, and how much is the house worth? Where is it?

I believe that in much of the country, rent at least covers an interest-only mortgage. Double the rent sounds a bit extreme.

There is also risk in not buying. If you buy the house you can afford now, you will still own a house. If you don't buy now then you might end up having enough for a castle or a bedsit (or anything in between).

[AgeingBabyBoomer]

Can you give some figures about the rent/buy costs? i.e. what do you pay per month, and how much is the house worth? Where is it?

I believe that in much of the country, rent at least covers an interest-only mortgage. Double the rent sounds a bit extreme.

No it doesn't

There is also risk in not buying. If you buy the house you can afford now, you will still own a house. If you don't buy now then you might end up having enough for a castle or a bedsit (or anything in between).

You don't 'own' the house, you own a large debt (aka a mortgage).

If it is interest only, you are merely renting from the bank.

ABB

[PropertyGuru]

bank renter. Noun. CF numpty.

[RobK]

Can you give some figures about the rent/buy costs? i.e. what do you pay per month, and how much is the house worth? Where is it?

I believe that in much of the country, rent at least covers an interest-only mortgage. Double the rent sounds a bit extreme.

There is also risk in not buying. If you buy the house you can afford now, you will still own a house. If you don't buy now then you might end up having enough for a castle or a bedsit (or anything in between).

I live in North London - a repayment morgage on the flat I am currently renting would be 180% of my current rent. Makes no financial sense to buy - for exactly the same economic reasons that it makes no sense for my landlord to continue renting and not cash-in.

The only risk in not buying is if prices continue to go up. The way I look at it - prices may continue to go up, but relying on capital growth in the current market is a very risky investment. By renting, I am saving loads of money in the bank completely risk-free.

[wotnocrash]

I live in North London - a repayment morgage on the flat I am currently renting would be 180% of my current rent. Makes no financial sense to buy - for exactly the same economic reasons that it makes no sense for my landlord to continue renting and not cash-in.

The only risk in not buying is if prices continue to go up. The way I look at it - prices may continue to go up, but relying on capital growth in the current market is a very risky investment. By renting, I am saving loads of money in the bank completely risk-free.

That is not typical of north london. My house would rent for about 1200pcm and my repayment mortgage (25 years) are £1500pcm (I bought spring 06). It is highly unlikely that you will ever be able to get a property on a repayment mortgage for the same outgoings as rent. You may be saving loads of money in the bank, but have you saved the £30k that the average property in London has risen in the past year?

[88Crash]

Can you give some figures about the rent/buy costs? i.e. what do you pay per month, and how much is the house worth? Where is it?

I believe that in much of the country, rent at least covers an interest-only mortgage. Double the rent sounds a bit extreme.

There is also risk in not buying. If you buy the house you can afford now, you will still own a house. If you don't buy now then you might end up having enough for a castle or a bedsit (or anything in between).

I'm renting a 700K house for £1825 per month (and that includes a gardner)

I doubt if an IO mortgage would cover that??

[wotnocrash]

I'm renting a 700K house for £1825 per month (and that includes a gardner)

I doubt if an IO mortgage would cover that??

That may be a bargain, but long term, would you not be better spending that £1825pcm on a repayment mortgage on a £300k property instead? Your 1825 per month is never going to buy that 700k property or anything close to it.

[Orbital]

I think the original poster makes the mistake of thinking people only see houses as investments. Whilst this is clearly true for him and many others, for me I saw a house as a home and an investment. I was once forced out of my rented home and its not nice. If you have a family and kids it is important to many parents (sure not all, but many) to provide a stable consistant family home for them. Having been forced out by a LL Id never rent again, you think you are protected, but if the LL wants you out, he'll get you out. You can make things difficult and delay, but then the LL will make your life difficult too, lifes too short to deal with that stress - the only winners in our legal system are the lawyers.

This site is clearly single male orientated and for that reason I can comprehend the lack of understanding of the desire to 'nest' and to create a home for oneself, the desire to style as you see fit and improve it in the way you want. All things that are difficult when you rent, and lets be honest who wants to improve someone elses home at their own cost, especially when you might be removed in one or two years time (when the LL decides to cash in for example )?!

Sure, for many buying a home is just about money, I think this is kind of sad and goes against our natural dwelling instincts, but each to their own. Personally house buying for me was about stabilty and family provision, so I was therefore motivated to build up the large deposit I required to obtain an affordable mortgage and provide a cushion in the event of a down turn. Long term fixed rates give me plenty of time to get the mortgage down, and insurance covers illness and death (cheery!), maybe the paper value of my house will go down, why should that bother me? Whatever happens, I just need to make my payments and in 25 years (actually about 15 at my overpayment rate), Ill own a house outright.

There's more to life than money. No, really there is.

for exactly the same economic reasons that it makes no sense for my landlord to continue renting

He's told you how much his mortgage is? you'll probably tell me he has lol, but anyway you must remember landlords wont be on 100% mortages. I think people make the mistake of thinking all landlords pay huge monthly installments, remember if they own a property outright then they make 100% profit (expenses ignored for simplicity ). Unless you know what mortgage they have then you are only guessing what their yield is. My parents downsized and invested their free capital, their London flat they rent out brings in over 12k(!!) a year and all they have to do is the odd bit of maintenance. Thats more than my take home pay a few years back. If in their position I wouldnt change a thing.

Life doesnt have to be about squeezing every last penny out of every decision you make. Geesh what a way to live.

Edited November 9, 2006 by Orbital

[RobK]

It is highly unlikely that you will ever be able to get a property on a repayment mortgage for the same outgoings as rent.

Indeed - and yet there are still loads of BTL landlords out there. Presumably still waiting for that extra bit of capital growth. And remember - these figures are all pre-costs - the actual saving from renting is more than just the difference between rent and repayment mortgage.

You may be saving loads of money in the bank, but have you saved the £30k that the average property in London has risen in the past year?

To be honest, that is irrelevant - risky investments can go both up and down. I reckon there is a fair chance house prices may go down over the next couple of years, but I could be wrong. But I know for certain my savings will go up.

[wotnocrash]

Indeed - and yet there are still loads of BTL landlords out there. Presumably still waiting for that extra bit of capital growth. And remember - these figures are all pre-costs - the actual saving from renting is more than just the difference between rent and repayment mortgage.

To be honest, that is irrelevant - risky investments can go both up and down. I reckon there is a fair chance house prices may go down over the next couple of years, but I could be wrong. But I know for certain my savings will go up.

Unless your savings are in government bonds, they are not risk free. Anyone remember what else happened back in the early 1990's? BCCI? I wouldn't call £30k irrelevant.

[frugalista]

Unless your savings are in government bonds, they are not risk free. Anyone remember what else happened back in the early 1990's? BCCI? I wouldn't call £30k irrelevant.

Yes, technically there is a risk of bank failure.

First of all BCCI was a secondary bank, not a high street bank. It offered its clients a slightly higher interest rate and the downside (as they found out to their misfortune) was that it was a riskier bank.

Secondly the risk is tiny, especially if you don't put more than £30k in any single account as your savings are then insured against loss. It is surely dwarfed by the risks associated with owning a single property investment.

I would not advocate holding cash over the long term but for short periods (possibly including now) it can be the most sensible thing.

Even if your savings are in government bonds, they are not risk free. Remember Argentina and Russia, which defaulted on bonds in the last few years?

frugalista

Edited November 9, 2006 by frugalista

[Europa]

Actually I would say don't buy anyway, but especially so if you are middle aged and have some spare cash. The last thing I would do is blow my reasonable savings on a deposit for vastly inflated mortgage on a vastly inflated capital cost of housing.

Currently I am renting a very comfortable place....not luxurious but comfortable. To attain the same degree of comfort I would have to let go of all my hard earned savings, then pay an enormous sum per month...in fact nearly DOUBLE what I am paying in rent, in order to carry on in the same place.

This makes absolutely zero sense.

Which is why when the crash comes....and it still will, it is going to be violent.

The only possible reason why 90% of the population has been prepared to mortgage themselves to insane levels, and the only reason others let them do it, is pure personal greed. But, at last, every indication is that the party really is over now.

125% mortgages are an invitation to lemmings to throw themselves off Beachy Head. The party would have been over three years ago if the idiocy of the British Property Buying Population had not been taken in by the myth that not buying puts you into the gutter. On the contrary, there has never been a better time to rent.

Landlords are going to be falling over themselves to attract buyers, failing which they will kill for a reliable tenant, failing which many of them, overstretched and under-brained, will shortly "market" their "portfolios" in ever increasing desperation.

Pick the right area and you can live in rented at around HALF "owning" will cost you.

VacantPossession

You sound a little desperate

I think the idea is that you should have paid off your mortgage by the time you reach 45 - 50. Alternatively, the mortgage you originally took out will have been eroded by inflation over the years and will be peanuts in comparison with rent.

But if you're happy to rent until the day you die, and to watch your monthly rent payments go up with inflation, then be my guest Quite why you expect anyone else to follow is beyond me.

The party would have been over three years ago if the idiocy of the British Property Buying Population had not been taken in by the myth that not buying puts you into the gutter

Erm, yes... the housing market would indeed have crashed if it hadn't been for those pesky buyers

[adibrown]

That may be a bargain, but long term, would you not be better spending that £1825pcm on a repayment mortgage on a £300k property instead? Your 1825 per month is never going to buy that 700k property or anything close to it.

I think your missing the point. It is only a good option if prices continue to rise and after 8-10 years of rises it seems economics would predict a higher chance that prices will now enter a downward shift than continue upwards. With this in mind you would be foolish to buy when you would be losing on average an additional £400 a week in capital if the market heads downwards.

Only fools buy in a market this inflated. The clever money goes on rent until prices hit the bottom and begin to rise again.

The real skill is calling the bottom....probably in about 5 years time (although looking at the US it could be 2 years).

[MarkG]

He's told you how much his mortgage is? you'll probably tell me he has lol, but anyway you must remember landlords wont be on 100% mortages.

The size of the mortgage is irrelevant to a rational landlord; what matters is the yield relative to the current value of the house. If you bought a house for a thousand pounds in 1965 and rented it out for twenty pounds a month today when it's worth 300,000, you'd hardly be boasting about your wonderful 10% yield.

[BearBum]

I'm 46 (recently divorced) & was resigned to the fact that I couldn't afford a decent place of my own taking into account maintenance payments etc. etc.

I have however kept looking & have just found & bought a small 2 bed house that is perfect for me. Stone, end terrace with original beamed ceiling etc. Loads of character & in a picturesque rural village nr Durham. The only downside for me, is there is no parking immediately outside the house but I am prepared to sacrifice that. Basically, I've bought the place for 76k which means I have had to take out a mortgage of 20k over 20 years. I do think prices will drop at some stage but I loved this little place as soon as I saw it & to be honest, can't imagine losing a huge amount on it. if at all. I don't intend moving for a long time anyway.

Basically, what I'm saying is just keep looking & it is just possible you might find something affordable & that you actually like but It is tough & depressing at the moment I know.

[frugalista]

The size of the mortgage is irrelevant to a rational landlord; what matters is the yield relative to the current value of the house. If you bought a house for a thousand pounds in 1965 and rented it out for twenty pounds a month today when it's worth 300,000, you'd hardly be boasting about your wonderful 10% yield.

LOL still a lot of people who need to learn the basics from this forum....

BTW I make it a 24% yield!

wow.....

frugalista

[IamSpartacus]

LOL still a lot of people who need to learn the basics from this forum....

BTW I make it a 24% yield!

wow.....

frugalista

Ummm, no - 0.08%. What matters is the current market value. If you aren't getting a good yield on that you might as well sell it and put the £300K in the bank.

[DaggaDagga]

I spent 5 years moaning about high prices and waiting for the crash before becoming a FTB last year. When I stopped moaning and actually started looking I realised that they're not actually that expensive.

Oh, and we're one of the idiots with an interest only mortgage. But this is tied into our offset accounts. So far, we've paid off much more capital than we would have paid on a repayment mortgage. The only difference is that we choose when and how much capital to pay, rather than the bank dictating it. People are not as stupid as some may believe.

And here's a weird way of looking at it... We bought a house for 195k. The interest is about the same as we were already paying in rent, so it's no additional cost compared with renting. If we pay £300 a month into the offset account then that pays the mortgage off in full in 25 years. £300 x 12 x 25 = £90,000. So this house will actually cost us less than half of what we've bought it for. Plus the interest and this £300 will not rise with inflation. Rents do rise.

...and I bought my first BTL house 3 months ago.

[RobK]

Ummm, no - 0.08%. What matters is the current market value. If you aren't getting a good yield on that you might as well sell it and put the £300K in the bank.

Exactly right. Amazing how often this comes up on this forum.

What has happened in the past is irrelevant (other than showing what the return on your original investment is) - all that matters is the yield that you will make on your current investment (i.e. the equity that you could release if you sold) in the future.

Edited November 9, 2006 by RobK

[MarkG]

BTW I make it a 24% yield!

True, I hadn't had any coffee before making that post .

[adibrown]

I spent 5 years moaning about high prices and waiting for the crash before becoming a FTB last year. When I stopped moaning and actually started looking I realised that they're not actually that expensive.

Oh, and we're one of the idiots with an interest only mortgage. But this is tied into our offset accounts. So far, we've paid off much more capital than we would have paid on a repayment mortgage. The only difference is that we choose when and how much capital to pay, rather than the bank dictating it. People are not as stupid as some may believe.

And here's a weird way of looking at it... We bought a house for 195k. The interest is about the same as we were already paying in rent, so it's no additional cost compared with renting. If we pay £300 a month into the offset account then that pays the mortgage off in full in 25 years. £300 x 12 x 25 = £90,000. So this house will actually cost us less than half of what we've bought it for. Plus the interest and this £300 will not rise with inflation. Rents do rise.

...and I bought my first BTL house 3 months ago.

All good and well as long as houses keep going up in price........of course if prices drop by lets say 30% I can buy the same house next door in 2 years time and pay 30% less every month in interest and also pay off the debt around 8 years quicker than you

But lets not forget, its different this time. You should be OK.

[DaggaDagga]

All good and well as long as houses keep going up in price........of course if prices drop by lets say 30% I can buy the same house next door in 2 years time and pay 30% less every month in interest and also pay off the debt around 8 years quicker than you

But lets not forget, its different this time. You should be OK.

It doesn't really matter whether prices rise or fall. And you really don't want to live next door to me. Good luck waiting for the big crash

[adibrown]

It doesn't really matter whether prices rise or fall. And you really don't want to live next door to me. Good luck waiting for the big crash

A terrible misconception. If you buy something really expensive by borrowing money and you are tied into paying say £1400 a month interest and repayment (whatever form this is in) for 25years and then I come along 2 years later and pay a lot less and I then pay £900 a month for 25 years.

Do you think that the fact that I have £500 more than you every month but we both have the same house doesn't matter.

Think about it son, think about it.