Answer To 'should I Buy Now Or Rent' Questions

[Democorruptcy]

So you're renting a £350,000 house for £550pcm? Where is this?

What has £550pm (£6,600 per year) got to do with anything?

[porca misèria]

Why 5%?

£300k at 4% = £12k minus 20% tax = £9.6k = £800 a month - if his rent is less than £800 then 4% is enough on £300k

That figures. 5% becomes at most 4% net of tax, unless it's in a tax shelter.

It's at the lower end, where the hoards of involuntary renters are, that buying is so much cheaper than renting. Where a flat might be £89k to buy or £595/month to rent. The poor getting ****ed.

[19 year mortgage 8itch]

That figures. 5% becomes at most 4% net of tax, unless it's in a tax shelter.

It's at the lower end, where the hoards of involuntary renters are, that buying is so much cheaper than renting. Where a flat might be £89k to buy or £595/month to rent. The poor getting ****ed.

Why is rent so much in that case? LHA...

IME, most flats are leasehold with monthly fees to consider as well.

[Dr Renter]

If I were to draw £350K out of the bank and buy the house I'm renting, I'd lose £11,200 per annum in interest after tax (I'm retired and no longer pay 40%), I pay less than that in rent and my money is sitting in the bank rather than being tied up in a depreciating, illiquid, asset.

Of course, if you factor in maintenance, falling house prices etc, I'm substantially better off renting.

So you're renting a £350,000 house for £550pcm? Where is this?

[Bruce Banner]

Yes, in your personal case you are able to overcome the tax efficiency of owning housing because your landlord has a very low rental yield and your income tax rate is low.

At the moment, rental prices in your area favour the approach you are taking.

In general (especially if houses return to 3x wages and rental yields go back to double digits), the tax system favours owning a house over renting one and investing elsewhere.

Edit: I seem to recall you saying your landlord is getting a 2% yield and you are earning 5%+ on NS&I certificates (which are no longer available of course). You must admit this is a very unusual situation and one which is not available to most of the population. The going rate is about 5% yields on rent and 3% on savings.

There are quite a lot of posters here who are in a similar position to me. If you shop around for good rental deals and interest rates, it can be done.

[Bruce Banner]

So you're renting a £350,000 house for £550pcm? Where is this?

Wrong, as usual .

[this_prisoner_is_opting_out]

I am currently paying 680 euros a month on a 1-bed rental flat.

I am going to buy at 100% and my fixed 10 year repayment will be approx 320 a month for a 3-bed house.

Utilities coming in at the same due to superior insulation on the house.

I'm prepared for further falls at these kind of prices.

[ccc]

Same story in the Scotsman today. However the detail is a little more illuminating.

Scotsman

"IT IS cheaper to buy a property than rent one in 80 per cent of towns in Britain because of falling house prices and rising rents, research suggests. Rents on a two-bedroom flat are now typically 9.9 per cent higher than interest-only mortgage payments, said Zoopla.co.uk."

Well - that rather changes things doesn't it. Did the other article not think this info was important....

[Dr Renter]

Sums are not your strong point , are they .

£350,000 x 5% is £17,500 annual savings

Take off the £11,200 you say you'll lose and that's £6,300 or just over £500pcm.

[Bruce Banner]

£350,000 x 5% is £17,500 annual savings

Take off the £11,200 you say you'll lose and that's £6,300 or just over £500pcm.

You post as though stupidity were a virtue .

When in a hole, stop digging.

[Cinzano Bianco]

Nothing is certain in life, but I'm very relaxed. I would certainly be 'shitting myself' if my money was tied up in an, illiquid, depreciating asset though.

Agree entirely (I am in a rented house also)... but if TSHTF, you would still have your house rather than a lot of pretty toilet paper. If I had your cash, I would be seriously think about buying a nice house with a plot of land (and some guns and stuff ).

[cardiffone]

Havent we been through all this before, in the long run it is still cheaper to buy than rent.

end of story.

If you have other needs like flexibility or you have some really good investments, in can be better to rent...

that doesn't apply to most people in most areas

[Dr Renter]

You post as though stupidity were a virtue .

When in a hole, stop digging.

Ah yes, the classic HPC response, don't respond with facts, respond with insults. A good tactic I suppose, the less info you give out, the less likely you'll trip yourself up. I would imagine it's difficult for you to remember what is truth and what is BS. This used to be such a lively and informative forum, sadly it's loons like you who have ruined it.

[ccc]

Does nobody else think it is pretty shocking the original article didn't even mention this was based on interest only mortgages ?

Scandalous IMO. Unless the Scotsman article is wrong of course.

[Bruce Banner]

Agree entirely (I am in a rented house also)... but if TSHTF, you would still have your house rather than a lot of pretty toilet paper. If I had your cash, I would be seriously think about buying a nice house with a plot of land (and some guns and stuff ).

Actually, even that's not a certainty. Governments can kick you out of your house if they want to, they call it compulsory purchase.

[Bruce Banner]

Ah yes, the classic HPC response, don't respond with facts, respond with insults. A good tactic I suppose, the less info you give out, the less likely you'll trip yourself up. I would imagine it's difficult for you to remember what is truth and what is BS. This used to be such a lively and informative forum, sadly it's loons like you who have ruined it.

But your questions are not based on what I have said. Can you not read?

[ccc]

This is the actual Zoopla blog

BLog

"(assuming interest-only mortgage at 5% interest p.a.)"

This article:

"an owner with a mortgage with a pay rate of 5 per cent"

-------------------------------------------------------------------------------------

If anyone can be bothered I think this could be one for the Press complaints Commision. I may send an email later myself. Leaving out the interest only bit and replacing with 'pay rate' is completely misleading IMO.

[Dr Renter]

If I were to draw £350K out of the bank and buy the house I'm renting, I'd lose £11,200 per annum.

You didn't write that then?

[Bruce Banner]

You didn't write that then?

Yes I did, but you have not quoted the complete post.

If I were to draw £350K out of the bank and buy the house I'm renting, I'd lose £11,200 per annum in interest after tax (I'm retired and no longer pay 40%), I pay less than that in rent and my money is sitting in the bank rather than being tied up in a depreciating, illiquid, asset.

Of course, if you factor in maintenance, falling house prices etc, I'm substantially better off renting.

[Riedquat]

I couldn't afford the mortgage to buy the house I'm renting, and when interest rates go up that would just be even worse. I find it astounding that so many people have been so short-sighted about interest rates.

[bb7t6]

Does nobody else think it is pretty shocking the original article didn't even mention this was based on interest only mortgages ?

Scandalous IMO. Unless the Scotsman article is wrong of course.

Not scandalous at all. If you're comparing costs of renting vs buying, it would be an unfair comparison to include capital repayments.

For what it's worth my example from the real world is that I rented my 2 bedder out for 4 years to 3 separate tenants, they paid between £700-£725 pcm. I now live there and have a Barclays offset mortgage with current rate of 2.8%. The property has an approx value of £180k, and my mortgage is just under £90k so the interest portion on my monthly payments are £210. I know that I'd be earning interest on the equity if I sold, but savings rates would nowhere near cover the shortfall. It is definitely cheaper for me to have bought than rent my current place.

[cakehead]

As someone about to re-enter the rental sector after fifteen years of ownership - this time with a family - my searches bear out that renting is frigging expensive at the moment. Okay we have a tiny mortgage but a house as nice as ours to rent is about 1300pcm and they're as rare as you like and most have barmy conditions. Buying an equivalent property would cost about 900 a month.

As ever you have to balance the real or notional security of your own gaff against the actual or perceived flexibility of renting. It's a tough call for us but while I'm far from convinced there'll be a crash (in fact I'd bet a tidy sum there won't be) I think there's some room for further falls and, more importantly, there'll be a lot more choice 18 months down the line.

[porca misèria]

Does nobody else think it is pretty shocking the original article didn't even mention this was based on interest only mortgages ?

Scandalous IMO. Unless the Scotsman article is wrong of course.

Where's the problem with that? Rents and Interest are precisely the direct comparables.

[winkie]

Not scandalous at all. If you're comparing costs of renting vs buying, it would be an unfair comparison to include capital repayments.

Renting is cheaper if you take interest rate at say 4% IO....Prices are stagnant or falling, people also underestimate the true cost in maintaining a property...only those that own one know how this can drain the finances....also renters can shop around and can move quickly if need be...when interest rates start to rise again and there is a far less choice of places where you can remortgage, that is if you can, things could get more difficult....renters imo are not as silly as some make them out to be.

[Democorruptcy]

You didn't write that then?

£350k at 4% = £14k - 20% tax = £11,200 in interest income - that's what he loses if he withdraws the cash.

If his rent is less than £933.33 or less it is covered by the interest.