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Answer To 'should I Buy Now Or Rent' Questions


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HOLA441
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HOLA442

Early next year I'll be buying (first time buyer) except I'll be buying outright with cash. Currently looking into around £130k -£150k, 3-bed semi-detached minimum. Its going to be for living in, not for investment. I'm not gonna be stretched, and since renting per year would amount to £5-7k, I can afford to take that kind of hit per year, when prices drop.

I think especially for the lower end of the market, when you consider rental costs (and the negatives associated with renting, whatcha can't do/have) vs buying outright with cash, buying during the early phases of a crash can still make financial sense. Whereas for those currently renting with a STR fund looking to buy at the middle to the top end (say, 400k+) you'd probably best to wait it out further.

If my logic is wrong please help correct me :P

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Rent in London, Buy everywhere else.

Prices are as unaffordable in most of the Home Counties as they are in London so I do not think the above statement is useful.

At the moment interest rates are at a record low but as soon as they start rising mortgages could rise to 6 - 7% within the next few years. The NS&I have recently withdrawn a lot of their savings products which matched inflation which is a possible indicator that the Govt. expect inflation to rise.

A house is a medium to long term purchase which means if people do stretch themselves to get on the ladder now they could face serious problems within the next few years if inflation does start to rise. I am sure we have not forgotten only a few years ago when rates were low and people stretched themselves with a discounted mortgage. After 2 or 3 years the discounted rate falls away and once often has to find a further £300 - £400 a month which for most people can be a lot of money.

The furture of interest rates is the key and there are arguments for the status quo and a rise. I do not know the answer but I do know that unless one can afford a mortgage with enough to spare to allow for any future increases buying now could be a dangerous decision.

M

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OK, there seem to be lots of posts popping up asking 'should I buy now or rent'.

And as Paddles has stated they are always from recent new members with less than 10 posts to their name, but of course they have been looking at this site for years. And yes, they missed out on the opportunity to buy a few years ago.

Pllleeeaaasseee.

Anyway, I'd like to suggest the following as a stock answer to these posts:-

OK, I currently rent a property for £750 per month and similar properties in the area are advertised at £180,000 (notice I said advertised, not worth).

So, I'm going to work out some figures based on this property for someone with zilch savings to their name.

If they purchase the property at £180k and pay a repayment mortgage at 6% over 25 years they would be paying £1,159 per month as opposed to £750 a month rent. Now if that house price drops 30% over the next 4 years they will be down £19,641 having overpaid for the mortgage for 48 months and this property is now worth £126,000. So in reality they have lost £73,641. If the house goes down by 40% they will have lost £91,641.

On interest only, it works out that they will be down £7,200 on overpaying a mortgage as opposed to rent meaning on 30% downturn in property prices they have made a total loss of £61,200 and on 40% drop £79,200.

A STR with dosh in the bank can also pay some/all of the rent with the interest on their savings so they are effectively living rent free.

Take for example a friend of mine. She and her husband have a property which an estate agent would value at £380,000. The have a mortgage of £80k and pay £491/month (repayment). Now if they were to sell tomorrow for £380k they would net around £280k after costs. This would provide £1400 in net interest per month which would pay for the rent of an equivalent property. So they get to live rent free, save £491 per month and watch the house prices drop. Now working on 4 years again that would mean a 30% drop saves them £137,568 and a 40% drop £175,568.

It's a no brainer really!!!!!!!

Comments please - especially all you EA's out there with your first posts! :rolleyes:

[Moderator: This thread is now pinned and any new threads started on the subject will be merged into this one]

have just had an offer accepted for a 3 bed semi £68750 which was 1st on market 28 days ago for 80k quickly reduced to 75k then 69995k as vendor wants a quick sale due to downsizing asap and had to act quickly to get his new smaller 1 bed house ? fair enough..so looks like getting a good deal although was it really worth 80k ? as surely its only worth what someone is prepared to pay for it ? anyway have gone for it anyway as fed up with paying just under 5k rent a yr! but if we are due this new crash does it make sense to buy it now and maybe lose 20/30% of equity..also if it takes 2 yrs for the crash id have still paid another 10k in rent thus surely cancelling out some of the crash..also im going to be paying cash for the house btw..does it make sense to go-ahead with the purchase in my situation ?? the house is a stepping stone to my goal of doing a selfbuild and will become a btl for the long term drawing in 450/500 in rent pcm advice guys cheers :)

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have just had an offer accepted for a 3 bed semi £68750 which was 1st on market 28 days ago for 80k quickly reduced to 75k then 69995k as vendor wants a quick sale due to downsizing asap and had to act quickly to get his new smaller 1 bed house ? fair enough..so looks like getting a good deal although was it really worth 80k ? as surely its only worth what someone is prepared to pay for it ? anyway have gone for it anyway as fed up with paying just under 5k rent a yr! but if we are due this new crash does it make sense to buy it now and maybe lose 20/30% of equity..also if it takes 2 yrs for the crash id have still paid another 10k in rent thus surely cancelling out some of the crash..also im going to be paying cash for the house btw..does it make sense to go-ahead with the purchase in my situation ?? the house is a stepping stone to my goal of doing a selfbuild and will become a btl for the long term drawing in 450/500 in rent pcm advice guys cheers :)

It probably has a realistc insurance value and sits on a bit of land. For all the talking about a 50% crash, I fail to see how in this instance it would be possible. It would actually cost more to buy the land and build on it. The only way you could lose a lot of money is if the world in fact does collapse, and it's a compulsory purchase by the people republic of China. We're all forked if that happens.

* unless it is a real sheit hole and you're not letting on.

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It probably has a realistc insurance value and sits on a bit of land. For all the talking about a 50% crash, I fail to see how in this instance it would be possible. It would actually cost more to buy the land and build on it. The only way you could lose a lot of money is if the world in fact does collapse, and it's a compulsory purchase by the people republic of China. We're all forked if that happens.

* unless it is a real sheit hole and you're not letting on.

no its actually a really nice house well presented newly decorated new carpets central heating double glazing newish kitchen..living room immaculate cracking fireplace gardens front and back driveway for 1 car..needs new bathroom suite, rewiring! although recently decorated! :( + new patio french doors and other minor adjustments really thats all..tbh mate :)

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HOLA449

This is a "hello" message as much as anything. Hello.

My situation is that I bought in 2006. I knew house prices were ridiculous but was fed up with renting and had a child on the way - we moved in a couple of months before he was born. I borrowed about 3.5x salary, which has been totally manageable. Since then, my salary has just about doubled, and I'd like to upsize. I could "afford" to borrow more I'm not keen on borrowing another £100K+ just to get another 2 rooms, or a slightly nicer area or whatever. My job is also an hours drive each way, so I'd like to move closer to work. My wife is stressing a bit about moving to an area where we plan to stay long term before my son starts school in about a years time, so he does not have to make friends and then be dragged away from them.

I think a house price correction is definitely on the way, I'm just not sure whether this will be a crash or a slow deflation over 5 years or so. If it was just me I'd probably sell up and rent, but not sure I want to expose my family to the renting experience unless I have to. I'm probably an overly cautious person in general. I do feel my current salary is inflated - if I lost my job I would probably not be able to get another paying what my current one does. My nightmare situation would be to borrow even a "sensible" amount (say 3.5x my salary now), then lose my job, then IR go up, then prices crash etc., but am I worrying too much?

Seems my options are

* sell up and rent for a couple of years. Could probably rent my "target" house for current morgage + interest on equity. i.e. upsize without buying

* just wait - if prices crash then I will still be better off in terms of the difference to upsize. Potential issue if prices crash too far that my equity would no longer be a big enough deposit, though can probably save a larger deposit easily enough.

* move "sideways" i.e. closer to work but to a similar house, upsize when prices drop. Seems inefficient as I would be paying 2 lots of costs (stamp duty etc) to get to my target house

* bite the bullet, upsize, hope I remain earning what I do. Maybe put in lowball offers 10-20% under asking price?

To be honest, I don't like *any* of my options that much! Leaning towards the sell and rent option at the moment.

Any advice/opinions?

Does anyone know whether its possible to get longer contract terms on a rental? My main concern about going back to renting is the possibliity of settling somewhere then being turfed out with a months notice. I'd be much happier with 3 months notice each way but don't know whether this is possible, or would at least cost more to arrange since it would differ from the standard boilerplate contract.

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HOLA4410

This is a "hello" message as much as anything. Hello.

My situation is that I bought in 2006. I knew house prices were ridiculous but was fed up with renting and had a child on the way - we moved in a couple of months before he was born. I borrowed about 3.5x salary, which has been totally manageable. Since then, my salary has just about doubled, and I'd like to upsize. I could "afford" to borrow more I'm not keen on borrowing another £100K+ just to get another 2 rooms, or a slightly nicer area or whatever. My job is also an hours drive each way, so I'd like to move closer to work. My wife is stressing a bit about moving to an area where we plan to stay long term before my son starts school in about a years time, so he does not have to make friends and then be dragged away from them.

I think a house price correction is definitely on the way, I'm just not sure whether this will be a crash or a slow deflation over 5 years or so. If it was just me I'd probably sell up and rent, but not sure I want to expose my family to the renting experience unless I have to. I'm probably an overly cautious person in general. I do feel my current salary is inflated - if I lost my job I would probably not be able to get another paying what my current one does. My nightmare situation would be to borrow even a "sensible" amount (say 3.5x my salary now), then lose my job, then IR go up, then prices crash etc., but am I worrying too much?

Seems my options are

* sell up and rent for a couple of years. Could probably rent my "target" house for current morgage + interest on equity. i.e. upsize without buying

* just wait - if prices crash then I will still be better off in terms of the difference to upsize. Potential issue if prices crash too far that my equity would no longer be a big enough deposit, though can probably save a larger deposit easily enough.

* move "sideways" i.e. closer to work but to a similar house, upsize when prices drop. Seems inefficient as I would be paying 2 lots of costs (stamp duty etc) to get to my target house

* bite the bullet, upsize, hope I remain earning what I do. Maybe put in lowball offers 10-20% under asking price?

To be honest, I don't like *any* of my options that much! Leaning towards the sell and rent option at the moment.

Any advice/opinions?

Does anyone know whether its possible to get longer contract terms on a rental? My main concern about going back to renting is the possibliity of settling somewhere then being turfed out with a months notice. I'd be much happier with 3 months notice each way but don't know whether this is possible, or would at least cost more to arrange since it would differ from the standard boilerplate contract.

Yes. Ask the agent. You should be able to get a year, perhaps more, but it works both ways.

Also, try to find out as much as poss abput the owner. Are tjey a reluctant landlord - then steer clear. Have they plenty of equity and a portfolio? - then perhaps they are more likely to be able to keep afloat for a longer term.

Get tyhe right landlord (not the right house) and you should be OK.

If the letting agent is any good s/he'll know who's a goof long term tenant and match you into a place for one of his more serious clients. At least, that's my theory.

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I found this when having a look at the express site to see how they had reported the Nationwide figures......guess what.....they hadn't!

I came across this piece.....there is almost an atempt to write a balanced article, or at least to be seen to, but the VI blood flows strongly through their veins....

http://www.express.co.uk/money/view/189580/Is-buying-a-house-better-than-renting-

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HOLA4415
So it could be a good time to get on the property ladder despite continuing economic uncertainty and a host of harsh Government austerity measures.

...yeah...good time for many to lose their deposit and dive into negative equity....this is so unbalanced it must be criminal ....time to shut down or fine such publications ... :rolleyes:

Edited by South Lorne
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HOLA4416

"Be warned, though, these figures can also be misleading because they exclude many of the expenses involved in buying a property.

Firstly, they don’t include the cost of repaying the capital"

Duh !!!!

Unbelievable, they say that renting is "money down the drain", yet they base their comparison on interest only mortgage, which is in effect renting from the lender :rolleyes:.

Edit: Actually, interest only, is not like renting from the lender, it's much worse. If you can't pay the rent mortgage, you not only get kicked out, but they also pursue you for the difference between the current and original values.

Edited by Bruce Banner
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HOLA4417

Unbelievable, they say that renting is "money down the drain", yet they base their comparison on interest only mortgage, which is in effect renting from the lender :rolleyes:.

Edit: Actually, interest only, is not like renting from the lender, it's much worse. If you can't pay the rent mortgage, you not only get kicked out, but they also pursue you for the difference between the current and original values.

...and you're responsible for all the repairs, maintenance and upkeep in the meantime.

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HOLA4418

Typical express, not a mention of the Nationwide survay, if it had been +0.6% then it would have been front page.

If you go to there property section, they bleet on about 'soaring house prices' ...

WTF!

Well they are soaring ... if you look at the graph upside down through a magnifying glass! :)
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...yeah...good time for many to lose their deposit and dive into negative equity....this is so unbalanced it must be criminal ....time to shut down or fine such publications ... :rolleyes:

Yeah a few years ago I complained to the PCC about an Express Headline which just said "House Prices Continue to Soar" when in fact the figures at the time had come out and shown a 0.3% fall.

The main point of the article was that even with this small drop prices were still 9% more than the previous year. They twisted the truth in a hideous manner and made a positive news story from a negative report by Nationwide.

Anyway the PCC came back to me to say that it had found the article to be within the boundaries of legal reporting although it did admit that the headline may be misleading to some given the event it was reporting. So they did nothing.

What prompted me was I went into my local Sainsburys and somebody had placed the Express on top of all the other papers (obviously a desperate property owner) and so it was clear for all to see and breathe a sigh of relief at the headline as they entered the store. What was even more ironic was that this was the beginning of what turned out to be 20% falls so the Express headline couldnt have been further from the mark.

The problem is that they are completely and utterly unaccountable for anything they print. As long as they remain within the legal framework they cannot be prosecuted or pilloried in public. If I was to make a statement on here that house prices were set to double in 2 years and then 2 years later they had dropped by half rather than doubled then I would be brought to task, the Express would simply run another headline "House Prices to Double in 2 Years" and could reasonably continue to do so as long as in the main body of text they quoted a "property expert" or "economist" who happened to make that said statement.

My argument to the PCC was that if I was a major shareholder in ICI and owned a newspaper I couldnt reasonably run a front page headline saying "ICI Shares set to double" "Buy ICI shares now" and continue to do so every 3 or 4 days. BUT Richard Desmond who is a massive property investor can do so with property. Unbelievable

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HOLA4420

Unbelievable, they say that renting is "money down the drain", yet they base their comparison on interest only mortgage, which is in effect renting from the lender :rolleyes:.

Edit: Actually, interest only, is not like renting from the lender, it's much worse. If you can't pay the rent mortgage, you not only get kicked out, but they also pursue you for the difference between the current and original values.

Bear in mind also that by taking out a mortgage you are most likely fuelling the big rent-a-currency scam that is our prevailing money system.

Home buying is the major conduit through which collectively we borrow our costly money supply into circulation.

Home renting on the other hand circulates money that someone else has already borrowed into existence.

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HOLA4421

Unbelievable, they say that renting is "money down the drain", yet they base their comparison on interest only mortgage, which is in effect renting from the lender :rolleyes:.

Edit: Actually, interest only, is not like renting from the lender, it's much worse. If you can't pay the rent mortgage, you not only get kicked out, but they also pursue you for the difference between the current and original values.

But I am afraid in a lot of cases it is money down the drain, I paid my mortgage off in 2008 and yes up until that time I was paying 'rent' to the BS, but my 'rent' was £136 per month for a two bed Edwardian flat in Clapham with garden, at the same time the couple who rented the same flat next door from a private LL were paying £900 per month and looking at rent prices in the same area now you can expect to pay over a grand and as for being kicked out if you cant pay your mortgage, yes it happens but I bet for every 1 person being repossed theres 10 more being thrown out of their homes on the whim of their LL

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But I am afraid in a lot of cases it is money down the drain, I paid my mortgage off in 2008 and yes up until that time I was paying 'rent' to the BS, but my 'rent' was £136 per month for a two bed Edwardian flat in Clapham with garden, at the same time the couple who rented the same flat next door from a private LL were paying £900 per month and looking at rent prices in the same area now you can expect to pay over a grand and as for being kicked out if you cant pay your mortgage, yes it happens but I bet for every 1 person being repossed theres 10 more being thrown out of their homes on the whim of their LL

NO NO NO NO NO you have it all wrong. People on here are not talking about renting for the rest of our lives :rolleyes:

We are suggesting that during a period when house prices are at a globally accepted "peak" ,roughly 5.5 times income and during a period of record cuts and austerity and a recession which many believe to be returning deeper than ever is NOT a good time to buy. As a result it makes much more sense to rent until the price of that asset class crashes back to below the perceived level of normality and the economy looks a bit more stable.

When talking of paying off mortgages etc you are talking long term and I dont think anybody is suggesting renting for 25 years+.

Surely if I was to buy your flat in Clapham now (No disrespect but personally I would rather eat my own eyeballs than live in the most overpriced ghettto in London) for say £300,000 I would be better off waiting 2 - 3 years and purchase for £180,000. Even though I may have "thrown away" £24,000 in rent in that period I will have saved £120,000 in purchase price.

It isnt about renting or buying it is about WHEN to rent and WHEN to buy

Edited by Einstein71
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HOLA4424

But I am afraid in a lot of cases it is money down the drain, I paid my mortgage off in 2008 and yes up until that time I was paying 'rent' to the BS, but my 'rent' was £136 per month for a two bed Edwardian flat in Clapham with garden, at the same time the couple who rented the same flat next door from a private LL were paying £900 per month and looking at rent prices in the same area now you can expect to pay over a grand and as for being kicked out if you cant pay your mortgage, yes it happens but I bet for every 1 person being repossed theres 10 more being thrown out of their homes on the whim of their LL

The rent on my flat is approximately half what an interest only mortgage repayment would be.

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HOLA4425

I found this when having a look at the express site to see how they had reported the Nationwide figures......guess what.....they hadn't!

I came across this piece.....there is almost an atempt to write a balanced article, or at least to be seen to, but the VI blood flows strongly through their veins....

http://www.express.c...r-than-renting-

I say bring it on! More lambs sheeple to the slaughter. ;)

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