Houses: Renting vs Buying

[Harold_Shand]

I bought my house 4 years ago, I've always thought that house ownership was the 'right' thing to do and it was an exciting time. As the years have gone on, the house has cost me a fair few quid, not on anything major ( yet ), but decorating and little things certaintly add up. It's nice to be able to do what you want with the house and that but I am starting to think that house ownership is not all it's cracked up to be.

I'm starting to think about selling this house and renting in the town where me and the wife work. I wouldn't be able to buy a place there because it is much more expensive. But that's not really the point, my concern is that I will regret forever letting go of the house and mortgage. You hear about people when they've got to have care at the end of life, they have to sell their houses and their kids end up with fuck all... there's all the maintenance and you're at the mercy of interest rates. Sometimes it's hard to make ends meet now, if the interest rates were to get back to normal some time soon, it could get difficult, big sacrifices and all that shit.

I don't know if it's just brain washing or if the smart choice is stay with a house and mortgage or if in reality, renting works out better.
Any opinions?
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Harold_Shand's theory might be the best explanation.

[daemonoid]

Renting allows a care free lifestyle as you suggest but the costs are high...

On average your mortgage will come down relative to your income over time (sure there may be interest rate spikes, but the trend is downwards).

You also highlight one of the biggest values of home ownership - you get a built in pension fund. In times of low pensions your house may be the only asset you have to ensure a standard of living. Care may cost, you may just want to enjoy your retirement by downsizing.

On the flip side your renting costs remain the same or increase and you get nothing in return.

I rent out my house now I'm out of the UK so have a good idea of the numbers between comparing rent / buying. Rent of my house is ~£750, when I was living in it the mortgage was ~£950. Thing is though that £950 was part capital, part interest so ~£350 I'm essentially putting into a bricks and mortar savings account. At the end of the year the rent will likely go up, the mortgage will stay flat.

The mortgage also gives you flexibility - you can switch to interest only, take payment holidays or even re-negotiate over more years if you really need to.

That said I'm renting in the Netherlands as I need flexibility even though I could afford the deposit on a tiny little flat here (about the price of a decent 600).
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[G]

Weird logic for your situation, but have you looked in to how much rent you'd get in you rented your house out?

Unless you want to do major work (bigger garages etc), there's a lot to be said for renting.

With a mortgage you are effectively renting the house from the mortgage company courtesy of the interest payments.

As it's just me and I don't need much, now renting a room in a shared house with everything-included; now negotiated down to £200 per month from £225 for 'services provided' .

[Kwaks]

As mentioned the third option is interest only, much lower payments (mine went from 575 to 238) yet you will still benefit from tehe price of the house increasing.

Rent yours out, rent in the town you work and everyone is a winner.
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[Robby]

For me, my mortgage is about half the price that rental prices are advertised at for identical flats in my block. Mortgage is cheaper by a long way, and the value of my flat has gone up a lot.

The renting=flexibility statement isn't quite that clear cut. Lots of people move house every 5 years or so, you have more time spent with estate agents, and more fees, but you can still move in a few months (unless your house is unsaleable or you think it's worth more than it is). With renting you can rarely just up sticks and go when you want to, not without penalty. Contracts work both ways.

If you rent, you might be a bit closer to work, but the price of rent may go up, and you might not be in a position to buy a house again.
If you stay where you are, the mortgage price stays the same as you gradually own more of the house and you wage gradually goes up.
If you rent somewhere else and rent out your house, you'll be paying income tax on the rental income. There may be a way around this setting yourself up a ltd company, or putting it in your wife's name if she doesn't work, but it's still a ballache.

I would go down the route of staying where you are, and finding a cheaper or faster way of getting to work.

[Kickstart]

Hi

My view is long term buying is cheaper. Rough cost last time I worked it out using a sensible interest rate (not the current noddy one) and inflation and local prices of house to buy compared to renting equivalent is buying worked out cheaper after something like 15 years (ie, total expenditure on buying vs renting - doesn't include maintenance). After 25 years the mortgage is paid off so your monthly expenses on living space is zero.

Short term renting is cheaper.

The flexibility might be nice but it is a very expensive nicety.

However this all on the basis of buying a house at a reasonable price, and not just before a price bubble pops.

All the best

Keith
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[Teflon-Mike]

Bought 11 years ago. 25 year DR Mortgage was £10 a month more than rent. Now, mortgage is < 50% of what the rent would be, and I own almost as much of the place as the bank does.
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[JonB]

Problem is Keith, will this bubble actually burst? Supply and demand is to a certain extent is keeping prices high in some areas whilst a large proportion of home owners stand to lose a lot of money if this bubble ever does burst.

As a prospective buyer I really can't see when and how prices will go down in not just the short term, but the medium term as well!
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[Jayy]

My view is, unless I'm in a position to buy a large chunk of the property outright, I won't get a mortgage. Absolutely no fucking way I'm enslaving myself to the banking system.

People call renting 'dead money' but I see it as freedom. Rather be paying £500pm to someone else and making them a few quid than to the banks and paying interest.

Also, if anything were to happen to me and I couldn't work, I wouldn't be able to pay the mortgage, they would reposess the house and sell it for far less than it is worth and I would still owe them the money unless I filed for bankruptcy.

No thanks, rather just rent unless I was in a financial position to be able to afford a pretty substantial chunk of the cost of the house without mortgaging myself up to the max.

[crazymotorbik...]

[fatpies]

[Kickstart]

[angryjonny]

[fatpies]

[angryjonny]

[CaNsA]

FWIW, and this is just my point of view with a couple of facts thrown in for good measure.

Most people in Europe rent, it's a rarity to find someone who owns their own property.

Strangely enough in Britain we are brought up to believe you must own your own house and to invest in bricks & mortar.
This may have been true a good few years ago, but not so much now.

I plan never to buy a house, cash upfront or otherwise.
I dont like the idea of being tied to something for 25yrs, a 2yr vodafone contract is enough for me thanks.

My POV is greatly influenced by the fact that I will inherit atleast 1 of 3 properties.


hth
CaNsA

[G]

[angryjonny]

[Kickstart]

[fatpies]

[Jayy]

Regardless of the insurance and protection, I'd still rather not be enslaved to the banks for the tune of £150k +

Part of the reason we're in the financial crisis is from bad mortgages being given to people who couldn't pay them back and I'm not about to add to that statistic. Maybe I will change my mind in years to come, maybe not but I'd rather rent.

[G]

[angryjonny]

[Kickstart]

[G]

As above, not sure a sustained 5% a year price increase in rent is that likely for the moment.