Rob182 Posted June 9, 2014 Share Posted June 9, 2014 The monthly amount I'm paying for my mortgage is something like £50/£100 more than I used to pay rent (neither included bills). I don't feel any richer/ poorer than when I rented as I've gradually increased my income over the years too. However, in the 2 years I've lived in my house, I've made a lot of changes/ improvements and could probably now sell it for more than I bought it for. I wouldn't have the opportunity to improve a property if I wasn't 'on the ladder'. Link to comment Share on other sites More sharing options...
CVByrne Posted June 9, 2014 Share Posted June 9, 2014 The value of the money in 30 years time is far less than it is today due to inflation, also your income at that point would make the final 2 repaying years a much lower % than it is now. The maths is just rough sums I agree but if you were to require me to dig deeper you'd find the overall idea is fundamentally sound as the more of your own capital you put in the better deal you can get, ie lower interest. There are the added benefit too, massive flexibility, no need to play this "ladder" game where by you sell and move property as you need to move up. Ultimately people should regularly save and spend their 20's in rental accom. Then when it comes time to settle down and get married you will be in a good position financially both in larger deposit and higher income to buy a home you keep when you have children. Lets just say this, if I bought a home at 24 I'd be in about 40% negative equity and languishing in Dublin stuck in a stagnant employment situation. Put a price on avoiding that please? Tell me renting was "dead money". 1 Link to comment Share on other sites More sharing options...
Seat68 Posted June 9, 2014 Share Posted June 9, 2014 thats purely your circumstance though, I bought a home at 25, not in negative equity and job on job my circumstances have improved. Link to comment Share on other sites More sharing options...
Stevo985 Posted June 9, 2014 VT Supporter Share Posted June 9, 2014 Exactly. I bought at 24, no negative equity, remortgaged last year to put me in a much better mortgage position now (one of the assumptions missing from your maths), and am doing well in my career. Link to comment Share on other sites More sharing options...
CVByrne Posted June 9, 2014 Share Posted June 9, 2014 thats purely your circumstance though, I bought a home at 25, not in negative equity and job on job my circumstances have improved. Yes that's your situation. You bought in an era of high interest rates, you benefited from the subsequent large drop in avg interest rates which led to massive price increases for property. Now what advice do you give to someone else today? Do you know what property prices will be like in 5 years time??? Do you know what the Economy in the midlands will be like?? Link to comment Share on other sites More sharing options...
CVByrne Posted June 9, 2014 Share Posted June 9, 2014 Steveo what year did you buy in? How old are you now? 28? Link to comment Share on other sites More sharing options...
Stevo985 Posted June 9, 2014 VT Supporter Share Posted June 9, 2014 thats purely your circumstance though, I bought a home at 25, not in negative equity and job on job my circumstances have improved. Yes that's your situation. You bought in an era of high interest rates, you benefited from the subsequent large drop in avg interest rates which led to massive price increases for property. Now what advice do you give to someone else today? Do you know what property prices will be like in 5 years time??? Do you know what the Economy in the midlands will be like?? Shouldn't you ask yourself those questions when you're giving out your advice? Steveo what year did you buy in? How old are you now? 28? 2010. Yeah I'm 28 now Link to comment Share on other sites More sharing options...
chrisp65 Posted June 9, 2014 Share Posted June 9, 2014 Bought my house 12 years ago when it felt expensive. It has since more than tripled in 'value'. I certainly couldn't afford to buy it now had I waited. It's a bit of a lottery and anybody giving any advice on what will happen in the future is just guessing. Link to comment Share on other sites More sharing options...
Rob182 Posted June 9, 2014 Share Posted June 9, 2014 If you buy a place that is stretching you financially, then yes, you'll only be able to put down a small deposit, own a small percentage and could end up paying way more than you need to. But if you buy a nice, modest house/ flat, putting down a decent deposit and being able to save money WHILST paying your mortgage (and not paying dead money to landlords), then in a few years you could sell your property and use the money saved to move up the ladder. 1 Link to comment Share on other sites More sharing options...
CVByrne Posted June 9, 2014 Share Posted June 9, 2014 My advice is don't take risks, by renting and building a savings for a deposit what risks are there? Less than the fear of losing money / having to pay more, which is why people rush to buy homes when prices are rising fast feeding the bubble. If you had bought your home in 2007 and it was 2011, 4 years after you bought it you'd be 20% in negative equity. How many people like you bought at 24 in 2007? I'd imagine more people than did in 2010. I am saying people should not take such huge risks when they don't have to. That's all. There is no big downside to saving, renting and waiting. Link to comment Share on other sites More sharing options...
Rob182 Posted June 9, 2014 Share Posted June 9, 2014 ....except for that it's dead money. Link to comment Share on other sites More sharing options...
CVByrne Posted June 9, 2014 Share Posted June 9, 2014 If you buy a place that is stretching you financially, then yes, you'll only be able to put down a small deposit, own a small percentage and could end up paying way more than you need to. But if you buy a nice, modest house/ flat, putting down a decent deposit and being able to save money WHILST paying your mortgage (and not paying dead money to landlords), then in a few years you could sell your property and use the money saved to move up the ladder. Yes, there is a financial crossover point when renting and saving is less advantageous than buying a property of your own. But people fail to accept that saving and renting can be financially the better option until you have the right sized deposit. That's my argument, along with the benefits of flexibility. Young people of 24 should be thinking about their careers not home ownership. Link to comment Share on other sites More sharing options...
CVByrne Posted June 9, 2014 Share Posted June 9, 2014 ....except for that it's dead money. And what about the 20% someone has lost in equity buying the property? Is that not dead money? The man who rented until 2011 and saved then bought is in a far better position than the person who didn't want to waste dead money on rent in 2007 and bought a property. Link to comment Share on other sites More sharing options...
villarule123 Posted June 9, 2014 VT Supporter Share Posted June 9, 2014 (edited) I hate the idea of renting, and I'm glad that I haven't had to. But, it's so hard for young adults now to buy a house, especially with the going out culture that is around, there's not a lot of people that can manage their money properly. Plus with renting, you're throwing away dead money and if you have kids, if you don't end up buying a house then you have nothing left to inherit. I worked out the exact amount of money we'd need to save in 2 years to be able to buy a house in the £220-250k bracket, and me and the missus agreed to put aside the exact amount each month so we could save £20k in those 2 years. 6 months into that we managed to save £5k. It's doable if you put your mind to it. I still get to spend any money on myself that I get paid in overtime. I also planned out a weekly/monthly savings plan so that my daughter would have £20k as her 21st birthday present. She's 2 now, and already has £2k to her name. It sounds a bit OCD-ey, but it works. Edited June 9, 2014 by villarule123 Link to comment Share on other sites More sharing options...
CVByrne Posted June 9, 2014 Share Posted June 9, 2014 OCD-ey don't be daft. That's proper planning, fair play. I think you have made a mistake in saving for your daughter now though when she's only 2. You're putting too much burden on yourself financially now. I'd use the money you are saving for her and put it towards the house as deposit. Then when times are more stable after you've sorted out your home then you will be free to plan for her. What's best for her future may not be trying to put money away so a 21 year old girl can go spend it (possibly irresponsibly) in 19 years time. Also "dead money", rent is not dead money as I have said. Renting + saving a deposit can be better for a persons all round life and future than jumping straight away into property ownership the first chance they get. But clearly the off topic part of a villa forum is not the place for such sensible talk. Link to comment Share on other sites More sharing options...
samjp26 Posted June 9, 2014 Share Posted June 9, 2014 Seriously, I don't know where you live in London mate but on an average salary it would be impossible to save anything worth saving whilst renting a place in Birmingham. Link to comment Share on other sites More sharing options...
villarule123 Posted June 9, 2014 VT Supporter Share Posted June 9, 2014 OCD-ey don't be daft. That's proper planning, fair play. I think you have made a mistake in saving for your daughter now though when she's only 2. You're putting too much burden on yourself financially now. I'd use the money you are saving for her and put it towards the house as deposit. Then when times are more stable after you've sorted out your home then you will be free to plan for her. What's best for her future may not be trying to put money away so a 21 year old girl can go spend it (possibly irresponsibly) in 19 years time. Also "dead money", rent is not dead money as I have said. Renting + saving a deposit can be better for a persons all round life and future than jumping straight away into property ownership the first chance they get. But clearly the off topic part of a villa forum is not the place for such sensible talk. Personally if I wanted to get my own place then I'd stay with my parents until I had the deposit to buy a house. But a lot of people aren't capable of saving or aren't able to. I guess we're lucky that we both work and get paid decent money. I can't imagine how hard it must be for one person working and the other staying at home or if there was no one around to help look after the kid(s) With my daughter's savings, we put away £5 a week each whilst the 2 sets of grandparents put £10 a month in to help. I don't even notice it leaving my bank tbh. It will be worth it when I surprise her on her 21st to see her face. By the way, she won't be allowed anywhere near the money unless it's for a house deposit. Link to comment Share on other sites More sharing options...
Tayls Posted June 9, 2014 Author Share Posted June 9, 2014 I think it is important to buy a house when you can though. My missus and I had a 40k deposit and we are both 25 - almost completed on our first house purchase. Between us we do ok, but I am not 100% happy in my job and it is not what I want to do for the rest of my life - I don think. Have we made the right choice? Link to comment Share on other sites More sharing options...
snowychap Posted June 9, 2014 Share Posted June 9, 2014 It's a bit of a lottery and anybody giving any advice on what will happen in the future is just guessing.I agree but I also think there is a lot of sound stuff in what Conor is saying (though I'd say it was the general commoditization of property rather than people buying houses out of fear of not getting 'on the ladder' that put and continues to put pressure on our economy).I agree with him about the 'dead money' phrase but a lot of that does also rather depend upon having the better regulated - and more secure - rental market of other countries.I don't think people should be put off the idea of owning a home (at which point does one 'own' it, btw? When the mortgage is fully paid? Until then a sale can still be forced by the mortgagee, can't it?) but I think the sadness he expressed at 'accepted thinking' shouldn't be viewed as the crazy talk that it would appear to have been in the last coupe of pages (I'd add to his vested interests guided by profit vested political interests, too).As an aside, I also wonder what correlation there may be between the slowdown (and fall) of home ownership and the apparent increase in flexibility of the labour market. Link to comment Share on other sites More sharing options...
mykeyb Posted June 11, 2014 Share Posted June 11, 2014 Let me point out a wee bit of simple maths. Say a 200k mortgage you want to take out over 30 years at an avg 4% per year. That's £956 per month = £344,160 in total If you were to rent for £500 per month and could afford to save £800 per month also then in 2 years including interest you'd have ~ £20k Now you get a mortgage of £180k and your repayments are £860 per month. £309,600 in total. So rent and savings cost £31,200 for the two years so in total £309,600 + £31,200 = £340,800 £344,160 - £340,800 = £3,360 savings you've made. This kind of maths is the numbers people don't make. Because to do so would undermine the people who want you to buy homes so they can make money. People say rent is dead money, no rent could be saving you from real dead money which is the interest portion of a mortgage. People should run the numbers. But they don't. Buying a property is the biggest financial decision a person will make in his or her life, it should be give a huge amount of thought and planning. Where have you allowed for the fact that the house that 2 years ago was valued at £200,000 is now going to cost you considerably more, or are you now buying a house for £200000 that you could have got for less 2 years ago. In the last 12 months house prices rose by 8 per cent so on 200K thats 16K increase. So if you bought you house 12 months ago your investment has increased by 16K or you have waited 12 months to by the house which is now going to cost you 16k more. Over 24 months the difference would be even more in favour of buying over renting 1 Link to comment Share on other sites More sharing options...
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