- Tue May 27, 2008 10:53 am
#343759
I am not sure on the Mortgage V Renting debate really, it very much depends on your circumstances.
5 Years ago it would have been a different story, buying was the only sensible option. You either rent the house or you rent the money to live in the house. If I were renting I would try and find a private landlord like me, why ? well the fees will be less, and also I never put the rent up after people move in, so your rent is inflation proof. Now not all Landlords are like me, but I know a few who are. The reason why, well part laziness, and not being very good at asking for more, it's a simple thing that a Void on a rental unit costs allot of money, and if you try and squeeze an extra £50 out then you may end up loosing say £1000 plus the cost of readvertising. Also when you have good tenants it means that basically they will stay even longer as they are getting cheap rent compared to other places, and indeed compared to Mortgage costs.
There are many pluses with regard to renting.
1. Lower costs of moving. ( £10,000 minimum sunk costs of moving with stamp duty etc )
2. Maintenance costs covered.
3. Flexibility to meet job demands.
4. Insulation against interest rate movements
5. Insulation from Falling House prices.
6. Insulation against property price disparity in geography. ( go from Renting in London to renting in Glasgow or Truro and you will see a difference, but not as big as you would if you had to buy)
7. Easier maintenance of your credit rating. If the shit hits the fan you can readily stay in a place and not pay for at least two months. Once you get evicted it is not going on a credit black list. If you default on a mortgage it will haunt you for many years to come, even if it's just getting a credit card.
On the plus side to buying.
1. You can make money if the value of your house goes up.
2. You can make money by improving your home.
3. An English Mans home is his Castle, owning makes us feel good.
So what would I recommend ?
1. What ever it is you must live within your means at all times, credit for anything should be avoided for all things, except your mortgage. It may be hard but it is the best advice I can give anyone. Even with a car, drive a banger and save up until you can buy a better one.
2. Until you are settled down with a partner and a family even, in todays market I would not even consider buying in my twenties as you are not missing out on anything and you are very likely to move around allot, or split up, or what ever. Having a mortgage and property when this happens is a real waste of money.
3. It is a pisser that there are people maybe only 5 years older than you that have managed to get on the property ladder when things were cheaper, and now have a £100k mortgage and a £200k house or what ever, but that is not going to happen over the next 5 years, if anything they may well still have a £200k house in 5 years time, but will have remortgaged to go on Holiday etc and will have a £160k mortgage which they will be struggling to repay.
4. Save as much as you can if you want a house eventually, £20k in savings will grow at £1200 a year, tax free if you use ISA, so in ten years you will have £35k ish. Basically on the above scenario you will have changed a 10% deposit into a 15% deposit. This is because in reality house prices will not increase over this period, if this changes, then you need to re-assess. I am not sure of the numbers but would guess on average it will also cost you about £3000 a year more to buy than Rent, so saving should be easier.
Overall then, at the moment, I would not enter the property market for at least 5 years, save money, get a good credit rating by not borrowing. You can always keep looking, if a bargain presents itself then go for it. If you can buy somewhere and the Mortgage on 25 years is less than renting with a 10% deposit, then it's a good deal, but they are hard to find. Do without, and save all you can, a second hand table and an Indian Tie Died cloth for £30, with £400 in the bank, is better than a £430 table and chairs from Ikea.
If you do not plan on staying in a house for in reality 5 years, at the moment I wouldn't buy ever.
If you own a house and you have little or no equity in it, should you sell and rent ?
Do you know what? if you have the bottle, then do it. We are born with nothing and leave with nothing, and happiness is the only thing that is worth earning in between. Some of the happiest old people live in High Rise Council Blocks and have sod all. Many people will sit and worry in the house they own. If not owning a house though would in some way make a difference to you, then stay in it. If you see life like a game of monopoly then you won't ever stop playing, and playing means keeping hold of your houses, and trying for hotels. What ever happens though you all know that the person who wins the game of monopoly will always be the one with the least amount of friends playing.
What a load of hippie shit hey ! But what ever happens if you own that house, or you rent it, your neighbors are facing the same challenges as you. You do need security for your family and an investment in a house can provide that.
Financially and more hard nosed opinion would be.
It's how you manage that security is what is important. If you have a personal balance sheet of £50k or £500k the choices that you have are very much different.( The personal balance sheet is simply the excess of the value of all assets over liabilities [house value minus associated costs of selling - mortgage + investments & cash and value of cars - loans and credit cards] I suggest that you need £5k per year of anticipated life expectancy (say 80)of you and your partner to be secure financially. So at 30 you would need £500k (unlikely) but at 50 you only need £300k(possible). Once you get to this number then you can choose to keep it in your house, or in cash and investments, it will see you through, given that you still live within your means. Renting will remove the opportunity of seeing changes in your net worth through house price movements.
Renting is cheaper now than buying, and you are unlikely to see a rise in house prices for 5 to 10 years. So if you are struggling with the mortgage and you can see yourself continuing to struggle, then selling and renting is not going to be a bad option for you if it will give you a better quality of life over that period. This is only a small part of the equation though.
Anyway, you asked for my opinions and therefore if you disagree with me please don't shout at me, no one can ever get this one right I am afraid. All I know is that I am a lucky bastard for getting on the housing lady at 21, 16 years ago, there is no way in this world that if I was that age now I could ever do it again.
chrismoyles.net
