First Time Buyers Page 11

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  • disusedgenius 3 Apr 2013 15:39:39 5,228 posts
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    Wouldn't you basically just have to sell up and go back to renting, at that point?
  • Shikasama 3 Apr 2013 15:42:10 6,635 posts
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    To me an interest only mortgage is basically renting and hoping your house value doesn't take a massive dive
  • mrpon 3 Apr 2013 15:43:57 28,492 posts
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    Get on the ladder at the right time (ie: me) and you'll get yourself tasty interest rate, 1.24%, of which I'm overpaying a tidy sum.

    Give yourself 5 or gig, you're worth it.

  • mcmonkeyplc 3 Apr 2013 15:45:51 39,387 posts
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    You can't get interest only mortgages these days anyway.

    Come and get it cumslingers!

  • Chopsen 3 Apr 2013 15:46:04 15,737 posts
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    Shikasama wrote:
    Good comments people

    I wasn't saying one was better than the other per se, just that I think the tangible benefits of ownership aren't as clear as people make them. The whole 'but after 25 years you own your house' thing seems like something of a misnomer to me. Unless you are later on in life you probably aren't going to be in the house for 25 years, meaning you'll just go from one mortgage into another and you haven't actually 'gained' anything in capital. Especially if your house depreciates
    When you move, you don't start from scratch and start paying a new mortgage all over again for the whole value of the new house. The capital you've already paid off stays with you, it's your money! So by the end of 25-30 years, you will be mortgage free, even if you have moved around.

    You then live "rent free" or can downsize and/or release some of the capital in your house. Even incorporating the odd short term blip and risk of negative equity (short term being <10 years), buying a house a house has always made a return on that investment over any historical 30 year period you chose.
  • henro_ben 3 Apr 2013 15:48:27 2,211 posts
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    Interest only mortgages are a massive gamble, and a lot of people are going to be shafted in the next few years I think.

    Personally I rented for 17 years or so and I was sick of it, much prefer 'owning' my home. It's just nice not having a landlord, can do what I want with the place, no stupid letting agents or restrictions on pets/smoking/decorating etc. For me it's worth it.

    But if your life style's different then renting can make a lot of sense, especially if you're contract & move around a lot, or like to go travelling every few months / years etc.

    Neither option is really better or worse than the other, depends on your circumstances.
  • elstoof 3 Apr 2013 15:49:24 6,642 posts
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    Interest only can work well if you're a contract worker who gets paid a big lump sum every 6 months or so to put into the house fund for instance. A friend of mine has 3 homes, all interest only of which two are rented so he doesn't have to work. He's just hoping the value of 2 of them is high enough when the terms are over that he can sell those 2 and pay all 3 off. Too much of a gamble for my tastes.
  • nickthegun 3 Apr 2013 15:50:19 58,899 posts
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    Yeah, theres a lot of advantages to renting. Its not chucking your money away at all, as seen by the fact that we are one of the few countries that are completely obsessed with owning houses.

    ---------------------------------------------------------
    He totally called it

  • Chopsen 3 Apr 2013 15:51:28 15,737 posts
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    Yeah, I always viewed them as a bit of a fudge to allow people to get invest in property despite the housing market being over-valued (as defined by that most people couldn't actually afford to buy a house).

    It still *can* be an investment, because at the end of any given period the value of the house will have gone up, and you only owe the bank the original value when you bought it. However, this assumes you then become homeless or really do go back in to renting.
  • Deleted user 3 April 2013 15:56:22
    Way I see it is that if you dont own your own home by the time you retire how are you going to pay rent?

    Pensions wont cover it. We had a talk at work recently. The amount you have to pay in to guarantee a pension of 20,000 is ridiculous - almost impossible to do I would say.
  • Chopsen 3 Apr 2013 16:01:04 15,737 posts
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    Seeing that most of us wont be able to retire until we're in our 70s and probably die working, I think that problem will be the least of our worries :)
  • Deleted user 3 April 2013 16:06:49
    True enough.

    To the guy questioning whether its worth buying I would point out that inflation makes rent payments more expensive year on year whilst in effect reducing the amount you pay on your mortgage.

    After a few years you find that your mortgage payments are less than rental would be and also with the benefit of paying back capital.

    I find it hard to find a financial argument for renting unless you are planning on moving around a lot.
  • Rhythm 3 Apr 2013 16:13:23 2,471 posts
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    mcmonkeyplc wrote:
    You can't get interest only mortgages these days anyway.
    Yes you can. My friend's just started one on a 300k house (a real Northern house too, none of this namby pamby one bed flat in the city nonsense, he's got a third of an acre and a driveway long enough for 6 cars :-D )
  • Deleted user 3 April 2013 16:16:52
    I think its 100% (or more!) mortgages which you cant get nowadays.

    Lenders just want to know they will get their money back if things go wrong. So an interest only mortgage would potentially be fine if combined with a decent deposit. That way even if prices went down the bank could still sell the property to get their money back.
  • Rhythm 3 Apr 2013 16:29:12 2,471 posts
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    Yeah, they were happy to give him the 300k on interest-only as he had rental income from his first property that covered both his original mortgage and part of the new one
  • FWB 3 Apr 2013 16:57:38 43,878 posts
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    Renting in London is mental compared to owning.
  • nickthegun 3 Apr 2013 17:02:57 58,899 posts
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    The amount of money me bredrin spends on rent actually makes my brain hurt

    ---------------------------------------------------------
    He totally called it

  • disusedgenius 3 Apr 2013 17:03:46 5,228 posts
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    FWB wrote:
    Renting in London is mental compared to owning.
    Pretty much why I'm buying at the moment. After a few years of a good deal with flatmates I actively like (but are moving away from the country soon) this is actually less stressful than looking for somewhere else to rent again.
  • FWB 3 Apr 2013 17:06:12 43,878 posts
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    If the rents in my block are anything to go by, I could be MAKING about a grand a month if I leased mine out. One bed.
  • IJ 3 Apr 2013 17:09:29 804 posts
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    Buying/renting/interest only/repayment are all very much dependent on your situation. People will passionately say you shouldn't rent it's throwing money away, or interest only is a huge gamble etc but they're not right, it depends completely on your own situation. Don't listen too much to others and don't try to second guess too much in the future. Buying, or not buying, a house because you think house prices will go up or down is, frankly, stupid. It's much more efficient, less capital intensive and much simplier to simply buy or sell an ETF based on the average house price in the UK. If you are REALLY concerned about house prices going down, but want to get on the property ladder, then just buy a flat and buy an ETF which gains in value if house prices fall.

    There are a lot of factors to think about. First, is the cost of trading a house, which is very high. Mover fees, lawyer fees, tax, surveys etc. So, I had the choice 3 years ago of either, renting for 5 years and saving up and buying the family house for 2 kids etc to last 10 years, or buying a flat and keeping it for five years. Because inbetween was not cost effective, buying for three years costs a lot of money in tax and moving costs. In that way, renting for five years and then buying the family house would have been better than renting for two years, buying a flat for three then a house.

    Second is quality of life, so I pay 600 a month mortgage costs, interest only. I can rent my flat for 2700pm (London...) So for 600pm I'm living in a 2700 place. The point being, I could never afford to live in my flat if I rented it.

    Should you stretch in terms of your deposit and mortgage size? For example, should you go for a 10% equity mortgage and borrow 90% for a bigger place which is 'just' affordable but banking on over the next few years you'll get pay increases or should you buy a smaller place and take a 15-20% equity stake? Well, there is no easy or right answer to that. If you do stretch, and do get the pay increases, it will almost certainly be the right financial decision, because you'll have to move less often and so will not incur all the moving costs.

    The way I look at it, I have to live somewhere, and the money I have invested in a house will stay in the property market until I'm retired at the least. I own a flat, but I want house prices to absolutely crash, because if I own a 200k flat, but want to buy a 400k house, then if prices drop 10% I lose 20k on my house, but my 400k house i upgrade to is now 40k cheaper. Now I could not own a flat and just save myself 40k...but you have to live somewhere and prices could go up.
  • disusedgenius 3 Apr 2013 17:09:46 5,228 posts
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    That's the backup plan should something go wrong. There's bound to be some poor fool I can have to pay my mortgage for me.
  • nickthegun 3 Apr 2013 17:11:29 58,899 posts
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    The rent the people who bought our old 2 bed shoe box are charging is crazy, but there were people in it within a few weeks of us moving out.

    ---------------------------------------------------------
    He totally called it

  • Salaman 3 Apr 2013 17:16:03 18,883 posts
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    Depends where you're at in life, this whole renting or buying. When I was younger, I couldn't fathom why people my age would buy a house. It seemed like such a massive financial commitment and basically a ball and chain around your leg, stiffling your freedom and flexibility to go where you want to go in life.

    I've since spent some time living in Germany and in the UK. So I'm glad I was renting. I'm now back in Belgium since a few years and I have a 3 year old daughter. When she came along I decided I was staying put for the next 20 years or so, so I'd be better of buying a place and I'm glad I did.

    With the current low interests it's a good time to get a mortgage.
    As someone rightly said. In 25 years, you will be free from monthly payments, which is a boon especially when you get to retirement.

    To give a good example of people that should have bought but decided to rent and have basically "put money down the drain", my ex girlfriend's parents in Germany were both teachers, so state employed for life basically, with a guranteed steady income. They rented a flat and when they divorced he moved out and rented a different flat a few blocks away.

    They could have easily gotten a mortgage and owned a flat or house but in their early sixties, they were both still living in a rented flat. She sadly past away but once he goes into retirement I'm not sure how he'll afford the place he lived in. Where I am in life now, it makes sense to own my house and pay the bank instead of some land lord even though I don't plan to stay in this particular house forever.
  • Deleted user 3 April 2013 17:17:49
    Fair points IJ.

    I would point out though that if there is a house price crash if will be for a reason (ie high interest rates, econonic collapse) making them unaffordable for the majority of people.

    Without knowing your personal circumstances that same reason could also affect you thus scuppering your plans to trade up!

    Edited by Alipan at 17:19:21 03-04-2013
  • disusedgenius 3 Apr 2013 17:24:53 5,228 posts
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    The thing is, the buying market crashing fucks over the rental market to an even greater degree (though yes, this is a London-centric thing I expect). Even a minor blip a year or two ago (where it's not like houses were even losing value or anything) was enough to see everything go up massively as demand rose.
  • FWB 3 Apr 2013 17:25:09 43,878 posts
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    Germany is a bit different. There was always a culture of renting. You rarely bought a house as an investment as you could never really get much in rent. Not like here where you are looking at double-triple the mortgage cost.

    Things are changing slightly, given that people there have realised their savings and cash aren't safe, but it's no where like the UK. Can't really make much off renting in Germany.
  • IJ 3 Apr 2013 17:50:22 804 posts
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    Alipan wrote:
    Fair points IJ.

    I would point out though that if there is a house price crash if will be for a reason (ie high interest rates, econonic collapse) making them unaffordable for the majority of people.

    Without knowing your personal circumstances that same reason could also affect you thus scuppering your plans to trade up!
    A very good point, but it's hard to price in losing your job. If you lose your job and can't get another one for a year, it's highly likely you'll need to sell your house unless you were exceptionally conservative, that is just the risk.

    But again, that factors into what is right for you. I have a job which is tied to the financial markets and so as such is highly risky and volatile. The probability of me getting made redundant is very high compared to other jobs, such as teaching, civil servant etc. That is why I am pretty conservative with my money, I get lump sum bonus' and almost all of mine goes towards paying off the mortgage, where as I should probably invest them in higher yielding assets. My view being that my job is my high risk factor, if I stay in my job I'll do well financially, if not then I'd like to be able to stay in my flat with a reduced income. Others take a higher risk approach and invest in assets which give them 10%, but if the world crashes down and they get made redundant they'll have to sell their house. But if they stay employed, they'll end up much richer than me.

    Depends on your own personal approach to life and what you can handle. It's like insurance, I have enough money not to need to insure my phone, I can afford 400 to replace it. But, I insure it anyway, because the emotional grief I have from losing that money, is greater than the 8 a month or whatever it is it costs me even though it costs me more in the long run. Logically absolutely stupid...but phsycologically more palatable!
  • elstoof 3 Apr 2013 18:06:07 6,642 posts
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    IJ wrote:
    I get lump sum bonus' and almost all of mine goes towards paying off the mortgage, where as I should probably invest them in higher yielding assets.
    Nah, there aren't any safe-ish investment products out there that will pay out a higher interest rate than the one your mortgage lender is charging you. Paying off your mortgage early is a much wiser investment generally.
  • elstoof 3 Apr 2013 18:10:23 6,642 posts
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    Also you can self-insure your phone etc, put the payments you would normally pay the insurer into a savings account every month.
  • FWB 3 Apr 2013 18:11:33 43,878 posts
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    Property, in London, is in my eyes the best investment. It's relatively safe (touch wood). The population is growing and there is not enough space. People will always need somewhere to live and if they don't then it's because we've all been nuked and none of your savings will matter.

    If you buy something here, don't let it go.
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