Renting vs mortgage - is a mortgage on your own asking for trouble?(12 Posts)
I've just been to the Citizens Advice this morning, having recently decided to seperate from DP. We have a joint mortgage and there is still a fair bit of equity (as long as the market doesn't plummet too much). I have a full time job which is about as secure as any job is nowadays (i.e all seems pretty secure but then you never know!) and my salary plus the equity would give me enough to buy a modest house for myself and DD. However, the Advisor suggested that maybe we should consider renting instead, as there are no benefits that will help you with mortgage payments should things go wrong, whereas help is available when renting, plus you can apply for other benefits such as housing that you wouldn't receive as an owner.
I hadn't really considered this as I thought to buy was the most sensible option, given that it means investing in an assett rather than just waving goodbye to your money, but I must admit this has sown a seed of doubt and made me feel very nervous about going it alone.
Does anyone have experience that might help me decide what's the best course of action?
I think she has given you bad advice, seeing as you work full time you wont be entitled to any housing benefit nor council tax benefit, also with private renting you could be going from one property to another if the landlord decide to sell as I can see happening with the market falling, my friend is on her 6th private rent in 4 years.
Owning your home is an achievement and if something happens and you find yourself out of work you will get the interest paid after a certain amount of time, although you would have to find the remainder, but, with a private rent you would get the majority of your rent paid.
If you can afford too then own your home as it is a good asset.
As a private renter myself, I couldn't agree more with Tinkerbel, who raises some terrific points.
Also, plowing the equity from the sale of the joint house into a mortgage of your own will also get you out of paying capital gains tax, IIRC.
Help is not always automatic for renters.
If you can afford a mortgage, then it makes sense. Absolutely nothing wrong with renting, but if it's about the same, then I'd get a mortgage.
I think that the CAB nationally has been advised, in the current financial climate, to discuss the option of renting...
I'm also a private renter after owning a property previously, am hoping to get back into work soon to buy again in the future, i'm not entitled to a council property even though I have been on the register for 9 years as they think I am suitably housed.
I agree with expat and Tinkerbel. You really don't want to have be at the mercy of landlords in the upcoming turbulence on the housing market.
I think you were right with your initial thought that investing gives you an asset rather than money down the drain. Ultimately you can always buy and if you do end up in such dire straits that you need housing sorted for you then you could sell and move into private rentals. To do it at the moment would seem to be anticipating the very worst outcome of a hypothetical situation - and doing yourself over financially in the meantime.
also, you can take out income protection insurance as a homeowner to cover you in case things go wrong.
But keep in mind that mortgage protection only kicks in after 30 days, so keep a few mortgage payments, just in case...
I think that generally it is better to buy than to rent, but at the moment with prices falling it might be better top rent for 6-12 months and then buy, as if prices move in the way they are projecting you should get more for your money, even if you do have to pay rent for that time.
Capital gains tax wont be an issue if you havent had a second home, and if it was it wouldnt make any difference to your liability whether you buy again immediatlely or not.
on the other hand, if inflation keeps rising, the BoE may raise interest rates.
really, if you're in a position to buy and you see it as a long-term move, then go for it and get income protection insurance, particularly to make sure your child stays in the same catchment area.
i can't tell you how much private renting sucks.
Thanks for the advice - renting doesn't sound too great and I think I would prefer to go with my initial instinct and buy somewhere, taking out the income protection insurance you mention expat (Sorry to hear you've had a bad time of it).
just reserve a few months' payments, too, in the case that ilovemydog points out, you may have to wait 30 days for the income protection to kick in.
but it will give you more stability.
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