do i REALLY have to explain why me and dh rent our house?

[spudFace]

we have been together for 20 years and have never had loads of money to save for a mortgage. what makes it worse is that my parents are very well off and have watched us struggle (and suffer) over the years. I am sick of telling people that i rent cos of all this but should i have to? i know that this subject will come up in conversation tomorrow with some new friends i have made recently. Am sick of the puzzled looks i get when i say I RENT MY HOUSE!!

what CAN i say to just tell people its none of their beeswax?

I think the insults show a bit more than that

Goodness me, what happened there ?
Between Expat and Hugh ?

But I do have a point to raise. Kind of disagreeing with Expat, I suppose.
And a bit disagreeing with Upwind, when she and I were having a discussion, and she said that someone who bought a house in 2000, couldn't be compared to somone who buys in 2006.

Well yes this is true. But also, gaining equity may not be necessarily 'fortunate', or 'luck'.
I mean yes, it may be more difficult to get on the property ladder now than it was in the 80's or 90's. But do not underestimate what a hard slog it must have been to keep up mortgage payments for all those years. Through some tough times.

I mean, I did not buy a house in my 20's. I did not have a mortgage. I was too busy travelling the world, and going to uni.
My dh bought his early. Nearly lost it in the tough times, of the 15%. Had two jobs just to live.

We can't blame people for their life choices. I could have chosen to have a mortgage. I could have chosen to deliberatley fall pregnant at 16. But I didn't.

When Expat said "i'm glad for all of you who were fortunate enough to be able to buy when the market wasn't so inflated, when you were young and didn't have kids, because you made enough money to save up for a deposit and/or qualify for a mortgage."

Expat and I had as much chance as anyone else to make those choices. Or we could have made different life choices, earlier, than would then have allowed us to. But we didn't.
but we can not condemn those that did get a mortgage then and now have ooodles of equity. They may have also struggled in other ways. And I bet it wasn't all a total breeze.

Thanks you oblomov for saying so elquently what I was trying to say earlier

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Um, correct me if I'm wrong, but the only ones who should be smug on here are the ones who rent?

Over last 5 years, residential rental costs have been around 4 - 4.7% (except London where they were 3.1%). Therefore, anyone consistently paying more than this on a mortgage, in terms of a mortgage rate (ie ignoring the bit in 2003 where interest rates briefly dipped below this, and ignoring 1 yr fixed deals) has been losing money compared to renting. Only when the rental yield is higher than the mortgage rate does renting become 'dead' money.

At least, that's the maths of it.

Now emotionally there is value to renting (no maintenance worries, ability to move to accomodate changing family structure, changes in income etc, no need to worry about property crashes) and there is value to owning (can do what you like to property, not subject to whims of landlord, windfall gains from rises in value).

But in pure mathematical terms renting is the wisest option and has been for some time. Saying that, as the credit crunch hits and demand for rental property goes up, so the yields might rise and situation might change.

Anyone who argues that at the end of the 25 years of mortgage you at least have a house to pass on is correct, but that's because they pay over and above the mortgage rate year on year to pay for it (check if you like: multiply your mortgage with the official mortgage rate and then divide by 12. the difference between that and what you pay is what you could theoretically save if you were renting): The house at the end of it is not a 'freebie' and anyone who rented and then invested money on the side would be in same position and able to buy same property, all other things being equal (which they're not of course, because of house prices and falls). People who say thank god they brought because they could never get on housing market now are right but it was a pure gamble they took - things could have gone the other way and they could have bankrupted themselves. And it has happened. I bought my first house for £15k in 87, sold it in 90 for £38k and in 95 it was sold at £4k - 90% drop in value.

God job we're not planning on going to france by the sounds of it

I certainly couldn't afford to pay the rent on the house I live in and also put money aside.
I can however afford the mortgage whcih when paid off will leave me with a house to sell.

I kind of see you point Squiffy. But at the end of the day - the homeowners will have something to pass onto their children, and the renters won't. Not everyone will end up in a nursing home, not all of the properties value will go on inheritance tax. Some people want to be able to leave something behind for their kids, is that so very wrong?

It's not wrong to want to have this house to pass on, but it is something that you have PAID for.

Hugh, newname: here's how it works.

House worth 250k. assume you have 50k deposit and mtgge 200k

mthly payments at say 6.5% (average now) = £1,350

IF you rented same house your rental would be 250k * 4.35% (average rental yield) =

£906

So if you rented instead of buying you could put aside the £444 you saved each month (along with the 50k deposit you didn't have to spend), and at the end of the mortgage term there would be enough in that kitty to buy the same property outright.

The only reason you might not be able to get same property is if house prices have fluctuated widely. Which of course they have. But they can fluctuate in the other direction TOO. Historically stock markets have outstripped house price inflation so if you put the money you saved by renting into the stock market then you could probably afford a BETTER house. But it is all a gamble one way or other. and it is all luck in terms of how the cookie crumbles.

Squiffy - you'd need to save that money for about 28 years before you had enough to buy the house outright. Do you honestly think that £250k is going to buy you very much in 28 years time, seriously?

Newname.

First you need to use annually compounded rates and also to take into account the 50k deposit which will also earn interest.

If we use say the current bank of England rate of 5% then at the end of 25 years there will be a cash balance of £434,563 in the kitty.

Will this be more than the value of the 250k property in 25 years time? Absolutely impossible to tell. Like I say, it's a gamble. But historically, market returns HAVE outstripped house price inflation (although the last few year threw it up a bit, as will the next few years, but in the other direction)

Keep taking the pills Squiffy.

Ah. Didn't like it when your honestly and seriously patronisations backfired, then?

tengreenbottles -

You do not need to smile smugly at all those who have bought a house as not everyone has a mortgage to pay.

My DH bought his first property in 92 and we have recently paid off our mortgage so do not pay interest to anyone.

We haven't had any money from parents - it has been achieved by DH buying at the right time, working hard and living within our means. Ideally we would like to be in a slightly larger house but can not afford to take out a large mortgage at the moment..hopefully we will be able to upgrade if prices fall further. Obviously we are in a very fortunate position.

Hopefully a new generation of first time buyers will have the chance to get on the property ladder if prices fall far enough in the next few years.

I can't see why anyone would choose to rent for the long term as the cost will go up and up whereas if you take out a 25 yr mortgage the payments will stay the same, whilst your income hopefully rises with inflation.

Squiffy love, if you seriously don't think that a house will double in value in 25 years then you're living in a dream world.

Marvellous idea of yours though - no wonder everyone is doing it. Oh wait, they're not.

newname, no need for the rudeness, squiffy has given you a perfectly polite and reasonab;le explanation of her pov.

I'm merely expressing what a load of old tosh she is talking wwww.

Actually, you're right though www, that was a bit bitchy.

Sorry Squiffy.

good on you for apologising well done

I think the problem with the renting vs buying calculations is that it doesn't hold true if the value of property is rising, and of course that is what people are used to. That of course looks like it will change, at least in the short term, but no one can really predict what will happen longer term.

Those people that bought their homes some time ago will have a decent slug of equity in them. That means that they are not paying the current value of the house the interest rate. They are paying the mortgage taken out at the time they bought the home the interest rate (which might well be fixed from a time when rates were considerably lower). Everybodies answers will be different depending on when they bought and how much equity they have. In my case though, if my mortgage had not been paid off, I would estimate that the amount of interest I was paying on the amount originally borrowed would be around 30-40% of the current rental value of the house I am currently in.

As I say though, the numbers will be different for different people. I would agree though that for people thinking of entering the market now, waiting and seeing what happens to house values is a sensible approach.

we are moving in 4 weeks into rental the house to buy would be 450 to 500k
we are paying 1295 per month, even with our equity we would need a mortgage of 360k at 6% over 25 years that would be 2319 quid.
Way too much for us so in the mean time we are banking our equity and living in a great house we would never be able to afford

hang fire and pick up a bargain.

To OP: Of course you shouldn't have to explain why you rent! It would never even occur to me to ask anybody why they rent.

Some friends of ours rent. They moved here from Wales and could afford to buy, but round here they could just get more house for their money by renting.

The house that they live in is lovely and is in a nice area. They now say that they don't want to buy as they are really happy there.

DP (yes DP, I'm not married never got round to it and couldn't be arsed to plan it, but wanted to start a family) is often going on about selling up our house and renting somewhere bigger, then we are mortgage free and not tied in. But I happen to like owning just because we rented for a couple of months while we were buying this house and I hated it. It always felt like the owners were spying on us.

My Grandmother always rented because she and my Grandad couldn't afford to buy.

If you can find a single qualified accountant, or statistican, or mathematician who can say there is a single error in anything I have pointed out I will happily withdraw what I have said. And as I and Soapbox have pointed out, none of us can predict how things will act in the future at the time when we make our decisions: house price rises relative to rental yields relative to interest rates relative to stock markets.

One thing that lots of people in this country don't ask is exactly this question of whether we should go for ownership - because we nearly all do it ourselves, we assume it is the best thing to do. We are one of the very few countries in the world that have this obsession with ownership. Much of Central Europe and Scandinavia think we are nuts for going for home ownership.

I say all of this, by the way, as houseowner myself.