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Original poster

Mortgage vs renting

81 replies

FlyMeToDunoon · 19/09/2009 21:52

Talk me through this please.
DP and I are in a 3 bed house. We can't afford to move.
Can't afford to keep the property maintained properly. It needs some repointing, windows need renovating, window sills and front door frame need replacing. etc etc.
Basically we have no spare cash. We live on overdrafts which we are trying to pay off.
So we sometimes fantasise about selling up, putting the equity in a savings account of some kind and renting.
Assuming a good, nice landlord then maintainance is looked after, we have an investment [equity] for the future and possibily our monthly outgoings are lower.
What is the reality?

OP posts:

panicpants · 19/09/2009 22:05

House prices could go up, so your equity may be worth less in the future and will therefore losing money.

How about selling your house and buying a 2 or even a 1 bed (sorry don't know if you have dc's) and paying off some of your mortgage thereby reducing monthly payments? That way you are protecting your equity.

Or you could rent out your house...if you could get rent which would cover your mortgage, then you are free to rent a smaller house with less rent..and you would also keep you equity intact.

panicpants · 19/09/2009 22:05

House prices could go up, so your equity may be worth less in the future and will therefore losing money.

Or you could rent out your house...if you could get rent which would cover your mortgage, then you are free to rent a smaller house with less rent..and you would also keep you equity intact.

Original poster

FlyMeToDunoon · 19/09/2009 22:25

If the equity was in a savings or ISA or something it would make increases as would house prices.
If we rented out our house we would need to find the money to maintain it from somewhere.
We have three DCs so need similar space as where we are.

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OldLadyKnowsNothing · 20/09/2009 02:57

I wouldn't count on investments or savings making any sort of money atm; I know of one chap in his 70's with massive savings being offered 0.01% on his long-term dosh.

Yes, I typed that right - his savings are worth less now than they were last year, because of inflation

ABetaDad · 20/09/2009 03:09

FlyMeToDunoon - you are facing the reality that many people have now come to realise. The cash outgOing on a house with a 100% mortgage is a LOT higher than what you would pay in rent.

Without house price rises - it is more expensive to own than rent if you have a mortgage. We have rented for 25 years and have always kept this in mind. The last house we rented the landlord put more money into the house doing it up and maintaining it than we payed in rent for the 4 years we were there. We estimated he needed to spend another 50k on it by the time we left and he made hardly anything on the price appreciation and when we left he accepted a 10% lower rent from the next tenants.

Currently we are renting a house at about 50% of the cost of a 100% interest only mortgage plus mainatining it. The landlord is a developer desperate to sell but cannot.

The real risk you face by renting is that rents will rise more quickly with inflation than your income. If ou ar enot worried about that keep renting until prices get back to the long run multiple of 3 - 3.5 x average salaries.

Original poster

FlyMeToDunoon · 20/09/2009 10:03

ABetaDad What plans do you have for your retirement if you don't mind me asking?
We expect to pay off our mortgage when we are 65 and feel that atm it is a huge burden and for what? Neither of us has a pension and can't afford to start saving now so we assume we will have to sell the house anyway and buy a very small place in order to have a lump sum for us to supplement any state pension we might be getting.
The house of course may have crumbled away by then.....

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noddyholder · 20/09/2009 15:42

I think renting is going to become much more desirable and commonplace over the next few years.there will just be a whole section of society who will never buy like in europe and it will take a while but will soon be seen as a desirable alternative.

LittleMissNosey · 20/09/2009 15:51

I want to rent - hate having a mortgage. But I am also worried about retirement and living in old age

sarah293 · 20/09/2009 15:53

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CarGirl · 20/09/2009 16:01

Hmmm how long is the term on your mortgage now and is it repayment?

You could look at lengthening the term &/or going interest only until you are back on your feet financially.

Provided you can see this as a short term measure or are comfortable with the fact that you may have to sell up & downsize as soon as the eldest dc leaves home then that is something worth doing?

noddyholder · 20/09/2009 16:03

You should only lengthen the trem or go interest only if you are sure of salary increases,interest rate stability and rising house prices.

CarGirl · 20/09/2009 16:05

but surely if the alternative is having to sell up & rent with young/school age children doing those things can help.

I would want to rent with school age children in case we had to keep moving it would be a nightmare.

I think it does depend if you can accept you may have to sell up and downsize/rent at some point in the future. Longer term the house value is very likely to rise I'm talking 5 years or so as a minimum.

noddyholder · 20/09/2009 16:10

We ar obsessd with owning property in this country and it has to end soon as it is not sustainable.If you are scraping by month on month and getting into debt you cannot afford it as simple as that.And property (unless you own a few)is not a good investment for retirement anymore.

CarGirl · 20/09/2009 16:14

I agree that owning is not the be all and all at all. However the bog standard short term tenancy thingy is a nightmare, so many people getting moved on every 6 or 12 months which is far from ideal with young children.

I would view going interest only etc as an alternative to renting in that kind of situation.

LittleMissNosey · 20/09/2009 16:16

But owning a property does mean you have somewhere to live when you retire - what happens if you are renting when you retire? Thats what scares me

noddyholder · 20/09/2009 16:16

It is about time the govt did something about making renting more attractive safer option as they do in europe instead of seen as a second rate way to live where the maintenance is shoddy and you nver feel safe

sarah293 · 20/09/2009 16:20

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noddyholder · 20/09/2009 16:22

It is because we are obsessed that the govt do nothing about the dire rental situation as most people aspire to buy

CarGirl · 20/09/2009 16:34

hmmmm but it was Thatcher that created the obsession, partly be selling off so much social housing stock and central government pocketing the money rather than giving it to local authorities to build more social housing like they were supposed to.

bodeniites · 20/09/2009 16:44

we dont own uor house we rent it from a housing association it was a new build when we moved in 9 years ago i wished i owned my own home but i would never buy one like we live in IFSWIM it would need to be much fancier which is never going to happen therefore we will continue to live here. the rents are reasonable(council tax is quite high and E down to a D because of sn son) which means we have some disposable income we can rent all our lifetime and then our ds1 could remain here if he was still livng here when we died it is a lovely house in a nice area so i am quite happy to stay

CarGirl · 20/09/2009 16:46

it's okay if you rent from housing association as it's assured tenancy it's so different if you rent privately.

AcrylicAfternoons · 20/09/2009 16:51

If you can get a council house / housing association then I would say go for it.

But private renting can be hellish and I'd seriously think before considering it. You may end up having to move about a lot due to short term tenancy agreements. It can be very unsettling, as you never know when you may have to move again because the landlord wants to sell the house or move his mates in instead (this happened to me)

Every time you move there's the cost of removal van, deposits or administration costs (charged by some letting agencies). Your furniture may not be suitable for the new house (to big / not enough storage etc), so you end up buying new stuff and getting rid of stuff all the time. So the cost of this as well means it may not end up being that much cheaper.

You have the hassle of trying to get your deposit back off the landlord (I have been screwed over on a couple occasions by greedy landlords). Some landlords don't do repairs promptly or look after the property well, I've lived in houses with bad damp, broken boilers for weeks on end, leaking roofs etc.

Also the niggly stuff like not being able to decorate how you would like, the decor not being to your taste, or spending money on decorating / new curtains only to have to move again, and annoying quirks of a rented house that you can't change (why have all the windows been painted shut, why is there only one plug socket in each room etc)

suzybsue · 20/09/2009 17:06

im with Cargirl, may be worth extending length of mortgage if that is a option.

What part of the country do you live in?

Morosky · 20/09/2009 17:15

We owned our own home until a few months ago we moved to the other end of the country and could not sell so we had to rent. We have now been renting for a year, for most of that time we have been paying mortgage and rent. Now we have sold, have cleated every penny of debt and have a nest egg. We are saving to buy again but are in no great rush to be honest.

We rent privately, have a lovely house which like betadad we rent at approximately half the cost of a mortgage. The house is a lodge house on a country estate so is almost certainly not likely to be sold within the next 20 years. Houses like ours very rarely come up for sale and I doubt we could afford to buy it. We have considered buying another house to rent out and then sell to fund our retirement. As a teacher I have a secure pension and renting enables us to save more than our actual rent every month.

Original poster

FlyMeToDunoon · 20/09/2009 17:48

Right, lots of replies thanks.
Firstly we would rather not extend the term of our mortgage as it is until we are 65 as it is and one of the points for us that it feels like a massive pressure and burden we carry into our old age.
Secondly we converted from an ISA mortgage two years ago to a repayment one because we felt much more at ease knowing we were paying off the mortgage and that we would not be in danger of having to find extra money at the end of the term. Lucky for us as it turned out because our ISA would be worth very little atm.
If we rented we would look for a long term let and hopefully would be able to avoid painted shut windows and one plug per room places.
We are in the south east.

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