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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:
Original poster
FlyMeToDunoon · 20/09/2009 18:42

Developers cannot knock down here it is a conservation area and house is in a terrace.

Do a little each year- well the windows in themselves would cost hundreds each as they are sash. is it worth doing one a year?
Re-pointing we could get done at a pinch [overdraft gets bigger]
Door frame is rotten and needs complete replacement- over a hundred again and again on the overdraft.
Window frames ditto.
Our boiler is very old and we have been told it will probably last no more than another year. Replacemnet £3000 at least.
I could go on...

OP posts:
Ivykaty44 · 20/09/2009 18:47

It was an example of the fact land is worth more.

Original poster
FlyMeToDunoon · 20/09/2009 18:49

Ok.

OP posts:
LittleMissNosey · 20/09/2009 18:52

'You pay off your house so you own your home, but where's your disposable income?'

Your disposable income is the fact you are not paying any rent or mortgage costs.

And being able to downsize is a nice option. Selling your family home, for a smaller house is sensible. Less upkeep, smaller bills and a nice little nest egg.

I am in my twenties, I refuse to believe that when I retire, my house will not be worth more than what I paid for it three years ago - that is a ridiculous notion.

DH and I pay into our occupational pensions, which are good pensions to have. But, if we had to pay rent on a house each month, with no other income it wouldn't lead to a happy retiremment. I would love the freedm of renting, but long term security forces me to keep the mortgage.

panicpants · 20/09/2009 19:13

Also, once you retire, you still have to find money each month for your rent...but you will have (hopefully) paid off your mortgage by then, so you won't be paying any mortgage or rent, reducing stress and worry surely??

But the other thing, which is important to me anyway, is I want to leave something for my children. And a paid off house, once I die, means they will not be in this situation themselves..therefore all the money I have paid in a mortgage will go to them.

I know that doesn't help you on the short term..but maybe something to keep in mind?

CarGirl · 20/09/2009 19:17

panicpants most of the equity in your home will probably go on care for yourself in your old age. I see my house as meaning I got a choice in care home if needed when the time comes!

It would be lovely if my dc get something but I don't necessarily think they will.

smackapacka · 20/09/2009 19:20

That was my point Littlemissnosey - you do still need a pension to pay for other bills even once the mortgage is paid off. I wouldn't be in favour of renting in retirement, but with lower outgoings whilst we're working (becuase of renting) we can save up for a home to live in once we retire (then live off pensions).

LittleMissNosey · 20/09/2009 19:32

I must live in a really strange of the country. To rent my house would cost me the same as my mortgage. I've looked around and we wouldn't save anything by renting.

CarGirl · 20/09/2009 19:37

it depends how big your mortgage is in relation to what the house is currently worth!

If we had 100% mortgage then it would be more expensive to own it than pay rent but we don't have a 100% mortgage because the value has increased and we put down a 14% deposit.

DaisymooSteiner · 20/09/2009 19:40

Me too LMN - we would never be able to afford to rent the house we pay a mortgage on!!

LittleMissNosey · 20/09/2009 19:53

We put down a 10% deposit cargirl

expatinscotland · 20/09/2009 19:58

What CarGirl said By CarGirl at 18:41:31.

There's no such thing as a long-term let unless it's a council/HA/social landlord. They're the only ones who offer assured tenancy.

Otherwise, the private landlord can always serve you 60 days notice after the initial 4 month period.

expatinscotland · 20/09/2009 19:58

What CarGirl said By CarGirl at 18:41:31.

There's no such thing as a long-term let unless it's a council/HA/social landlord. They're the only ones who offer assured tenancy.

Otherwise, the private landlord can always serve you 60 days notice after the initial 4 month period.

CarGirl · 20/09/2009 20:00

We bought nearly 8 years ago before the market started to rapidly escalate. At that time our mortgage was still only about 70% of what renting it would have been. Now the mortgage is lower and the rentals have increased.

expatinscotland · 20/09/2009 20:02

I'd look at selling and buying something smaller before I considered private renting.

Quattrocento · 20/09/2009 20:03

That's a good point Cargirl

As you go on, your mortgage does become a smaller proportion of your outgoings, because of inflation.

CarGirl · 20/09/2009 20:10

Quattro that's assuming repayment mortgage.

When we considered buying a bigger property last year it would have mean going interest only and selling up after 15 years and downsizing ie once some/all of the dds had left home/were adults.

AnAuntieNotAMum · 20/09/2009 20:43

Quattrocento - "I dunno, thought houseprices in London were going up now. Everyone in the City is talking about green shoots, and some of them actually seem to be meaning it".

House prices in London have recovered somewhat but the stats are also being driven by the small number of properties changing hands, with more activity at the higher end of the market. We might be at the bottom but it is as much as a gamble to take this position as to say that we are not. Remember too that repossession auction sales are excluded from the land registry house price index and, as these are mostly mortgage free, also excluded from Nationwide and Halifax figures as they are based on their own mortgage activity.

Everyone in the City? Some people are talking about the next wave of commerical property loan defaults. Some people are talking about the timebomb of people being unable to pay off personal debt on credit cards. Some people are wondering what the hell will happen when governments stop printing money QE and take interest rates up from their historical lows. All it's going to take is for one government wanting a stronger currency to break away and put up their rates, money will start to flow into that country and then others will follow suit. Without wage inflation and easy credit but with higher interest rates, houseprices are unlikely to go up and may fall.

To see some people who aren't talking green shoots, go onto iplayer and have a look at last week's newsnight special a year on from Lehmans.

The only way I see house prices going up significantly in the short term is if strong inflation takes hold - in which case, that big mortgage debt will be eroded and those with IO mortgages who can keep up the payments will be sitting pretty, as we saw in the seventies.

ABetaDad · 20/09/2009 20:47

What is rankling is the situation my PILs have got into.

Struggled for years to buy a 2 up 2 down house they now have no mortgage. However, the couple across the road have never saved a penny and have a council house that they can live in until they die. They get housing benefit, their house maintained and pay a paltry rent.

Who is better off? I would say the couple across the road as my PILs will have to sell their house to pay for care home accomadation if they get too frail. The couple across the road will just get everythig paid for. Both my PILs and te couple across teh road will end up with nothing but in the couple across the road have had more disposable income for the whole of their lives. There is a big disincentive to owning if you are on lowish income. Better to get a council house and/or sheltered housing and live on the state as much as possible after retirement.

We have invested the money we saved from not owning and done very well out of that. We intend to rent until DSs leave home then buy a small house just big enough for us to live in with as little capital tied up in it as possible but only once prices have fallen.

Jut cannot understand old people living in squalor in massive houses they cannot afford to maintain. Madness.

Wonderstuff · 20/09/2009 22:14

The problem with that ABetaDad is that 1. there is less and less social housing available, it is very difficult to get a house and 2. your choices are very limited, more difficult to move and you have very little say in where you live. The OP is talking about private rental. Agree re older people in big houses, my gran is really struggling with council tax, she moans about it going up when her pension isn't, but her house is much bigger than she needs. I guess when you reach a certain age it is difficult to contemplate moving.

expatinscotland · 20/09/2009 22:17

Trust me, I can't think of many places where you'd really want to be in a position where you had to accept what little social housing is on offer.

Wonderstuff · 20/09/2009 22:39

In our area there is one shared equity house we could offer on, it really isn't in a nice area. They have just introduced a bid system for council rented housing, no way we will be able to get anything that way. Last year the paper said there were 40000 in our area waiting for housing, can't see that number going down.

AnAuntieNotAMum · 21/09/2009 14:12

A view from the current Investors Chronicle (could be all wrong of course...) from someone in the property business..

"On top of all this, the housing market, a key economic component, remains in the doldrums, with transactions and mortgage lending still frozen at extremely low levels. The recent hype regarding a series of summer house price rises should be discarded, as it's based on severely depressed sales levels, and it is likely that a second - and prolonged - fall in prices is imminent. Banks are simply not open for business and a large deposit and unblemished credit rating are prerequisites for today?s buyers, holding a true market recovery firmly at bay".

noddyholder · 21/09/2009 16:17

There is def a mini boom going on in some areas but this is built on weak fundamentals eg low IR and not many decent properties for sale.This will last as long as GB and darling can fiddle the figures but once the election is over its further falls

Original poster
FlyMeToDunoon · 21/09/2009 16:40

OMG it's dire isn't it.

OP posts: