# Buy Or Rent?



## scottishcammy (Jul 11, 2003)

Chaps, what's your opinions?

We currently have a mortgage, which has 2 years left on the current fixed rate, with the Coventry Building Society.

We pay around Â£758 per month. However, about 3 years ago, decided to go down to paying interest only, as things were a bit tight.

We also have a fair sized debt, which will pay off in 3 years, and will be several hundred pounds a month better off at that point.

Obviously there is going to be a year during which there is a gap; we will be off the fixed rate, and still have a year of paying our debt off as well.

I've no idea if we will be better off, or worse off for this year (basic mortgage rates, chances of re-mortgaging making us worse off with worse rate, etc.)

Now, the quandary is, should we look to sell now, paying off our mortgage and our outstanding debt, look to rent, and be a lot better of financially, or keep going as we are?

Work wise, I have to retire at 55 years old (I'm 36), but I do get a really good pension and commutation (though that may change with the cut-backs!!!) as it stands, I would get 2/3 of my final salary, and if I was retiring today, around Â£100,000 lump sum, give or take.

Your thoughts gentlemen (because I really can't make my mind up!).


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## clockworks (Apr 11, 2010)

Why would you want to sell now, with the market at/close to the bottom? If you are happy with your house, stick with it. No idea what the rental market is like where you live, but Â£700 a month doesn't get you very much here.

Cut back on unnecessary luxuries, and start paying off the mortgage.


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## scottishcammy (Jul 11, 2003)

clockworks said:


> Why would you want to sell now, with the market at/close to the bottom? If you are happy with your house, stick with it. No idea what the rental market is like where you live, but Â£700 a month doesn't get you very much here.
> 
> Cut back on unnecessary luxuries, and start paying off the mortgage.


For a very nice 3 bedroomed, detached house in the same area is around Â£100 - Â£150 month less than just paying interest on the mortgage, and around Â£400 - Â£450 month less paying capital and interest at current rate, not taking into consideration not having any debt repayment.

Not very happy with the house, it's very small for 3 growing kids.


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## jwg663 (Feb 26, 2004)

It's big step to sell and go to renting if you've been in the house a few years.

A few general questions to ask yourself, in no particular order.

I don't expect to see answers on here:

.

.

Realistically, how much is my house worth on the open market?

Will it sell?

How much equity do I have in it?

Would the equity pay off my outstanding debt?

If I rent would I look to buy again in the future?

Can I restructure my mortgage, ie pay less but pay longer?

If I go to renting & don't buy again in the future, what will I have to leave to the kids?

.

.

Unless you downsize or move to another area, you'll probably pay more than you sold for

if you buy again in the future. Your lump sum at 55 looks good, but remember that your

life expectancy is about 80 or 85 & you'll have a long time to go.


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## clockworks (Apr 11, 2010)

OK, but you'll have to pay agent's and legal fees, which will be around 2% and Â£500, plus removal costs. That'll outweigh any savings for the next couple of years. Then there's the temptation to spend any cash you walk away with, which will make buying a house again difficult.

Renting might sound like a good option, but I've always seen it as "wasted" money. Rents will keep going up in the future, your mortgage will shrink with inflation. Odds are, in five years, your repayment mortgage will be cheaper than renting.

If your current house is too small, now is a good time to trade up - that's what I'm doing. 3 bed terraced to 4 bed detached is costing me less than Â£50K, including all the fees. 2 years ago the same move would've cost me Â£100K+. I don't have (or need) a mortgage, so I guess it's relatively easy for me. In your position, I'd get a second job, rather than selling up.


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## Alas (Jun 18, 2006)

clockworks said:


> No idea what the rental market is like where you live, but Â£700 a month doesn't get you very much here.


In Fife that gets you Beckingham Palace :thumbsup: 

Stick with the mortgage just now Cammy as not much point in selling atthe bottom of the market. In 3 years time Reuben will have wrecked the house and you'll have to move anyway - Sorted 

Alasdair


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## hotmog (Feb 4, 2006)

If you sell up now and pay off your mortgage/debts, you might think yourself better off financially in the short term. All you will have done, however, is to liquidise your main asset in order that you can write off your outstanding liabilities. Any money left over afterwards is unlikely to be enough to allow you to buy another property.

You still have to live somewhere, however, so that will leave you with no option but to rent. You will be paying anything up to twice as much per month in rent compared with the cost of a mortgage on a similar property. Not only that, but you will be committing yourself to paying dead money - effectively paying off someone else's mortgage (and which will increase with inflation over the years) - for the rest of your life. And at the end of that, there will be nothing to show for it in terms of material assets or security to pass on to your wife and/or kids.

Keeping your exisiting property with its mortgage might appear to be the harder option short-term, but over the long-term your mortgage debt is fixed while the value of your property can ultimately only increase. Once the mortgage is paid off - possibly with your retirement lump sum, if not before, then that's it, the roof over your head is yours to keep forever and won't cost you penny more to live there (in terms of "rent") for the rest of your life. And when you do eventually pop your clogs, your wife & kids will still have that physical asset to live in, and the financial equity it represents to fall back on.


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## scottishcammy (Jul 11, 2003)

Thanks for the replies, certainly food for thought. Unfortunately a second job is out of the question.


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## scottishcammy (Jul 11, 2003)

Thanks hotmog, well put mate.


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## scottishcammy (Jul 11, 2003)

Alas said:


> clockworks said:
> 
> 
> > No idea what the rental market is like where you live, but Â£700 a month doesn't get you very much here.
> ...


Reuben is nodding his head


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## clockworks (Apr 11, 2010)

Alas said:


> clockworks said:
> 
> 
> > No idea what the rental market is like where you live, but Â£700 a month doesn't get you very much here.
> ...


Here it would get you a reasonable 3 bed in a slightly dodgy area, or rough 3 bed terraced in a nice area. A one bed flat is Â£400+. Property prices here are on a par with southeast England, despite the wages being far less.


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## scottishcammy (Jul 11, 2003)

This is the sort of thing you'd get here. east Lothian is a fantastic place to live, and this is a very nice area:

For rent


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## clockworks (Apr 11, 2010)

That'd be for sale at Â£190K here, probably close to Â£900 a month. Even more if it had nice sea or countryside views.


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## scottishcammy (Jul 11, 2003)

Weird, that would go for well over Â£200,000 here, but the rent is in line with other properties. Must be the rent is lower here. It's right next to the sea, a national country park, a railway station, and about 25 mins from Edinburgh.


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## clockworks (Apr 11, 2010)

Supply and demand, I guess. Property is generally in short supply here because of very strict planning rules. Not much decent stuff for long-term rental, as there's more money in holiday letting.

Low wages here limit the cost of buying a family-type home.

I guess there must be a surplus of empty buy-to-let properties in your area, or why would anyone rent out a house for less that the cost of covering the mortgage?


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## mulliner86 (Jan 12, 2010)

you'd be very lucky to rent a 1 bed flat for Â£750 round where I am.

personnaly I'd always choose to buy, I'd view the mortgage as a long term savings account with a good interest rate given the way house prices have soared over thw last decade.

just my 2 pence worth.

Cheers

Leo


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## MarkF (Jul 5, 2003)

Agree with all the below. I don't have a mortgage and I sleep really well.

Buyers able to obtain mortgages are thin on the ground, buyers able to get mortgages who actually want to buy right now, even thinner..........it's an awkward time, I don't believe the "house price crash" scenario, IMO it's impossible, not least because the UK's balance sheet is reliant on the current high prices, broadly, I expect normal houses in normal areas to stagnate for many, many years.

I do expect higher inflation though and wouldn't want to turn bricks and mortar into cash unless I had no choice or a brilliant reason for wanting to do so.

Can't you extend or turn the garage into a bedroom when the kids are a little bigger?



hotmog said:


> If you sell up now and pay off your mortgage/debts, you might think yourself better off financially in the short term. All you will have done, however, is to liquidise your main asset in order that you can write off your outstanding liabilities. Any money left over afterwards is unlikely to be enough to allow you to buy another property.
> 
> You still have to live somewhere, however, so that will leave you with no option but to rent. You will be paying anything up to twice as much per month in rent compared with the cost of a mortgage on a similar property. Not only that, but you will be committing yourself to paying dead money - effectively paying off someone else's mortgage (and which will increase with inflation over the years) - for the rest of your life. And at the end of that, there will be nothing to show for it in terms of material assets or security to pass on to your wife and/or kids.
> 
> Keeping your exisiting property with its mortgage might appear to be the harder option short-term, but over the long-term your mortgage debt is fixed while the value of your property can ultimately only increase. Once the mortgage is paid off - possibly with your retirement lump sum, if not before, then that's it, the roof over your head is yours to keep forever and won't cost you penny more to live there (in terms of "rent") for the rest of your life. And when you do eventually pop your clogs, your wife & kids will still have that physical asset to live in, and the financial equity it represents to fall back on.


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