sandrahofis
Member
We are facing the big dilemma: buy property in a popular UK city, or rent?
Rent, of course, is money down the drain. If you pay £1.5k a month in rent, after a year you have spent £18k in return for 0% ownership.
With mortgage interest rates increasing (since BoE raised interest rates last week by 0.75%), the interest portion of any mortgage payment also increases. Nonetheless, if you pay £1.5k a month in mortgage payments, after a year, you may have spent £9k on interest, but £9k against the principle, thus increasing your % ownership of the housing asset.
So after three years, you'd have built up equity of £27k in your property.
Now, let's say the property is worth £270k. If property prices drop by 10% over three years, you would lose £27k. Is that not then breaking even versus renting?
I guess what I'm saying is that you lose money either way (rent or buy) in the current climate, and rent prices are high.
But maybe, just maybe, investing in a house could leave you with an asset, and therefore still be worthwhile?
I would love to hear the opinion of others. Do you feel interest rates will increase even more? If so, would waiting for house prices to drop be futile, as you'd end up paying an even higher interest rate (shiver) on a lower principle? Again, net / net, the same?
So ... we have a deposit, we have mortgage approval, we've spotted a house in our budget we like ... it's not a forever home, but a stepping stone 3 - 8 year home. Do we take the plunge and get our foot in the door of the housing market, or do we continue to throw money at the overpriced and under-supplied rental market?
Rent, of course, is money down the drain. If you pay £1.5k a month in rent, after a year you have spent £18k in return for 0% ownership.
With mortgage interest rates increasing (since BoE raised interest rates last week by 0.75%), the interest portion of any mortgage payment also increases. Nonetheless, if you pay £1.5k a month in mortgage payments, after a year, you may have spent £9k on interest, but £9k against the principle, thus increasing your % ownership of the housing asset.
So after three years, you'd have built up equity of £27k in your property.
Now, let's say the property is worth £270k. If property prices drop by 10% over three years, you would lose £27k. Is that not then breaking even versus renting?
I guess what I'm saying is that you lose money either way (rent or buy) in the current climate, and rent prices are high.
But maybe, just maybe, investing in a house could leave you with an asset, and therefore still be worthwhile?
I would love to hear the opinion of others. Do you feel interest rates will increase even more? If so, would waiting for house prices to drop be futile, as you'd end up paying an even higher interest rate (shiver) on a lower principle? Again, net / net, the same?
So ... we have a deposit, we have mortgage approval, we've spotted a house in our budget we like ... it's not a forever home, but a stepping stone 3 - 8 year home. Do we take the plunge and get our foot in the door of the housing market, or do we continue to throw money at the overpriced and under-supplied rental market?
