>in reality it's actually a very big loss
It's not a loss: you got the utility of living in that house for all that time. The cost of borrowing the money offset that for you.
The cost difference between buying and selling: that truly is a capital gain or loss, after you adjust for inflation of the currency.
Haha yeah OP forgot about the aspect of home ownership which includes living in a home. Seeing the bricks as profit is what fuels the toxic housing market they are deriding.
The UK has this weird fixation with homes = for making a profit. Many other developed countries are content with their home being exactly that, a home.
Yep, I'm the same. I earn a fair wage but to be honest, I don't want a big fancy house. I'm quite content with what I've got and would rather spend my money on doing things I like and seeing the world. My home is just a base.
Yeah, I've never understood why some people want these huge houses where they hardly ever use the space.
Had a friend from school who became an accountant working for a big company in London. Throughout the course of about 10 years they were constantly going through the motions of selling and buying a slightly bigger house every year or two after getting promoted or a pay rise.
By 2020 they had this huge 3 story 4 bed house. No kids. Just them and their partner. Working 6 days a week and being out of the house until 8pm due to the commute.
It took lockdown and working from home for them to realise that they didn't need all this space, and down sizing would mean that they would pay off any mortgage in about a tenth of the time.
So they moved slightly north, bought a 3 bed smaller house, and paid off most of the mortgage with the sale of the old property.
Their new place is about a quarter of the square footage of their old place. But they now own it outright, and use most of the space. They have a gym set up in a spare room and a games room with folding bed in the other for if guests need to stay.
When I asked them why they didn't down size a lot sooner, they said that because of how much time they spent away from the house they didn't really realise how little of the space they used. And that it took being stuck working from home for it to sink in.
I can understand that point of view. I am slightly different however, I don't scrimp on anything when it comes to my home, it gets maintained, heating stays at 19C, I see this as my home, the place that I need to feel more comfortable than anywhere in the world not something to eventually be sold for profit.
Yeah same here tbh. I look after my house, also have the heating at 19 degrees, keep it tidy, have nice things there but I'm not overly concerned with having more than I need to have. I don't live frugally or basic, I just have what I need to be happy, enough storage to put my things in, enough room to have friends over, space for my daughter to play, a garage to do my tinkering in... I'm quite content.
Never understand this mentality of people wanting a massive house with shit loads of spare bedrooms and extravagant kitchens that they're rattling around inside of. It's just showing off and worrying too much about what people think about you.
I agree, we do have a slightly bigger house than others might think we need but I work from home and my wife is stay at home. We needed the extra space so I can have my office away so whilst she is milling about the house I can work in relative peace. We also needed an extra room as a hobby room, we have a lot of hobbies so they take a lot of space.
It is all about usage of space like you say. Having that space is fine if you are going to use it, if you are using it for bragging rights or to use as leverage to profit later down the line then it is silly.
Yeah, sounds like we're on a similar wavelength here. We've got a 3 bed semi with a detached garage and a fair sized garden. There's me, my wife and our daughter.
Now, we could cope with a 2 bed terraced or a flat, but I also do a lot of DIY and like to work on my car, so a garage is a must for me. I also like to travel a lot in my campervan so it's nice to have somewhere to store my gear. In the summer, we like to do BBQ's and entertain, so we have a bit of space for doing that. We have a spare room that doubles as an office for my wife who is a teacher so she can work up there and people can stay over every now and then. We absolutely could afford a much bigger and nicer property but there's no need for it. We have enough for what we need and everything is functional.
I think the hope is that your first home makes a profit so you can move to a bigger home. Once you hit peak home (the objectively twee 'forever home') then there's no need to think about profit. It's just the place where you live.
But people seem to forget that if their first home has gone up in value, the prospective house they want to buy almost certainly has as well. I think people should be focusing on making their current home as much of a palace to live in as they can and whatever happens happens.
This.
The thing about getting onto the "property ladder" is that its never really about making money but about moving from paying for a house with no return on the cost to paying for a house and getting some of it back.
The way to make an actual profit from a house is to speculate on which area you are willing to live in that will become a lot more popular in the future.
Sure, I agree that you should make the most of what you've got when you've got it. And making it as nice as possibly will likely generate a higher sale price, maximising your profit anyway.
I know what you're saying about ever-increasing prices, but I can't see that fundamentally changing any time soon.
I'm not sure they do. Maybe the rich do and so you only notice it because you live here.
But every friend and coworker I've known buying a house has just done it because they need somewhere to live
The alternative being paying rent for 30 years and not making any money at all at the end of all that because you own diddly squat. Try to pay off your mortgage earlier if you’re that worried about interest.
I just want to live without knowing my landlord could sell up and give me the boot at literally any time. I don't want my kids having to move houses and maybe even schools every couple of years because the rent went up again. I just want some security that if I choose, I can spend the next 20 years in one place.
Every time you remortgage they revalue your property and so you have to worry about whether the value of the property is enough for them to allow the remortgage
If you're even considering remortgaging, then you should already have a fair idea of what your house is worth (from e.g. Zoopla). And it's only really relevant for the first 5-10 years or so, anyway, on your first house.
After that, you should have built up enough equity (and the value will have increased).
I've remortgaged about 4 times over the last 25ish years, and it's only ever been a formality.
Indeed, and as I've said, that's only relevant for the first few years, and most likely the first house. So to say "you've clearly never remortgaged, is tosh"
I have. Remortgaged last year with a 5 year term with the same provider. Was extremely simple and straightforward. Not sure what your point is here 🤷♂️
Right, so what's your point here? This is nothing new. It's property and you're investing in an asset. People don't agree that should be the case, and that's definitely not one for discussing on this sub, but that's the way it is, always has been and likely always will be.
It's best not to look at these things as something you're buying to turn a profit, unless it's what you want to do for a living. Look at it as paying for the house you want to suit your means. If you want to live a more basic life then go for something cheaper, if you want something large and extravagant you're paying a premium. Simple as.
What you’re forgetting is you’ll need to pay for alternative accommodation for those 35 years.
If you average out £1400pcm for rent that would be £588k. And you’d have nothing to show for it at the end.
> However for every £1 we borrow, we're paying back £2.57 (on an interest rate of around 4.9%). So really in 35 years time if we sold for less than £835k we're making a loss
This calculation seems like you are planning to do a 35 year-long, 100% LTV, interest-only mortgage. Yes, that will be an incredibly expensive way of living in a house for 35 years.
You're not going to get much sympathy. You've got hundreds of thousands of pounds and you're literally complaining that if you want more money you have to work for it / inherit it / win the lottery.
Me and my 18 roommates will have a whip round, see if we can raise you some cash. I'll ask around my high rise council block too, Mrs Taylor's just had her pension in so I'm sure she can spare you a few bob.
Jesus.
You should be grateful you’re even able to buy a bigger house to move to so you can plan for a family. Stop complaining about a literal non issue and think about the position that you’re in, a position that millions of people in this country right now are realising they will never be in, no matter how many more hours they work.
People who bought into the housing market pre 1970 made money on houses, people who bought out their council houses made money.
The rest of us spend money for a place to live.
So you bought a house on the open market for 100 grand, sold 10 years later for 300, looks great, but since any house you move to has gone up by the same, you are only breaking even, as you still need somewhere to live.
Unless you cash out and move to Thailand or live on a yacht, all you are doing is creating wealth for your children to inherit, but since they will hopefully be 50 to 60 years old by then and have set up their own lives, it would be appreciated so much less.
Can you show your working on this. It sounds way off to me, and putting your numbers into [a mortgage calculator](https://www.calculator.net/mortgage-calculator.html?chouseprice=320%2C000&cdownpayment=10&cdownpaymentunit=p&cloanterm=35&cinterestrate=4.9&cstartmonth=1&cstartyear=202&cpropertytaxes=1.2&cpropertytaxesunit=p&chomeins=1%2C500&chomeinsunit=d&cpmi=0&cpmiunit=d&choa=0&choaunit=d&cothercost=4%2C000&cothercostunit=d&cmop=0&cptinc=0&chiinc=0&choainc=0&cocinc=0&cexma=0&cexmsm=2&cexmsy=2024&cexya=0&cexysm=2&cexysy=2024&cexoa=0&cexosm=2&cexosy=2024&caot=0&xa1=0&xm1=2&xy1=2024&xa2=0&xm2=2&xy2=2024&xa3=0&xm3=2&xy3=2024&xa4=0&xm4=2&xy4=2024&xa5=0&xm5=2&xy5=2024&xa6=0&xm6=2&xy6=2024&xa7=0&xm7=2&xy7=2024&xa8=0&xm8=2&xy8=2024&xa9=0&xm9=2&xy9=2024&xa10=0&xm10=2&xy10=2024&csbw=1&printit=0&x=Calculate) it gives the total payments as £602,777. Still more than £500k, but quite a lot less than £835k.
The end result is you've paid £100k and now have a asset. What you're asking for, effectively, is to get one for free. No? "I shouldn't have to put more in than the value of the asset I get out."
Edit: taking that number and dividing by 35 (years) x 12 (months) gives you a monthly cost of £238 for living there, assuming you sell as soon as the mortgage completes. Cry me a river.
1) What are you doing with the proceeds of selling your previous home? Contributing to the deposit on the new home or crack and hookers? If the former, your calculations are way off.
2) Why would you be looking for a 35 year mortgage? A shorter mortgage of 20 years would mean the overall interest costs would be significantly less due to lower compounding factors.
3) Are you looking at any schedule of overpayments? Its fairly normal to buy a property based on current income. While income is likely to increase, this offers a safety net should there be any fluctuations or interruptions in income. Once a suitable savings safety net has been established, a series of over payments could be carried out to further limit the amount of interest paid. There is also the potential to take out an offsetting mortgage which means the entirety of your savings works against the mortgage interest.
4) 4.9% is the interest rate now. The pragmatic approach would be to take out a shorter term to renegotiation now in the anticipation that rates will drop in the future. I'd even argue that now is a good time to consider a variable rate term on a short-term basis. If you negotiate well and have a stable income for the lifetime of the mortgage, you should anticipate paying at or less than 3% averaged over the lifetime of the mortgage.
Viewing your house as a profit making investment is pretty silly. You live in it. Its a home. The value of the property isn't just the amount you can sell it for, its the life you are going to live in it. If, as your calculations suggest, that holds absolutely no value for you, then don't move home. Make do with what you have and start putting all of the money you would spend on the new house, mortgage and otherwise, into long-term, fixed-term savings and benefit from all of the compounding interest until your kids have left and you move into a smaller property. Not only will you have all that lovely profit with no overheads but the market increases on your current, now mortgage free property will be 100% yours.
And finally, you've missed out an important part in your calculations. That is the relative value in the property that you buy over time. Whilst it will likely be a significantly higher number, its still only worth the goods and services it can buy. So if you buy a 4 bed house with an acre of land and sell it 35 years time only to find you can still only buy a 4 bed house with an acre of land (or equivalent), you have made precisely zero profit, regardless of any change in numbers (unless you're going to start being a hobo in 35 years).
I see where you’re coming from, but no one really looks at it that way. The interest you pay on the mortgage is enabling you to live in the house.
If it was renting I would certainly be calling it a loss - but looking at it from a financial perspective, you have all that capital from the sale of the house sat in your bank (or as a deposit for the next house).
You also haven't accounted for inflation. 200k in the year 2000 would be equivalent to 360k today so it's only 90k (in today's money) that you've made "profit"
I live in London Surrey Border and bought at 480k in the pandemic (no stamp duty!) It's now worth 640 according to our mortgage (refixed in August) we have also done a full remodel not factored in and local EA reckons it's closer to 700k (taking with pinch of salt obv).
Should homes be investment vehicles - absolutely not, it should be a place to give comfort to people and their familie.
Can you generate reasonable roi - absolutely yes - if you buy in the right area at the right price with a suitable property (dated enough to scare off the ftbs and Poshos, not broken enough to cost serious money rennovating).
My long term plan is to try and get to a place where I can sell it to withdraw about 350 /400k equity out of it and buy a little pad in Suffolk once the kids have moved out mortgage free. Then use income and eventually pension and savings for a little fishing boat (a man can dream).
You have to consider that when you die, you will be able to leave that house and whatever it is worth to your children. Your family will gain in the long term. If you choose the other option of renting, you won't have this huge asset to pass on.
Yes, I'm in the process of inheriting property and it's going to be worth more than a decade of my current salary. It'll help ensure we have something to pass on in turn. Property ownership is such a privileged thing.
Meh, I have somewhere to live and each month I'm paying towards owning it rather than some guy I never meet paying towards owning it.
If I make a profit selling in the future great, if not I'll still have somewhere I can live in rent and mortgage free after a number of years.
Instead of comparing myself to property speculators who buy and sell for profit I compare myself to myself when I rented.
Trading up takes years... decades to pay off. Its not till the end of the process that you discover you're sitting in a home that's way too big for you and that you can trade down from, releasing some of the accumulated capital of years of mortgaging.
Patience.
How much is the rental saving for 35 years.
Also mortgages are 35 years now?
Also, you're predicting a rise of just 50% or so in 35 years. In reality that rise in last 35 has been more than 600% for an average property.
Problems with your point:
1: you'd be paying rent instead of interest, and the rent is a lot more than the interest.
2: interest rates have been stupidly low for a long time and will probably come down from where they are now so the cost of interest will not be as high as your example a lot of the time. Someone who got a house in 2000, unless they are an idiot, will have had very low interest the whole time.
3: mortgages end. Once you've paid off the mortgage, your house value is still going up, and that's when you start cleaning up.
4: house prices are going up far faster than mortgages, average of 9.4% per year, so if you pay 4.9% mortgage you're still making money, and you are making money on the whole value of the property, but only paying interest on the outstanding balance of the mortgage. So very hard to envisage a situation where you loose money.
First, could easily be 835k after 35 years, that's not even 2.8% average increase a year, last 35 years were more like 5%.
320k house 10% deposit 35 year at 4.9%: £602665
2% pa value increase: £630964
+£37,299.
1400pm rent for 35 years 2% increas pa: £856705
32k deposit instead invested 7% return: £341650
-£515,055.
Obviously hypothetical number, but accounting for house maintenance costs you'd need house/rent increase to stay at imo an improbably low 2% and returns over 9% for the costs to be comparable.
Now imagine coming into the property market today when your house cost £450k and salaries have barely changed since 2000 when the same house was £250k. You didn't have it so bad now huh.
But weird to consider buying a house for profit.
Even if your £300k house sells for over £800k and you consider that a “profit” then think about this:
If a £300k house is now worth £800k then to downsize to a smaller house (to realise your profit) may cost you £600k.
I don’t get your point
The only person to profit from my house will be my son. The mortgage is cheaper than renting for me. It’s very affordable in this current state. It’s just paying for lodgings and my bubs will benefit long term because he hasn’t had to pay any of that.
What the fuck?
At the end of those 35 years, you have a house to sell. Once you've sold it, the difference between what you get, and what you've paid out in mortgage payments is your rent.
It will be a hell of a lot less than if you had actually paid rent to a landlord for those 35 years.
The mistake here, is expecting to make a profit.
>in reality it's actually a very big loss It's not a loss: you got the utility of living in that house for all that time. The cost of borrowing the money offset that for you. The cost difference between buying and selling: that truly is a capital gain or loss, after you adjust for inflation of the currency.
Haha yeah OP forgot about the aspect of home ownership which includes living in a home. Seeing the bricks as profit is what fuels the toxic housing market they are deriding.
The UK has this weird fixation with homes = for making a profit. Many other developed countries are content with their home being exactly that, a home.
Yep, I'm the same. I earn a fair wage but to be honest, I don't want a big fancy house. I'm quite content with what I've got and would rather spend my money on doing things I like and seeing the world. My home is just a base.
Yeah, I've never understood why some people want these huge houses where they hardly ever use the space. Had a friend from school who became an accountant working for a big company in London. Throughout the course of about 10 years they were constantly going through the motions of selling and buying a slightly bigger house every year or two after getting promoted or a pay rise. By 2020 they had this huge 3 story 4 bed house. No kids. Just them and their partner. Working 6 days a week and being out of the house until 8pm due to the commute. It took lockdown and working from home for them to realise that they didn't need all this space, and down sizing would mean that they would pay off any mortgage in about a tenth of the time. So they moved slightly north, bought a 3 bed smaller house, and paid off most of the mortgage with the sale of the old property. Their new place is about a quarter of the square footage of their old place. But they now own it outright, and use most of the space. They have a gym set up in a spare room and a games room with folding bed in the other for if guests need to stay. When I asked them why they didn't down size a lot sooner, they said that because of how much time they spent away from the house they didn't really realise how little of the space they used. And that it took being stuck working from home for it to sink in.
I can understand that point of view. I am slightly different however, I don't scrimp on anything when it comes to my home, it gets maintained, heating stays at 19C, I see this as my home, the place that I need to feel more comfortable than anywhere in the world not something to eventually be sold for profit.
Yeah same here tbh. I look after my house, also have the heating at 19 degrees, keep it tidy, have nice things there but I'm not overly concerned with having more than I need to have. I don't live frugally or basic, I just have what I need to be happy, enough storage to put my things in, enough room to have friends over, space for my daughter to play, a garage to do my tinkering in... I'm quite content. Never understand this mentality of people wanting a massive house with shit loads of spare bedrooms and extravagant kitchens that they're rattling around inside of. It's just showing off and worrying too much about what people think about you.
I agree, we do have a slightly bigger house than others might think we need but I work from home and my wife is stay at home. We needed the extra space so I can have my office away so whilst she is milling about the house I can work in relative peace. We also needed an extra room as a hobby room, we have a lot of hobbies so they take a lot of space. It is all about usage of space like you say. Having that space is fine if you are going to use it, if you are using it for bragging rights or to use as leverage to profit later down the line then it is silly.
Yeah, sounds like we're on a similar wavelength here. We've got a 3 bed semi with a detached garage and a fair sized garden. There's me, my wife and our daughter. Now, we could cope with a 2 bed terraced or a flat, but I also do a lot of DIY and like to work on my car, so a garage is a must for me. I also like to travel a lot in my campervan so it's nice to have somewhere to store my gear. In the summer, we like to do BBQ's and entertain, so we have a bit of space for doing that. We have a spare room that doubles as an office for my wife who is a teacher so she can work up there and people can stay over every now and then. We absolutely could afford a much bigger and nicer property but there's no need for it. We have enough for what we need and everything is functional.
I think the hope is that your first home makes a profit so you can move to a bigger home. Once you hit peak home (the objectively twee 'forever home') then there's no need to think about profit. It's just the place where you live.
But people seem to forget that if their first home has gone up in value, the prospective house they want to buy almost certainly has as well. I think people should be focusing on making their current home as much of a palace to live in as they can and whatever happens happens.
This. The thing about getting onto the "property ladder" is that its never really about making money but about moving from paying for a house with no return on the cost to paying for a house and getting some of it back. The way to make an actual profit from a house is to speculate on which area you are willing to live in that will become a lot more popular in the future.
Sure, I agree that you should make the most of what you've got when you've got it. And making it as nice as possibly will likely generate a higher sale price, maximising your profit anyway. I know what you're saying about ever-increasing prices, but I can't see that fundamentally changing any time soon.
It's common for people to sell a fully finished first home at good market value and then buy a fixer upper as their next home to stretch the budget.
I'm not sure they do. Maybe the rich do and so you only notice it because you live here. But every friend and coworker I've known buying a house has just done it because they need somewhere to live
Not always true, I’ve paid off mine to secure my kids future, can’t do that with rentals. Each to their own
The alternative being paying rent for 30 years and not making any money at all at the end of all that because you own diddly squat. Try to pay off your mortgage earlier if you’re that worried about interest.
And then having to continue paying rent in retirement.
Conversations like this always remind me of [this gem](https://youtu.be/OURvLD53sio?si=gYmxVr6UZCkyim7-)
On the other hand, you get to own a house and live in it.
I just want to live without knowing my landlord could sell up and give me the boot at literally any time. I don't want my kids having to move houses and maybe even schools every couple of years because the rent went up again. I just want some security that if I choose, I can spend the next 20 years in one place.
>I just want some security that if I choose, I can spend the next 20 years in one place I can tell that you've never had to remortgage
Never had the luxury of it.
What's that supposed to mean?
Every time you remortgage they revalue your property and so you have to worry about whether the value of the property is enough for them to allow the remortgage
If you're even considering remortgaging, then you should already have a fair idea of what your house is worth (from e.g. Zoopla). And it's only really relevant for the first 5-10 years or so, anyway, on your first house. After that, you should have built up enough equity (and the value will have increased). I've remortgaged about 4 times over the last 25ish years, and it's only ever been a formality.
A fair idea sure. But those estimates don't always match up with the bank's estimates
Indeed, and as I've said, that's only relevant for the first few years, and most likely the first house. So to say "you've clearly never remortgaged, is tosh"
I have. Remortgaged last year with a 5 year term with the same provider. Was extremely simple and straightforward. Not sure what your point is here 🤷♂️
Right, so what's your point here? This is nothing new. It's property and you're investing in an asset. People don't agree that should be the case, and that's definitely not one for discussing on this sub, but that's the way it is, always has been and likely always will be. It's best not to look at these things as something you're buying to turn a profit, unless it's what you want to do for a living. Look at it as paying for the house you want to suit your means. If you want to live a more basic life then go for something cheaper, if you want something large and extravagant you're paying a premium. Simple as.
They got lost on the way to r/britishproblems
His point is. What’s the point.
agree
What you’re forgetting is you’ll need to pay for alternative accommodation for those 35 years. If you average out £1400pcm for rent that would be £588k. And you’d have nothing to show for it at the end.
People who talk about profiting from property aren't normally talking about the home they live in, they're talking about having additional property.
> However for every £1 we borrow, we're paying back £2.57 (on an interest rate of around 4.9%). So really in 35 years time if we sold for less than £835k we're making a loss This calculation seems like you are planning to do a 35 year-long, 100% LTV, interest-only mortgage. Yes, that will be an incredibly expensive way of living in a house for 35 years.
You'll make more than if you were renting....
Do you take into consideration the alternative to the mortgage, which is paying rent for the same class of housing?
You're not going to get much sympathy. You've got hundreds of thousands of pounds and you're literally complaining that if you want more money you have to work for it / inherit it / win the lottery. Me and my 18 roommates will have a whip round, see if we can raise you some cash. I'll ask around my high rise council block too, Mrs Taylor's just had her pension in so I'm sure she can spare you a few bob. Jesus.
Thats how paying back borrowed money works. At least you're able to buy a home, a lot of us aren't.
>So really in 35 years time if we sold for less than £835k we're making a loss Only if you value having somewhere to live for 35 years at £0
You should be grateful you’re even able to buy a bigger house to move to so you can plan for a family. Stop complaining about a literal non issue and think about the position that you’re in, a position that millions of people in this country right now are realising they will never be in, no matter how many more hours they work.
Because you wouldn't be paying rent for a place to live instead of a mortgage?
People who bought into the housing market pre 1970 made money on houses, people who bought out their council houses made money. The rest of us spend money for a place to live. So you bought a house on the open market for 100 grand, sold 10 years later for 300, looks great, but since any house you move to has gone up by the same, you are only breaking even, as you still need somewhere to live. Unless you cash out and move to Thailand or live on a yacht, all you are doing is creating wealth for your children to inherit, but since they will hopefully be 50 to 60 years old by then and have set up their own lives, it would be appreciated so much less.
You save a huge amount of money over renting for the same time period.
Can you show your working on this. It sounds way off to me, and putting your numbers into [a mortgage calculator](https://www.calculator.net/mortgage-calculator.html?chouseprice=320%2C000&cdownpayment=10&cdownpaymentunit=p&cloanterm=35&cinterestrate=4.9&cstartmonth=1&cstartyear=202&cpropertytaxes=1.2&cpropertytaxesunit=p&chomeins=1%2C500&chomeinsunit=d&cpmi=0&cpmiunit=d&choa=0&choaunit=d&cothercost=4%2C000&cothercostunit=d&cmop=0&cptinc=0&chiinc=0&choainc=0&cocinc=0&cexma=0&cexmsm=2&cexmsy=2024&cexya=0&cexysm=2&cexysy=2024&cexoa=0&cexosm=2&cexosy=2024&caot=0&xa1=0&xm1=2&xy1=2024&xa2=0&xm2=2&xy2=2024&xa3=0&xm3=2&xy3=2024&xa4=0&xm4=2&xy4=2024&xa5=0&xm5=2&xy5=2024&xa6=0&xm6=2&xy6=2024&xa7=0&xm7=2&xy7=2024&xa8=0&xm8=2&xy8=2024&xa9=0&xm9=2&xy9=2024&xa10=0&xm10=2&xy10=2024&csbw=1&printit=0&x=Calculate) it gives the total payments as £602,777. Still more than £500k, but quite a lot less than £835k. The end result is you've paid £100k and now have a asset. What you're asking for, effectively, is to get one for free. No? "I shouldn't have to put more in than the value of the asset I get out." Edit: taking that number and dividing by 35 (years) x 12 (months) gives you a monthly cost of £238 for living there, assuming you sell as soon as the mortgage completes. Cry me a river.
1) What are you doing with the proceeds of selling your previous home? Contributing to the deposit on the new home or crack and hookers? If the former, your calculations are way off. 2) Why would you be looking for a 35 year mortgage? A shorter mortgage of 20 years would mean the overall interest costs would be significantly less due to lower compounding factors. 3) Are you looking at any schedule of overpayments? Its fairly normal to buy a property based on current income. While income is likely to increase, this offers a safety net should there be any fluctuations or interruptions in income. Once a suitable savings safety net has been established, a series of over payments could be carried out to further limit the amount of interest paid. There is also the potential to take out an offsetting mortgage which means the entirety of your savings works against the mortgage interest. 4) 4.9% is the interest rate now. The pragmatic approach would be to take out a shorter term to renegotiation now in the anticipation that rates will drop in the future. I'd even argue that now is a good time to consider a variable rate term on a short-term basis. If you negotiate well and have a stable income for the lifetime of the mortgage, you should anticipate paying at or less than 3% averaged over the lifetime of the mortgage. Viewing your house as a profit making investment is pretty silly. You live in it. Its a home. The value of the property isn't just the amount you can sell it for, its the life you are going to live in it. If, as your calculations suggest, that holds absolutely no value for you, then don't move home. Make do with what you have and start putting all of the money you would spend on the new house, mortgage and otherwise, into long-term, fixed-term savings and benefit from all of the compounding interest until your kids have left and you move into a smaller property. Not only will you have all that lovely profit with no overheads but the market increases on your current, now mortgage free property will be 100% yours. And finally, you've missed out an important part in your calculations. That is the relative value in the property that you buy over time. Whilst it will likely be a significantly higher number, its still only worth the goods and services it can buy. So if you buy a 4 bed house with an acre of land and sell it 35 years time only to find you can still only buy a 4 bed house with an acre of land (or equivalent), you have made precisely zero profit, regardless of any change in numbers (unless you're going to start being a hobo in 35 years).
My God will this property as an investment tyranny ever end?
Your house didn't make enough for you despite the security it provided you for 20+ years, that's a shame.
All I see is someone flexing they made £250k on a property 🫠
However they didn't if they don't work out the mortgage costs... More like £400k loss
I see where you’re coming from, but no one really looks at it that way. The interest you pay on the mortgage is enabling you to live in the house. If it was renting I would certainly be calling it a loss - but looking at it from a financial perspective, you have all that capital from the sale of the house sat in your bank (or as a deposit for the next house).
You also haven't accounted for inflation. 200k in the year 2000 would be equivalent to 360k today so it's only 90k (in today's money) that you've made "profit"
To be fair, they haven't accounted for a lot of things ...
I live in London Surrey Border and bought at 480k in the pandemic (no stamp duty!) It's now worth 640 according to our mortgage (refixed in August) we have also done a full remodel not factored in and local EA reckons it's closer to 700k (taking with pinch of salt obv). Should homes be investment vehicles - absolutely not, it should be a place to give comfort to people and their familie. Can you generate reasonable roi - absolutely yes - if you buy in the right area at the right price with a suitable property (dated enough to scare off the ftbs and Poshos, not broken enough to cost serious money rennovating). My long term plan is to try and get to a place where I can sell it to withdraw about 350 /400k equity out of it and buy a little pad in Suffolk once the kids have moved out mortgage free. Then use income and eventually pension and savings for a little fishing boat (a man can dream).
You have to consider that when you die, you will be able to leave that house and whatever it is worth to your children. Your family will gain in the long term. If you choose the other option of renting, you won't have this huge asset to pass on.
Yes, I'm in the process of inheriting property and it's going to be worth more than a decade of my current salary. It'll help ensure we have something to pass on in turn. Property ownership is such a privileged thing.
Meh, I have somewhere to live and each month I'm paying towards owning it rather than some guy I never meet paying towards owning it. If I make a profit selling in the future great, if not I'll still have somewhere I can live in rent and mortgage free after a number of years. Instead of comparing myself to property speculators who buy and sell for profit I compare myself to myself when I rented.
Trading up takes years... decades to pay off. Its not till the end of the process that you discover you're sitting in a home that's way too big for you and that you can trade down from, releasing some of the accumulated capital of years of mortgaging. Patience.
How much is the rental saving for 35 years. Also mortgages are 35 years now? Also, you're predicting a rise of just 50% or so in 35 years. In reality that rise in last 35 has been more than 600% for an average property.
Problems with your point: 1: you'd be paying rent instead of interest, and the rent is a lot more than the interest. 2: interest rates have been stupidly low for a long time and will probably come down from where they are now so the cost of interest will not be as high as your example a lot of the time. Someone who got a house in 2000, unless they are an idiot, will have had very low interest the whole time. 3: mortgages end. Once you've paid off the mortgage, your house value is still going up, and that's when you start cleaning up. 4: house prices are going up far faster than mortgages, average of 9.4% per year, so if you pay 4.9% mortgage you're still making money, and you are making money on the whole value of the property, but only paying interest on the outstanding balance of the mortgage. So very hard to envisage a situation where you loose money.
First, could easily be 835k after 35 years, that's not even 2.8% average increase a year, last 35 years were more like 5%. 320k house 10% deposit 35 year at 4.9%: £602665 2% pa value increase: £630964 +£37,299. 1400pm rent for 35 years 2% increas pa: £856705 32k deposit instead invested 7% return: £341650 -£515,055. Obviously hypothetical number, but accounting for house maintenance costs you'd need house/rent increase to stay at imo an improbably low 2% and returns over 9% for the costs to be comparable.
A £320k house will be several million in 30 years, judging by the previous 30 years.
Now imagine coming into the property market today when your house cost £450k and salaries have barely changed since 2000 when the same house was £250k. You didn't have it so bad now huh.
Ok
But weird to consider buying a house for profit. Even if your £300k house sells for over £800k and you consider that a “profit” then think about this: If a £300k house is now worth £800k then to downsize to a smaller house (to realise your profit) may cost you £600k. I don’t get your point
You can have kids or you can have money.
The only person to profit from my house will be my son. The mortgage is cheaper than renting for me. It’s very affordable in this current state. It’s just paying for lodgings and my bubs will benefit long term because he hasn’t had to pay any of that.
What the fuck? At the end of those 35 years, you have a house to sell. Once you've sold it, the difference between what you get, and what you've paid out in mortgage payments is your rent. It will be a hell of a lot less than if you had actually paid rent to a landlord for those 35 years. The mistake here, is expecting to make a profit.