Dumping the Mortgage and renting... Anyone done it...?

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Dumping the Mortgage and renting... Anyone done it...?

63 posts & 40 voices | Started 2 years ago by Dancake | Latest reply from TandemJeremy

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Dancake - Member

Its madness, I know.

Having put 10 years into a mortgage and having a bit of equity makes you greedy. Truth is I can sell my house,get rid of 20 grand's worth of debt and rent a nicer one somewhere else for less money than my mortgage. My wife wont have to work as much and can spend more time with my son, and I can finally replace the crap car I drive. I can take my sone somewhere ace while he is young and can enjoy it....

but Ill have to get some serious investment in and never have a place I can call my own. At 35, I only have a few years left before a new mortgage is beyond me.

so a question. Has anyone done this.? Have they been regretting it ever since? Was it a good decision.? Does anyone not have a mortgage, and doesnt even want one..?

Posted 2 years ago #
thebikechain - Member

If it's not for you then it's not for you.

Remember you may want to have something to pass to your wee fella - a home may be just the thing.

Posted 2 years ago #
Dancake - Member

Remember you may want to have something to pass to your wee fella - a home may be just the thing.

this is my big argument..however If my wife and I live for ages he will have to wait a long time...maybe an investment for him that is available when he really needs it might be a better option?

Posted 2 years ago #
mastiles_fanylion - Member

Good question really. I have about £160k 'profit' in my house at current rates. I reckon (when interest rates on savings recover in the future) I could sell it and rent mainly just using the interest on the savings, then have disposable income to invest further.

Hmmm....

Posted 2 years ago #
thebikechain - Member

My good lady and me are doing the opposite - now looking to buy very soon.

We have the advantage of very cheap finance to help us so we may be (luckily) looking at a very short term mortgage period and actually be one of the lucky few who end up really owning their own house. Neither of us have a strong desire to own a home but the opportunity has been presented and it makes sense for us to go down that road.
Anyway, you need to go and see someone for advice, yhey see angles you may not.

Posted 2 years ago #
enfht - Member

Sounds like you over-committed in the first place financially, have you considered downsizing/moving to a cheaper area? Maybe it's another option to the two above?

Posted 2 years ago #
Dancake - Member

Anyway, you need to go and see someone for advice, yhey see angles you may not.

you are quite right. To do it scares the poo out, and I would have to do lots of mulling first .

Posted 2 years ago #
Ti29er - Member

I've doubled my money on my home by buying it some 8 or 9 years ago.
Can't do that with anything else I'm aware of.
I rent out to lodgers and this pays the mortgage.
Win-win.
Safe, secure, never going to be asked to move on unless I can't pay the mortgage (already covered that) so I'd avoid selling like the plague.
We are coming out of a recession and you want to sell at a relatively low point.
In a year from now, you'll have lost thousands and thousands of investment £'s.

Posted 2 years ago #
gazman - Member

my missus and me have got 7 years left on our mortgage we re-mortgaged 3 years ago when we had 17 yrs left so cutting 7 off. we were looking to re-mortgage again to reduce down to 5yrs but works not very good at the mo, our kids are 18 and 14 so when they fly the nest we will be doing the same as you are looking at, get rid of house and rent a flat somewhere nice i hope.

Posted 2 years ago #
Mostly Balanced - Member

Dancake, if you andd your wife live for ages do you really want to be paying rent through your retirement?
If you really want to spend money now there are plenty of equity releas schemes out there. A guy I once lodged with sold his house to go travelling and now he has nothing.

Posted 2 years ago #
molgrips - Member

When you rent, you are handing money to someone else... more so than when you have a mortgage. Plus you have an appreciating asset.

It depends when you want to cash in your asset I suppose.

Posted 2 years ago #
Dancake - Member

Cheers, guys.

I was kind of hoping no one would say, "its an ace idea" (!)

Downsizing isnt an option, so its a case of muddle through for the next 14 years or so. I guess it is the same for everybody.

I got us in this mess...even the bike was on credit.

Posted 2 years ago #
rs - Member

kind of did what you talk about but don't have any kids, just me and the fiancee. Had a mortgage on a 1 bed flat for about 3 years so never really paid much off, ended up taking a bit extra out against the flat to pay for a holiday to vancouver/whistler, loved it there so sold up and moved here two years ago. Used the profits to pay off some debt and the rest helped towards the move and a very enjoyable first year here. Don't regret doing it but the prospect of buying a house here seems a long way off and at 32, like you I'm not sure i'll get round to ever paying a mortgage off in my lifetime. Not sure that helps any.

Posted 2 years ago #
thebikechain - Member

Can you re-mortgage to release some equity - use this to pay your debts (or part of).

The mortgage will be at a lower more manageable rate and payment presumably. i.e. consolidation basically.

Posted 2 years ago #
mefty - Member

There are plently of people who don't think we are through this crisis and assets prices are still inflated. I think the assumption that houses prices are just going to rise over the next few years can be challenged. Also beware people's calculations of how much they make as they invariably forget how much they spend doing their house up. There is a lot to think about, read about the subject, look at the demographics etc etc. They are plenty of people on the continent who never buy house.

And paying rent is no more paying money to someone else than paying interest on a mortgage.

Posted 2 years ago #
spooky_b329 - Member

Dancake, you say you can get rid of £20k debt, is this the mortgage your talking about, or unsecured debt on cards etc? (edit - obviously took me more than 9 minutes to write this post as you've just mentioned the bike!)

My opinion is once you're on the ladder, you might as well stay. As others have said, would you rather be mortgage free and a homeowner at some point near your retirement, or be facing what could be another 25yrs of spending your pension on rent.

If money really is a problem, maybe you could consider going onto an interest only mortgage for a few years, that might make renting look less appealing.

We only bought our first house three years ago so have a long way to go in terms of paying off the mortgage, although house is only worth £5k more than we paid (and we spent more than that doing it up) I'm still much happier to be saddled with a mortgage than be paying money to my landlord each month

Posted 2 years ago #
mefty - Member

Ti29er - Doubling your money over nine years is a 8% return, which is good but they will be plenty of companies that will have returned more. However, because you had a mortgage you were able to "leverage" your investment and thus invest more.

Posted 2 years ago #
mudshark - Member

Renting is fine as long as you appreciate that you'll need an alternative investment to property - that is invest money elsewhere so as to pay rent into retirement or buy a house. If you think you can grow your money faster than property prices will rise then you'll win though keeping that profit tax free is an issue.

But it sounds like you don't want to invest so much so whilst you might have a better life before retirement your future beyond that could be difficult taking the rental option.

Posted 2 years ago #
uplink - Member

as spooky said
My thoughts on rent over mortgage as always come down to when I retire
I will either own a home or still have to pay rent
I'm not sure what benefits are available to help with this but who knows what's it's going to be like in 25yrs?

If you were to say rent is £600/month, how much extra pension contribution would you have to invest to cover that?
If things really go tits up when I'm old & decrepit, I can always use the house for capital.
It's hard to imagine retirement when you're young but it turns up pretty damn quickly - I'm facing it it 10 years time & if I'm still fit, I'll be making the most of the time off

I obviously don't know your situation so I can only suggest what I'd do [have done] when things have gone wrong & I needed some extra
Is there any way that you could get a part time job & work as many hours as you can & use the income purely for debt reduction?

Posted 2 years ago #
grievoustim - Member

where are these "cheap rents" people talk about

I'm splitting from my wife and need to decide between buying a new home for myself or renting

rents here in the brighton area just seem ridiculous - for what seem to be pretty poorly looked after places. Buying seems the better option for me right now

Posted 2 years ago #
ebygomm - Member

where are these "cheap rents" people talk about

I don't know, this area you pay about the same renting as you would with a mortgage

Posted 2 years ago #
Spamf - Member

We sold up ten years ago and have been renting ever since. No regrets!!
We are on our sixth rental property, and have lived in some fantastic places. They have either been dirt cheap (£275 a month for a "basic" one bed flat, when all other spare cash was spent travelling) or pricier for a nicer property/location. We have just moved back to town after two years in a converted barn. We now live in a lovely part of town, 10 minutes walk from school, in a house we could never afford to buy.

Why would I buy a property (and therefore live) in a less desirable area rather than rent in somewhere nice.

I can't imagine growing old and regretting all the unique places we've lived. I can imagine growing old and wishing I'd done more. I'd rather be in a nursing home with memories of great adventures, than be in my own home having not done much with life.

Live life while you (and your family) are young. My mum and dad had big plans for their retirement, but then mum got very ill and NONE of it happened. Go fot it!!!

Posted 2 years ago #
nickjb - Member

When you rent, you are handing money to someone else...

I've just had my annual summary from my mortgage company. £11k payed, £9k to the bank in interest, £2k payed off. My mortgage is twice what I was paying in rent, although the house wasn't as nice as the one I now own.

Posted 2 years ago #
molgrips - Member

Paying a mortgage doens't necessarily mean never doing anything with your life Spam. And renting also doens't guarantee brilliant adventures. Embrace life, sure - make it work, do lots of stuff.. but think carefully about cashing in your chips.

Also, on our mortgage the capital/interest ratio was about 50/50 before interest rates went down.

Posted 2 years ago #
Radioman - Member

Problem with renting is you still need an "endless" cashflow and even if its cheap you have to be very strict with yourelf to save.

My advice is to pay mortgages down if you can afford to but still keep some money for a "rainy day". Offset morgages are a good idea if you are "strict" and dont keep dipping into savings.

People forget mortages are not "cheap" despite the low headline rates. remember you are paying compound interest for 20-25 years so paying back capital early in the mortgage and finishing it early makes a massive difference in what you eventually pay.

The downside with having debt today is that we have low inflation(not many people are getting pay rises!), and I dont see that changing for some time. This means a big mortgage/loan will still seem big in a number of years. Todays value of all those payments you will have to make over the coming years is very high.
There are loads of "if and buts" in the rent/buy equation, but if you live in a house you like and can afford it, I think it is nice to feel that it will be yours at some time. I do not believe house prices will go up any more than inflation for some time and I certainly think the days of "it always goes up are over".

Posted 2 years ago #
barca1 - Member

Just another angle. Might be the one voice that can see a positive arguement to what your considering.
If you sell, use some of the cash released from the sale to pay off your biggest and/or longest running debts, rent for as long as 10 years if need be to clear your other debts and save a new deposit ready to buy your next house. Theoretically, you could have a 20 year mortgage on a nice little property to take you to your 65th year but very little or no other debt during this time.
The first five years might mean cash is tight'ish at a time in your life when others are seeing cash really freeing up as they'll be coming to the end of their mortgages but your time will come again and quite quickly if you stop yourself from overspending on credit again.
Anybody see a flaw in this plan?

Posted 2 years ago #
Rich_s - Member

Won't help the OP but depending on where you are in the UK, renting flats can be very cheap indeed due to oversupply built specifically for the buy to let market.

We sold up 2 years ago (3 bed det house) and into a 2 bed flat in a very nice area. Payments went from 650pm to 550 - as with nickjb the mortgage was being paid off at 2k p.a., and we're easily covering that off with the saving plus interest on our capital.

Also, don't forget that mortgage does not equal rent. If you rent, you don't pay for maintenance, breakdowns or buildings insurance (etc).

Trouble is, SWMBO has got her eyes on a "nice" part of the world for our family house and I'm wincing at the thought of the repayments...

Has anybody thought of using your pension to pay off your mortgage?

Posted 2 years ago #
The Southern Yeti - Member

I'm thinking of swapping my house for some magic beans? Any advice?

Posted 2 years ago #
spooky_b329 - Member

I've just had my annual summary from my mortgage company. £11k payed, £9k to the bank in interest, £2k payed off.

Sounds even worse for us as, being young, we opted for a 40yr mortgage to start with, but to overpay to keep us on track for a 30yr term, which gives us the option to borrow back the overpayments if things go wrong.

If we hadn't overpaid and stuck to the minimum payments, we be paying £8400 in interest, and a mere £240 off the balance! Obviously that gets more favourable as the years tick by...

Posted 2 years ago #
squin - Member

Don't do it unless it's your last resort. If you haven't already, switch your mortgage to interest only to reduce your monthly outgoings. The property will appreciate in value and time and capital growth will solve all your financial problems.

I would even suggest going one step further in that if you have equity in your property you could use it to buy an investment property which if you buy in the right way will mean that you will get your investment back in 6 months and will have an investment property for free - you will also have equity in it from day 1. In a couple of years the increase in value of prop 2 will mean that you can take a huge chunk of £ off of your residential mortgage.

A few years ago (5) we did the same (although for a very different reason) and it's moved us backwards. At the time I didn't take advice and knew nothing about property. Now, I understand property, have studdied how to make property work and wish I knew then what I know now. I now help buy-to-let landlords find below market value property to expand their portfolios and will shortly be getting back into the game myself.

Posted 2 years ago #
Radioman - Member

Squin that sounds scary. You still seem to believe house prices always go up. Borrowing lots to buy houses relying on capital appreciation is very risky. That is gearing up! Remember thats just what the Banks did and then found they got killed by falling asset prices. My view is that you may well see the UK housing market stagnate in the next few years. I.e houses fall in actual value or have near zero growth!They are still too expensive vs peoples earnings despite the current record low rates!

Buying something "below market" is a different story. If you do that you immediately make money by definition. If you can do that why not sell it straight away and take no risk.

Posted 2 years ago #
djglover - Member

You need this guy

He might say

Sell your bikes, tighten your belt, remortgage your house (to get rid of the 20K), don't even think about the new car, and take an income on the side.

Posted 2 years ago #
Ringo - Member

Weve just sold our house and are now looking to rent. The main reason for this is were moving to a totally different area and want to make sure we like it there before committing to buying another property.

Posted 2 years ago #
Stu McGroo - Member

right, i haven't read the other replies but this is my opinion.

if you were gonna buy a campervan and travel the world, fine, if you're in imminent danger of reposession, fine, but as you want to carry on living a coventional life in a conventional house then don't do it.

with the current market you should be buying another place not selling your only one. mortgage rates are low, rents are high, the value of your property (and your equity) has been reduced by 20% in the last 18 months.

if you really do want to realise some of your equity then remortgage or down size for **** sake don't rent unless you have to.

Posted 2 years ago #
squin - Member

Radioman - of course I was generalising, I wouldn't expect anyone to risk investing money on the back of those 2 paragraphs There are a number of strategies.

BMV prop doesn't matter when you buy it, you're right.

Historically, property has out-performed inflation, so that alone would see a capital growth.

All investment is a risk, property is just one 'class' of investment, but remember, there is only one class of investment that we live in - residential housing! The UK has an obsession with property ownership.

I don't have a crystal ball, but I do have the historical data of property growth and a few thoughts as to why property will increase in value again:
1. Due to the class of investment as above
2. In the next 10 years the population of the UK is heading towards 70m
3. We needed an extra 3m props over 10 years (starting in 2008) just to keep up with the current population and shortage of housing stock, and due to the credit crunch we are already 200k+ houses short of the yearly target.
4. None of the large house builders have built anything for the last year+
5. Our planning laws are so slow that we won't catch up on construction demand.
6. We lost a mass of skilled construction labour over the last couple of years.
7. We live on an island and 1/3 of the UK is green-belt.
8. We currently have a disproportionately large group of want to be first time buyers wanting to get on the property ladder but for the last few years have been kept off by low LTV lending rates. 2 years ago a FTB could happily get a 95% mortgage, over the last 18 months they were lucky to be offered 75%. We have just seen 90% re-enter the market and as more lenders follow suit, there will be more FTB's per property than 2 years ago - laws of supply and demand will kick in pushing up prices.

In and out in the next couple of years is more of a risk, but mid to long term the rewards could be good.

To balance the theory though, there are counter agrguements to all of my above points. Investment is risk and we all have different risk threasholds and different opinions because of this.

FWIW, you currently do get more property for your rented £ than the mortgaged £, but value for money and investment are two very different things.

There are no right or wrong answers.

Posted 2 years ago #

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