oh dear: Thinking of buy-to-let? Do the sums

[AtW]

You call 5% high????? My God you are young !

Look son, I've seen personally inflation rates of 2100% per year, and bank interests of 250% per annum, and this was not high because high or low are relative numbers. Right now if interest rate went up to 6% that would be extremely high.

[Phoenix]

Look son, I've seen personally inflation rates of 2100% per year, and bank interests of 250% per annum, and this was not high because high or low are relative numbers. Right now if interest rate went up to 6% that would be extremely high.

Son?
2100% No wonder you prefer renting!!

6% would be higher than what? you just said it's relative.....
And if we believe the picture you paint all Mortgage holders and Landlords would be shooting themselves? Bolloc*s!

[AtW]

6% would be higher than what? you just said it's relative.....

6% (BoE base rate) is higher than most people who bought houses in the last 18 months can handle.

[Phoenix]

6% (BoE base rate) is higher than most people who bought houses in the last 18 months can handle.

WhyTF!!! do you assume everyone borrowed to the limit and couldn't afford the interest rate to rise? This would be a major problem with the advice given by the Finance industry and would cause an outcry far larger than mis sold Endowments of the 80's!

You are Generalising and have no idea what you are talking about!!!

[oraclesmith]

I would agree for a first timer and if all areas in the UK were equal....But
Investment areas are everywhere. In the South.....Medway Towns for example...With the Investment going into this area it makes sense for investment in properties as the expected increase could be up to 6/7% in this year alone. And current prices are well below the Stamp duty freshold
e.g
Gillingham, Kent
Current average price for a flat: £81,800
Predicted% price increase for 2006: 6%
Set to benefit from the massive Thames Gateway development backed by £97m from the Government

It might work for this property. Sounds reasonable as a buy to let and maybe as a residence, but I wouldn't rely on a two year hit-and-run but be prepared to keep the property for longer until it makes the capital return expected.

6% increase in capital is nice if you own the property outright as an investment. If you have to have a mortgage you have to account for the cost of borrowing (say 4.8% interest only) and the other transaction costs of a purchase now and sell in two years. Your interest-only mortgage will only be about £270 per month with 10% deposit which works OK against a possible rent of £500 a month. You will also have to pay other monthly outgoings which may or may not be included in a rental deal - eg. ground rent, service charges, council tax etc. If there is a margin in the outgoings, then you're OK - the capital appreciation will be eroded somewhat by buying and selling costs and the deposit not earning interest, but out of say £10k you should still be in profit by about £7-8k and you will have made a small monthly saving.

[Phoenix]

Cool,

You talk sense, But don't let AtW generalise.
Investment is still possible in the UK and Mortgage holders will not be shooting themselves with another slight interst rise.

Renting is OK in the shortest of terms. But if you want to invest? Property is still the key....Of course you could find a high interest account for your money..........But where?

[Ardesco]

And if I am looking at SE England for 2 years? Buy or rent?

Few here have the answer to that, because (a) most can't see beyond their own situation, if that far, (b) most here have a dogma to propound rather than an analysis to make, (c) people generally advise me to change my entire life-plan in order to fit in with the schemes they think are clever, rather than think about which accommodation financing option would best suit my life.

No, for me it's horses for courses: buy for long term, rent for shorter term. And it's house for life, not the other way around.

That's for your home. For investment, Do Your Own Research.

Definetly rent. Long term is 10 years+. I'm not saying that rental doesn't have its place in the grand scheme of things just that if you are looking at living in on area for a long period of time you would be stupid to rent. If AtW had purchased a house in Birmingham 5 years ago he would now have made a quite reasonable capital gain while also paying off his mortgage which would probably be more than he has managed to save in the last 5 years. If he is planning to stay there another 5-10 years he will have made a hell of a lot more than he would have saved by renting (Bearing in mind that you are looking at the first 7 years of the mortgage being mainly interest then capital reduction starts to kick off after that.

[Pondlife]

There was some daft woman on Money Box on Saturday who was being advised that she could get a 100% interest only mortgage of £100k...

So how is that different from renting? Since you never actually get to pay off any of the principal?

But any iincrease in the value of the home is yours when you sell.

[Pondlife]

The difference being that if you don't pay your rent you lose your deposit. If you don't pay your mortgage you lose your house and are declared bankrupt.

[Phoenix]

The difference being that if you don't pay your rent you lose your deposit. If you don't pay your mortgage you lose your house and are declared bankrupt.

The risk is greater because the possible Investment return can be greater