Current Affairs Mortgages
- Thread starter neil999
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But where would you live if you invested instead of buying a house?
And taken a mortgage out to be able to put that amount into stocks/shares?
I sort of get what you're saying purely on returns, but most people when buying a house don't have the option of putting that money into other investments instead. And if you can do it as well as - then that's a different story as you're already pretty well off.
Martin Alvito
Player Valuation: £50m
Right, the argument here is to live in a slightly smaller space to fob off maintenance bills on someone else. This permits putting the rest of the money where the returns are.
Really depends on what is valuable to you isn’t it.
The security of having our own place in an area we like that we can make our own changes to and not being forced to move on a whim when the landlord wants to sell is more valuable to us personally that an extra % return on assets.
I get your point and have weighted it up a bit myself, and while I think some diversification works well, I think a house gives a couple of advantages:
1) You avoid "dead money" of renting. So the capital you spend gives you somewhere to live, which is a more central advantage than a dividend, and avoids the dead money of rent.
2) You gain the advantages of leverage. The property I have bought around 4 years ago has gone up in value around 30%, but we leveraged around 75% LTV, so have an ROI of well over 100%.
I know it will seem odd now, but property is a very safe investment compared to equities. They are forecasting a 10-20% drawdown in housing. S&P will have had multiple 30%+ drawdowns in that time.
The lack of volatility and therein risk control of property allows for people to effectively leverage up.
As always it tends to get pushed too far. People pushing 10:1 ratios, or at times even as much as 20:1 ratios, which is a problem, and one can only hope some caution re-emerges.
Having bought and sold a bit, the people involved in the property sector are in many cases leeches, and dangerous, talking people out of right minded cautiousness. That's another story though.
Anyway long story short, S&P investing probably makes more sense, but is probably not the right approach for 90% of people, who probably just want a comfortable life. The additional upside of market over house is there, but suspect for most people the costs involved are too great. Its illogical, but people are illogical.
This essentially.
You have to work out what you want. Money becomes less valuable as you get more. If you have a house you like, in an area you like, that's worth a lot more than the flip of potentially having say 5x more but not having those things on the other side of a flip.
It appears illogical, bit inherently it's very logical, as money and resource is not linear in it's real value to us.
The binman chronicles
Player Valuation: £80m
That's fair enough but not without risks, you can bet all of mine would have been put in safe as houses C&A, Wimpy, BHS and Woolworths.
By recent standards that's on the expensive side but go back 14 years and it would be classed as pretty cheap. If we are seeing an end to really low interest rates it could be around the sweet spot where the average will be and if the worst happens and it returns to 5/6/7% at least you won't have as big of a shock as someone going from say a 1.75% to that kind of new rate.
Yes, investing in shares no doubt provides the bigger return, but 50 years ago, not many people had a spare 16 grand to invest in shares.
Even today, not many people have a spare 16 grand to invest.
If you invest your deposit you also don't have to pay the interest payments on your mortgage. For instance, with low interest rates (1.7%), you pay over £50,000 in interest alone on your house over 25 years. If you get up to 4% and above then you're looking at over £150,000 just in interest. Then you add in the costs you incur in maintaining your home, which aren't insignificant, or if you're in a flat you might have to pay standing charges each year for maintenance of communal areas. What's more, you also gain the flexibility that comes from being able to move easily, which from a labour market perspective is very valuable.
I get that shares fluctuate in value, but over the long-term they also consistently outperform property, especially when you factor in the costs associated that I've outlined above.
Aye. Obviously it's only for those who have cobbled together money for a deposit.
It seems also that a growing number of investment funds cover residential property, so that's another option if you want to spread your risk.
www.economist.com
Why Wall Street is snapping up family homes
The opportunity is unprecedented, but comes with risks
Lobster Johnson
Player Valuation: £35m
It seems also that a growing number of investment funds cover residential property, so that's another option if you want to spread your risk.
Why Wall Street is snapping up family homes
The opportunity is unprecedented, but comes with risks
But isn't that just accelerating a process of peoples homes being a revenue stream for the financial services industry?
Yes very fair. I think for a time, rents have been higher than interest payments, but that is probably due to the unique environment of the last 10, and perhaps the last 20 years. We may be going into a phase where that shifts.
The housing market since 1970 has increased around 5% you and the S&P anywhere from 7-10. So it is a better investment. Or certainly was. There is an interesting caveat to say, at one point does the American Market maybe level out?
I think what owning the house does, is give you a sense of control over not being turfed out etc. Greater protections for renters would help in that regard.
A lot of he argument is though, that people dont necessarily want more money, theyd take less money and a secure place to live they had control over.
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