4 ms·

My mortgage is £350/month but the house next door is rented out at £750/month so it does happen, but then I had a reasonable deposit and got a low rate.

by dan1234 11y ago

sokoloff 11y ago
I think the best apples-to-apples comparison would be to compare the mortgage payment, property taxes, and insurance calculated as if the full market value of the property was mortgaged. That takes out the variance from deposit variances and purchases made many years ago.
- freshyill 11y ago
  Isn't that how it's usually done? My mortgage payment is somewhere around $2,700/month, but I'm pretty sure that covers insurance and taxes.
  - sokoloff 11y ago
    Yes, but I'm talking about something else. If landlord A puts down 50% of the purchase price and landlord B puts down 20%, their mortgage amounts (and montly cashflows) will be different, but the inherent value proposition to the landlord will be about the same. Likewise, if someone bought 10 years ago and their value doubled (but their mortgage stayed the same), that property will "appear" more profitable to that landlord than if they sold that rental to another landlord. That's why I think the "property holding costs" should be based on the full, mark-to-market, cost of the property today, and be based on a 100% financing mortgage rate. There's also a strong argument that we shouldn't include the principal paydown part of the mortgage payment when doing this analysis, as that's a forced-savings (and cashflow) item, not an inherent profitability impact.
    - e12e 11y ago
      Ah, but "forced-savings" doesn't work if that means you can't afford to eat. So it's very much relevant to the "young people can't afford to buy a house". True, it's slightly different problem - but it's also (probably) why people are forced to rent, driving up prices for rent vs buying a house/apartment. This also include the saving you need to do before you get a mortgage (which is harder to do if rent prices are inflated...). It's of course true, that even with a catastrophic collapse in the housing market, the money sunk into the principal are rarely truly lost. At some point the market is likely to recover to the point that it is worth something. If you can afford to wait.
e12e 11y ago
When did you purchase your house? Because we're talking about people moving into the market. If you managed to buy a house that only costs you 350 GPB/Month for both interest and downpayment, that's great. But is that what it would cost you if you bought your house today? (I'm not saying it'd wouldn't, but it's relevant for the discussion to know for sure).
- dan1234 11y ago
  Bought in 2011 for £90,000. Current Zoopla estimate is £110k
imtringued 11y ago
This raw number doesn't tell us very much. We still don't know the length of the mortgage, whether the house is larger or the condition of the building and a whole lot of other variables that I didn't mention.

My mortgage is £350/month but the house next door is rented out at £750/month so it does happen, but then I had a reasonable deposit and got a low rate.

by dan1234 11y ago

My mortgage is £350/month but the house next door is rented out at £750/month so it does happen, but then I had a reasonable deposit and got a low rate.

sokoloff 11y ago

I think the best apples-to-apples comparison would be to compare the mortgage payment, property taxes, and insurance calculated as if the full market value of the property was mortgaged. That takes out the variance from deposit variances and purchases made many years ago.

freshyill 11y ago
Isn't that how it's usually done? My mortgage payment is somewhere around $2,700/month, but I'm pretty sure that covers insurance and taxes.
- sokoloff 11y ago
  Yes, but I'm talking about something else. If landlord A puts down 50% of the purchase price and landlord B puts down 20%, their mortgage amounts (and montly cashflows) will be different, but the inherent value proposition to the landlord will be about the same. Likewise, if someone bought 10 years ago and their value doubled (but their mortgage stayed the same), that property will "appear" more profitable to that landlord than if they sold that rental to another landlord. That's why I think the "property holding costs" should be based on the full, mark-to-market, cost of the property today, and be based on a 100% financing mortgage rate. There's also a strong argument that we shouldn't include the principal paydown part of the mortgage payment when doing this analysis, as that's a forced-savings (and cashflow) item, not an inherent profitability impact.
  - e12e 11y ago
    Ah, but "forced-savings" doesn't work if that means you can't afford to eat. So it's very much relevant to the "young people can't afford to buy a house". True, it's slightly different problem - but it's also (probably) why people are forced to rent, driving up prices for rent vs buying a house/apartment. This also include the saving you need to do before you get a mortgage (which is harder to do if rent prices are inflated...). It's of course true, that even with a catastrophic collapse in the housing market, the money sunk into the principal are rarely truly lost. At some point the market is likely to recover to the point that it is worth something. If you can afford to wait.

e12e 11y ago

When did you purchase your house? Because we're talking about people moving into the market. If you managed to buy a house that only costs you 350 GPB/Month for both interest and downpayment, that's great. But is that what it would cost you if you bought your house today? (I'm not saying it'd wouldn't, but it's relevant for the discussion to know for sure).

dan1234 11y ago
Bought in 2011 for £90,000. Current Zoopla estimate is £110k

imtringued 11y ago

This raw number doesn't tell us very much. We still don't know the length of the mortgage, whether the house is larger or the condition of the building and a whole lot of other variables that I didn't mention.