Author Topic: can anybody please help me out?  (Read 8478 times)

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Offline vealmike

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Re: can anybody please help me out?
« Reply #75 on: November 03, 2017, 06:26:40 pm »
Not sure some of the non UK posters realise quite how expensive it is over here.

UK average first house price is £208K.

UK average age for first time buyers is 30.

UK average earnings for a 30 year old is £26K gross(£21K net, £1750 per month).

With a fairly hairy five times salary mortgage the first time buyer can 'only' borrow £130K, leaving them needing a deposit of £78K. That's everything they earn for 3 years and 9 months, provided they spend nothing on food, petrol, clothes, shelter, etc.

I don't think you can still get a five times salary mortgage. If you could, £130K at Simon's 2% over 25 years is £550 per month, or 31% of the average 30 year old's take home pay.

 

Renting is worse, a £240K house rents for £1100pcm. The interest on good a 5 year fix, buy to let mortgage for that would be £600 per month.  The landlord doesn't see £500 profit, a lot (40% usually) goes in tax. But is shows how much more expensive the rental market is in the long term. [/Landlord]

And don't get me started on the cost of moving. Conveyancing is not cheap, but having to spunk £12K on tax really stings. [/About to move house]
 

Online sokoloff

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Re: can anybody please help me out?
« Reply #76 on: November 03, 2017, 06:31:29 pm »
And don't get me started on the cost of moving. Conveyancing is not cheap, but having to spunk £12K on tax really stings. [/About to move house]
There's a tax on moving? (Seeking to understand.)
 

Online Simon

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Re: can anybody please help me out?
« Reply #77 on: November 03, 2017, 06:42:08 pm »
Selling a second home incurs tax, unless you an MP of course screwing the nation.
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Offline vealmike

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Re: can anybody please help me out?
« Reply #78 on: November 03, 2017, 06:49:39 pm »
And don't get me started on the cost of moving. Conveyancing is not cheap, but having to spunk £12K on tax really stings. [/About to move house]
There's a tax on moving? (Seeking to understand.)

It's called Stamp Duty Land Tax:
https://www.gov.uk/stamp-duty-land-tax

Payable when you purchase property. These are the residential rates:

Property or lease premium or transfer value   SDLT rate
Up to £125,000   Zero
The next £125,000 (the portion from £125,001 to £250,000)   2%
The next £675,000 (the portion from £250,001 to £925,000)   5%
The next £575,000 (the portion from £925,001 to £1.5 million)   10%
The remaining amount (the portion above £1.5 million)   12%

So for a 330K house:
80K at 5%  £4000
125K at 2% £2500
125K @ 0%

SDLT bill = £6500

Edit.
Just for fun, a £3.3 million pad...
£125K @0%
£125K @ 2%       £2,500
£675K @ 5%     £33,750
£575K @ 10%   £57,500
£1.8mil @ 12% £216,000
SDLT bill = £309,750
Fortunately as an engineer who doesn't believe in buying lottery tickets, I will never have this problem!
« Last Edit: November 03, 2017, 06:58:12 pm by vealmike »
 

Online Mr. Scram

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Re: can anybody please help me out?
« Reply #79 on: November 03, 2017, 06:54:31 pm »
There's a tax on moving? (Seeking to understand.)
It's not on moving, but on the purchase of a house, which isn't uncommon. It's like VAT on a different scale.
 

Online sokoloff

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Re: can anybody please help me out?
« Reply #80 on: November 03, 2017, 07:02:19 pm »
It's called Stamp Duty Land Tax:
https://www.gov.uk/stamp-duty-land-tax

Payable when you purchase property. These are the residential rates:

Property or lease premium or transfer value   SDLT rate
Up to £125,000   Zero
The next £125,000 (the portion from £125,001 to £250,000)   2%
The next £675,000 (the portion from £250,001 to £925,000)   5%
The next £575,000 (the portion from £925,001 to £1.5 million)   10%
The remaining amount (the portion above £1.5 million)   12%

So for a 330K house:
80K at 5%  £4000
125K at 2% £2500
125K @ 0%

SDLT bill = £6500
Wow. We have stamp duty as well, but it's much lower rate (0.456%) in MA, so 330K is a $1504 tax bill. I think New Hampshire was 0.75%.
 

Online Simon

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Re: can anybody please help me out?
« Reply #81 on: November 03, 2017, 07:06:05 pm »
You see when the rich and big business don't pay tax the rest of us do instead.
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Offline vealmike

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Re: can anybody please help me out?
« Reply #82 on: November 03, 2017, 07:16:53 pm »
Wouldn't be so bad if the houses were a decent size, but they're not.
The "average" fist time buyer's house is around 1000sq foot.

Ah, the economics of supply and demand. :palm:
 

Online Simon

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Re: can anybody please help me out?
« Reply #83 on: November 03, 2017, 07:27:51 pm »
yes hence the case of my friend buying a house in a desirable yet expensive area ending up with 1/3 the land. Sadly the ex council estates can be unpleasant but the house build quality is good.
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Offline NANDBlog

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Re: can anybody please help me out?
« Reply #84 on: November 03, 2017, 07:51:51 pm »
Not sure some of the non UK posters realise quite how expensive it is over here.
Trust me, it is not just there.
Here is the situation in Belgium:
If I would purchase the apartment I'm living in, it would cost me about 250.000 EUR. The longest term is 25 years, with that, I would pay little bit more than the double of my rent on interests, and I need to put down about 50.000 EUR, and I would need to pay an extra 30.000 EUR for other fees, not including the interest.
Instead, I long term rent my apartment. They cannot move me out unexpectedly, otherwise they need to pay me 12 months of rent. The long term means 9 years, I have 6 years left. They can increase the monthly fee by the inflation, not higher.

So for 9 years, it looks like this:
A) I pay 2x9x12xrent to the bank, and about payed all the extra fees and interest to the bank. Hopefully the housing prices went up. If that is the case, I need to pay some extra tax for that.
B) I pay 1x9x12xrent to the bank, and I have 1x9x12xrent left as money.
BTW I dont think I want to live here 6 years from now, I'm actually looking for a nice house in the suburbs, with a garage and an extra room. Something that will suit my current lifestyle in the next 3-4 years better.
 

Online Simon

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Re: can anybody please help me out?
« Reply #85 on: November 03, 2017, 08:24:48 pm »
Well beleive it or not central eirope does run on pretty much the same economics. when i lived in italy people in the country simply built houses for their kids when they got married next to theirs on their own land....
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Online sokoloff

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Re: can anybody please help me out?
« Reply #86 on: November 03, 2017, 09:57:20 pm »
Not sure some of the non UK posters realise quite how expensive it is over here.
Trust me, it is not just there.
Indeed not.

In my hometown, the http://realestate.boston.com/buying/2016/06/17/cambridge-most-expensive-home-prices/]median single family house last year[/url] was $1,675,000 (1281000GBP / 1442000EUR).
 

Online Simon

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Re: can anybody please help me out?
« Reply #87 on: November 03, 2017, 10:43:15 pm »
oh you mean like london prices ;)
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Online Mr. Scram

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Re: can anybody please help me out?
« Reply #88 on: November 04, 2017, 12:34:20 am »
oh you mean like london prices ;)
We all know one of the bombs of The Blitz knocked loose London's calibration pot. It's perception of a number of things has been off since.
 

Online Simon

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Re: can anybody please help me out?
« Reply #89 on: November 04, 2017, 07:55:04 am »
well lets face it few uk residents own anything in london.....
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Offline NANDBlog

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Re: can anybody please help me out?
« Reply #90 on: November 04, 2017, 10:06:16 am »
Not sure some of the non UK posters realise quite how expensive it is over here.
Trust me, it is not just there.
Indeed not.

In my hometown, the http://realestate.boston.com/buying/2016/06/17/cambridge-most-expensive-home-prices/]median single family house last year[/url] was $1,675,000 (1281000GBP / 1442000EUR).
You are comparing the price of a 500 sqf flat to a 3000 sqf house with land.
 

Online sokoloff

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Re: can anybody please help me out?
« Reply #91 on: November 04, 2017, 12:14:31 pm »
You are comparing the price of a 500 sqf flat to a 3000 sqf house with land.
OK, median 1 bedroom (all housing types, though very few free-standing homes would be 1 BR, so you can assume these are small flats) is $527K.

Housing in desirable areas is expensive the world over, because there are a lot of people vying to buy in desirable areas.
 

Online Zero999

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Re: can anybody please help me out?
« Reply #92 on: November 04, 2017, 06:20:21 pm »
You are comparing the price of a 500 sqf flat to a 3000 sqf house with land.
OK, median 1 bedroom (all housing types, though very few free-standing homes would be 1 BR, so you can assume these are small flats) is $527K.

Housing in desirable areas is expensive the world over, because there are a lot of people vying to buy in desirable areas.
The trouble is with the UK, house prices, compared to average earnings are high country wide, not just in small areas. The problem is worse in London, than the rest of the UK but it's still bad, compared to most of the US.
 

Online Simon

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Re: can anybody please help me out?
« Reply #93 on: November 04, 2017, 09:13:21 pm »
indeed, as you know i'm not extravagant, live fairly simply and in 7 years have paid off just £3000, even a 4x salary mortgage and lowish rates is quite some price which is why i don't want to move into an even more expensive house with an even bigger mortgage. And i don't think lower house prices alone is the answer to the overall problem, We need higher wages all round, official inflation indexes are not necessarily realistic and even officially price rises are outpacing wages, house prices have risen even more in proportion. fortunately where i work we get a year on year increase that appears to match the official inflation figure (usually 2% we were treated to 3% this year) but then I think they are conscious that they are not exactly the top payers in the industry. people stay around because either like me they are trapped through lack of qualifications of they like the fact that you can get way with making minimal effort - which might be one reason for low wages, it's a vicious circle.

These days being a couple and both working is the only way to live quite comfortably. All this equality bollocks with women all going to work has done is to lower overall wages and now both partners are forced to work. Obviously there are those that seem to think they have to spend more money impressing people. We have just had the opening of a shopping complex, boasting shops 90% of which are cloths shops, it's always quite busy down there, if everyone going down there is spending money i bet there are going to be a few more mortgage defaults and reposessions round here ;)
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Offline forrestc

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Re: can anybody please help me out?
« Reply #94 on: November 05, 2017, 01:57:57 am »
Not sure some of the non UK posters realise quite how expensive it is over here.
UK average first house price is £208K.
UK average age for first time buyers is 30.
UK average earnings for a 30 year old is £26K gross(£21K net, £1750 per month

Renting is worse, a £240K house rents for £1100pcm. The interest on good a 5 year fix, buy to let mortgage for that would be £600 per month.  The landlord doesn't see £500 profit, a lot (40% usually) goes in tax. But is shows how much more expensive the rental market is in the long term.

This is as good of a place to insert my $0.02 as anywhere:

In many parts of the world, and many personal situations, renting vs owning is a lifestyle choice, not a financial choice.   I.E. who is responsible for fixing things, paying taxes, etc..   

Some places/situations it is better financially to own.   Some places/situations it is better financially to rent.

For instance, in the US, generally it is financially better to rent in most of the populated areas on the coasts, and better to own in the middle part of the country.   This is assuming a typical 'stay in the same home for a few years' lifestyle.

If you will never move again, 'better' shifts toward owning.  If you regularly move (temporary jobs, etc), 'better' shifts toward renting.   But in some parts of the country, it almost never makes sense to buy, and in other parts of the country it rarely makes sense to rent.

In the US, many financial advisors will tell you that the home you are living in generally should *not* be considered an investment, instead, you should look at it as a lifestyle/recurring financial choice.   The underlying reason is that situations change, and it's hard to do a good analysis of the plusses and minuses based on your unknown current financial and where you want to live questions.   But thinking of  your home as an investment isn't the right choice for most people.   Doing this is part of the cause of the US housing meltdown which caused the last financial crisis - many people bought homes based on their future value, and took loans based on that.   There is no guarantee that a home will be worth more in the future.   And there's no guarantee that you'll be living in the same spot 20 years from now.
 

Online Mr. Scram

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Re: can anybody please help me out?
« Reply #95 on: November 05, 2017, 02:19:22 am »
Let's not forget that loans for houses were pushed quite aggressively by the power that were. That has caused a lot of people that shouldn't ever have gotten them to get loans, which subsequently went bad. It was as much failed policy as it was bad judgement by the people themselves. The fact that you can just walk away from a house in the US didn't really help either.

Even though your house isn't guaranteed to increase in value, in many areas values have increased for the past 100 years without fail. Even though the past crisis has ended that, prices have recovered and are well past what they were at their peak before it all went bad. That's as much as a sure thing as you're going to get in life. Obviously, there are going to be some exceptions, which can be fairly bothersome if that's you. And as always, money business is a long game.
 

Offline forrestc

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Re: can anybody please help me out?
« Reply #96 on: November 05, 2017, 05:04:21 am »
The fact that you can just walk away from a house in the US didn't really help either.

To clarify the policy for those elsewhere:

Once someone defaults on a loan in the US, the bank will take it back based on the fact that it is used to collateralize the loan.   The home is then sold through various methods, auction being a pretty common method.    The question is what to do if the amount earned from auction is different than the amount remaining on the mortgage.  This is where things get complicated, and can vary from   jurisdiction to jurisdiction.   

For instance, if the proceeds from sale do not entirely cover the loan amount, in most states, the prior homeowner is still on the hook for the amount of the shortcoming.  Only about 15 of the 50 states (mostly in the Western part of the US)  have laws on the books preventing this.   And even then, it isn't guaranteed that all of the debt secured by the home will be extinguished by the foreclosure.   For instance if the loan is a line of credit and/or a refinance, it might not be covered under these laws.   

Along the same lines, if you have more equity in your home than the remaining balance on the note, in some states, the bank gets to keep the surplus.  Or gets to keep it if you don't claim it in a certain period.   

One of the big underlying causes of the mortgage crisis was that banks were writing loans for more than the house was worth, based on future value.  The person buying the house would get a home for a certain period for only the cost of interest on the loan.   The theory was that at some period of time later, when the bank started to collect the principle part of the loan (commonly through a very large baloon payment at some point followed by higher monthly payments), that the homeowner would be able to either sell the home (and repeat the process elsewhere), or maybe their situation would change.   Many of the people who got taken in by this was looking at being able to be in a half-million dollar home for a few years for just the cost of the interest, and then move on.

What happened is that home values didn't go up as predicted.   As a result, people were not able to sell these properties and get out of the loan - and were also not able to make the balloon payment or make the increased payments on the loan because they were more than the home buyer planned for.  This resulted in a lot of properties being foreclosed on, and the lending banks losing a lot of money since this was really prevalent in California in particular which says the bank is stuck for any deficiency.   

In addition to the direct effect on the bank, it also triggered a major adjustment in home values, because now people are able to buy at auction very expensive homes for pennies on the dollar, further depressing the value of all homes in nearby areas.   

Banks also became very reluctant to lend money, which meant that fewer people could qualify to buy a home.   So if you were selling a home, there were fewer people able to buy it.  This also reduced housing values.   In many areas, homes have yet to recover to their pre-recession value.   





 
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Offline IanB

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Re: can anybody please help me out?
« Reply #97 on: November 05, 2017, 05:14:52 am »
Only about 15 of the 50 states (mostly in the Western part of the US)  have laws on the books preventing this.

Such laws to me seem like quite a good idea, since they should force lenders to lend conservatively and not sucker people into taking on debt they may not be able to repay.
I'm not an EE--what am I doing here?
 

Online Mr. Scram

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Re: can anybody please help me out?
« Reply #98 on: November 05, 2017, 05:24:58 am »
Such laws to me seem like quite a good idea, since they should force lenders to lend conservatively and not sucker people into taking on debt they may not be able to repay.
These laws also prevent foreclosing on people unless banks really must. Quickly selling a house from under someone at bargain prices, leaving them with a large deficiency debt is a problem in some parts of the world. The bank absorbing at least part of the debt forces them to work with the owner if he goes through a rough patch. Most people desperately want to pay, but need some time to recover or find a new job.
 

Offline SeanB

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Re: can anybody please help me out?
« Reply #99 on: November 05, 2017, 05:42:04 am »
Also are cases of a bank foreclosing on a house that they actually do not own, and the owner cannot afford the costs of the lawyers to prove this. Here there are a few cases wending through where the bank sold the house for ultra low prices to themselves, via an intermediary at the auction, then sold the place at a profit again, while still leaving the original owner liable for the shortfall on the first sale.
 


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