can anybody please help me out?

[Mr. Scram]

Well as I said i have used the increase in value to borrow money cheaply. in fact I used part of one advance at a lower rate to pay off some of the main mortgage. Indeed I'd rather maximize the value by making it all mine then I'm no strings attached.

Yes, fully owning a house seems a lovely prospect.

[sokoloff]

I can't see how you can use the surplus value of a home unless you either sell it for the profit difference or use it as collateral to borrow money to invest but this is a risky business as you don't know what will happen to rates on both sides of that arrangement.

You yourself saw a way to use the surplus value of a home when you borrowed the additional £10K to buy a car and handle other life expenses:

I currently owe £44'200 for the house alone and a further £10'000 on further advances to tie me over at times and buy a car, so I am currently 54'200 in debt.

You have benefited from the rise in your home's value in a way that you wouldn't have if you'd continued renting or in a way that you wouldn't have if you house price went sideways or down. (Where would that £10K have come from in those situations?)

Indeed some of that extra 10K I have borrowed is invested but the actual amount it will make me is minimal (currently 7% before tax while i pay 2% in mortgage interest that will go up later) and perhaps i just prefer to be mortgage free.

Today having paid off only £13'000 and having had to take on £10'000 of debt I've actually only paid off £3000 in 7 years!!!!!

I don't want this to sound insensitive, but a stark look at the facts suggests that maybe you're not acting in a manner entirely consistent with preferring to be mortgage free. If you prefer to be mortgage free, don't take out additional loans against your home. Of course, life happens and sometimes your today self absolutely needs to borrow money. But when you do that, you're definitely hurting future self, so make sure that it's an absolute need or is at least worth the penalty that future self will be paying.

On the good side, future self is entitled to all of the gains (minus any taxes) that the house price has made. So while you've maybe only paid off a net of £3K against your mortgage balances, your personal net worth has also risen by the (estimated by me) £60K that your house has appreciated while you owned it. If you'd rented or your house didn't go up, you be that much poorer versus today.

[Simon]

Like you say life throws things at you and without a car I can't get to work to make money to pay for the house, , on lower wages than can buy a decent house and barely afford the slums yes sometimes some credit has been needed and i have preferred borrowing at 2% on a mortgage than 12% on an overdraft, a house and vehicle are the only two things I'm, happy getting into debt over. If cash is required a loan against the house is best. what I am fighting for is to stay afloat and pay the thing off. Having recently looked at my situation i realized just how little I have paid off and now that I have been able to fix my main mortgage for the next 5 years at 1.94%, I have opted to maintain my previous payment rate when the interest was 3% plus add another 50 quid a month, I also tend to try and add another £100 now that I am resolved to ditch it that was helped by a 10% pay rise I got at the beginning of the year. My wages have slowly risen so that I am in more of a position to overpay, in the past I have had to borrow back what I have paid and the only advantage has been that with a price increase the bank has asked no questions, but this has been the only practical advantage, access to more cheap debt...... if my house value suddenly falls again when it comes to renew these mortgages what will I be asked for in interest ? this is why i don't like to gamble with vaporware money.

Basically what I am saying is that the biggest crisis in this country is wages along with rising house prices and precarious contract conditions for many, I'm one of the lucky ones and if I had not been so calculating could have easily ended up loosing my house.

Yes I'm £60'000 better off on paper but I'd need to spend that on another house if I sold so the net result is "0", you could say that I have benefited from a lower interest rate on loans and that would work out to be a small part of the £60K I have in vapormoney. So basically we are back to the same old asset rich and cash poor and that is whilst living on one of the cheapest houses you can buy in the area, our economy is indeed in the shit unless your a banker or other highly paid person in a mansion where cash poor means you just have to go without your 10th luxury and maybe sell something.

[Mr. Scram]

How is your net result 0 if your net worth is increasing significantly? Anyone renting won't have profited from the price hike at all and will have a proper 0 net result. Compared to your result, there is a massive difference of many tens of thousands of pounds.

I understand your sentiments, but they also seem fairly pessimistic, especially considering many people would love to do what you do. They see the chance of ever owning a house disappear over the horizon, as prices increase faster than their income does.

[Simon]

like I said I am lucky, and again as I said in my current position the 60K added value is of no practical value, I sell my house for 60K more, I buy a house of the same type and location for 60K more, or i buy a house worth 50% more because it's in a nicer location and now that 60K becomes 90K, so I'm down 30K and can't move, where do I gain? Renting is of course always going to be a mugs game and that is why I say we have a pay and working conditions crisis.

To give an example this house is worth lets say 130K, it is a 3 bedroom end of terrace with no drive. A house in a newer area that is 2 bedroom with a drive and detached (built on the last scrap of land going) is 170K so I'd swap size for a drive and maybe a nicer area (not really it's almost as bad as here if you move a hundred metres down the road....) and I'm paying 40K more for about the same all things considered. Where did I gain, assuming the area is slightly better I am now 40K more in debt to buy the same thing.

[Mr. Scram]

like I said I am lucky, and again as I said in my current position the 60K added value is of no practical value, I sell my house for 60K more, I buy a house of the same type and location for 60K more, or i buy a house worth 50% more because it's in a nicer location and now that 60K becomes 90K, so I'm down 30K and can't move, where do I gain? Renting is of course always going to be a mugs game and that is why I say we have a pay and working conditions crisis.

To give an example this house is worth lets say 130K, it is a 3 bedroom end of terrace with no drive. A house in a newer area that is 2 bedroom with a drive and detached (built on the last scrap of land going) is 170K so I'd swap size for a drive and maybe a nicer area (not really it's almost as bad as here if you move a hundred metres down the road....) and I'm paying 40K more for about the same all things considered. Where did I gain, assuming the area is slightly better I am now 40K more in debt to buy the same thing.

I feel we're just repeating ourselves here. What you gained is many tens of thousands of pounds compared to someone who just rented and never bought. An example:

- Dave buys a house worth 100000 monetary units. In 10 years, the house increases its value to 200000 units. You sell the house, pay back the bank and end up with 60000 monetary units you didn't put in by paying mortgage payments.
- Neighbour Dan couldn't get a loan and didn't buy. He rents a house. In 10 years, his house has increased value, but he gains nothing from it. If anything, his rent will be higher. Also, any money he puts in is lost.
 
Whatever comes next, buying another house or renting a place, the difference is there. If your house increases in value, you could always decide to cash out, buy a boat and sail the world. That wouldn't be possible for Dan. Even if within the housing market the gains aren't fattening your wallet, because prices are proportional to other prices, the gains do count in other markets.

[Simon]

OK yes your argument works for second homes and if you may choose to no longer live in a house, I think 99.99999999% of people buy a house to live in and when they sell 99.9999999% of people buy another house with the money. So for most people in the UK anyway you sell you house and you buy another. If you are simply moving region but getting a same value house then nothing gained nothing lost. if your moving to a cheaper region you will gain but this is an artificial gain based on the weirdness of our economy of which no one has certain control or predictability. If you move to a more expensive area well you won't be will you unless you were very well off in your current area and are downsizing. many people do indeed talk of moving north just so that they can afford a house an an acquaintance has done just that. but this was not a lifestyle choice, this was a desperate measure to move 200 miles north just so that she can afford a house and may find wages are lower.

Location of a property make up more in value than the size of it. A friend recently bought a house in a newly constructed village, it is a so called semidetached with the actual distance between the detached pairs being about 0.6m so really semi detached only in name. If anything his property like mine is for practical purposes an end of terrace, he has a drive to the side of his house whereas his neighbors drive is in front of his house because land is expensive and not to be wasted. To be honest the quality of build is appalling with 3 problems having to be fixed as soon as he moved in one being the window mechanism would not work... The overall size of his land is a 3rd of mine, he has two bedrooms (I have 3) and a postage stamp that is called a garden. For this tiny delight he paid 210K just because of it's location some distance from a town centre where he can get a train to London that he does not want to get anyway as he works locally...... So he has paid a little under twice the value of my house for 1/3 the land and a house of lower build quality (mine being a bomb proof ex council house). Should i want to move there which is just 15miles down the road I would not stand a chance....... location, location, location and yes it's all vaporcash, non of it exists unless your in just the right place at the right time.

[Simon]

If houses prices didn't go up so sharply then buying a nicer house for more money would mean the gap in price would be smaller and achievable, it's all relative to wages too not just the gain in house price as you have to plug the gap with more debt, yes we are going round in circles because you won't accept that with the 50% rise an increase in this house of 60K means that anything better increases by more than that so the difference just becomes a bigger mortgage than I already have. Yes ultimately it comes down to wages, that is why people are stuck renting from ever larger landlords than control the market being able to buy houses cash and charge huge rents preventing them from saving for a deposit while your local MP uses his wife's name to buy a second home via a scheme that gets him a zero interest loan and was meant for first time buyers not politicians playing the system.

[tszaboo]

I feel we're just repeating ourselves here. What you gained is many tens of thousands of pounds compared to someone who just rented and never bought. An example:

- Dave buys a house worth 100000 monetary units. In 10 years, the house increases its value to 200000 units. You sell the house, pay back the bank and end up with 60000 monetary units you didn't put in by paying mortgage payments.
- Neighbour Dan couldn't get a loan and didn't buy. He rents a house. In 10 years, his house has increased value, but he gains nothing from it. If anything, his rent will be higher. Also, any money he puts in is lost.
 
Whatever comes next, buying another house or renting a place, the difference is there. If your house increases in value, you could always decide to cash out, buy a boat and sail the world. That wouldn't be possible for Dan. Even if within the housing market the gains aren't fattening your wallet, because prices are proportional to other prices, the gains do count in other markets.

What usually happens is this:
Dave buys a house and pays 1000 Units a month for 60 years. Housing market changes, goes up and down. He moves sometimes. Maybe he gains money, maybe he loses. If he gains, he pays taxes after it. If he loses, too bad sucker.
Dan rents for 500. He spends 200 on weed and beer and shiny stuff. He also places 300 on a bank account, which makes some more money for him. If he needs to pay 5000 unit, he pays it from his pocket, while Dave cannot sell his house. Dave has to take extra loans, and pay for that. Dan retires, he has enough money to live very comfortably in a small condo, and buy that sports car he always wanted.
Dave lives in a big empty house, he is surrounded by 17 sets of kitchenware, and he wonders if his wife should really get a 7th cat. Dave dies early because he did not have money to pay the doctors. His wife becomes the cat lady.

[sokoloff]

If houses prices didn't go up so sharply then buying a nicer house for more money would mean the gap in price would be smaller and achievable, it's all relative to wages too not just the gain in house price as you have to plug the gap with more debt, yes we are going round in circles because you won't accept that with the 50% rise an increase in this house of 60K means that anything better increases by more than that so the difference just becomes a bigger mortgage than I already have.

I completely accept this when looked at in dollars/pounds. (It's just straightforward math.) When looked at as a ratio of incomes, indexed to inflation, etc, it's not as large as the nominal increase.

Yes ultimately it comes down to wages, that is why people are stuck renting from ever larger landlords than control the market being able to buy houses cash and charge huge rents preventing them from saving for a deposit while your local MP uses his wife's name to buy a second home via a scheme that gets him a zero interest loan and was meant for first time buyers not politicians playing the system.

Presumably if the people care enough, they can vote such MPs out when things like this are discovered (or prosecute them for fraud if the elements of fraud are present and provable)?

I look at the wages issue as a relative issue. If your wages are rising/falling at the same relative rate as everyone else with whom you would be competing for housing (whether bought or leased), you're neither getting ahead nor falling behind. If your wages are rising faster, even slightly faster, you're making headway against them and improving your [financial] station in life.
It means that when house, car, milk, or eggs prices go up by N% for everyone, your income has gone up by (N+1)% and you're able to save the difference. Conversely, if your wages are trailing, even slightly, the average among your peer group, when prices go up by N% and your income only by (N-1)%, things get a lot tighter for you over time.

Compounding interest is a long lever. If you're on the good side of it, it's awesome. If you're on the bad side, it pinches your fingers like hell.

[Mr. Scram]

If houses prices didn't go up so sharply then buying a nicer house for more money would mean the gap in price would be smaller and achievable, it's all relative to wages too not just the gain in house price as you have to plug the gap with more debt, yes we are going round in circles because you won't accept that with the 50% rise an increase in this house of 60K means that anything better increases by more than that so the difference just becomes a bigger mortgage than I already have. Yes ultimately it comes down to wages, that is why people are stuck renting from ever larger landlords than control the market being able to buy houses cash and charge huge rents preventing them from saving for a deposit while your local MP uses his wife's name to buy a second home via a scheme that gets him a zero interest loan and was meant for first time buyers not politicians playing the system.

I'm fully aware that more expensive properties will increase more. Obviously, houses would ideally cost just the labour they represent. It's just a pile of bricks on a bit of mud, after all. Current housing prices are completely off the charts and mostly artificial, but that's not going to change anytime soon. At least you can make some money thanks to it, and you don't need much luck to make a lot. You can also draw the short straw, but that's the name of the game.

Normally, moving up means a bigger mortgage. That's typically offset by increased wages and the money already paid. You could also decide to stay put and live mortage free very cheaply.

[Mr. Scram]

What usually happens is this:
Dave buys a house and pays 1000 Units a month for 60 years. Housing market changes, goes up and down. He moves sometimes. Maybe he gains money, maybe he loses. If he gains, he pays taxes after it. If he loses, too bad sucker.
Dan rents for 500. He spends 200 on weed and beer and shiny stuff. He also places 300 on a bank account, which makes some more money for him. If he needs to pay 5000 unit, he pays it from his pocket, while Dave cannot sell his house. Dave has to take extra loans, and pay for that. Dan retires, he has enough money to live very comfortably in a small condo, and buy that sports car he always wanted.
Dave lives in a big empty house, he is surrounded by 17 sets of kitchenware, and he wonders if his wife should really get a 7th cat. Dave dies early because he did not have money to pay the doctors. His wife becomes the cat lady.

In a lot of EU countries, renting is more expensive than buying. It's just that not everyone gets a loan. Obviously, part of the price difference is the risk you do or don't assume.

I don't think I've ever heard of buying being that much more expensive than renting, so I don't see your example reflected in daily life.

[Nusa]

OK yes your argument works for second homes and if you may choose to no longer live in a house, I think 99.99999999% of people buy a house to live in and when they sell 99.9999999% of people buy another house with the money. ....

Too high a percentage, although I take your point.

A significant chunk (certainly larger than 0.00000001%) of home sales happen because an elderly or disabled person is moving into some kind of managed care facility or to live with family. They are not buying another home, although they are probably using some of the money for their final years.

[Simon]

Some of their money? You obviously don't live in the UK,

[Zero999]

What usually happens is this:
Dave buys a house and pays 1000 Units a month for 60 years. Housing market changes, goes up and down. He moves sometimes. Maybe he gains money, maybe he loses. If he gains, he pays taxes after it. If he loses, too bad sucker.
Dan rents for 500. He spends 200 on weed and beer and shiny stuff. He also places 300 on a bank account, which makes some more money for him. If he needs to pay 5000 unit, he pays it from his pocket, while Dave cannot sell his house. Dave has to take extra loans, and pay for that. Dan retires, he has enough money to live very comfortably in a small condo, and buy that sports car he always wanted.
Dave lives in a big empty house, he is surrounded by 17 sets of kitchenware, and he wonders if his wife should really get a 7th cat. Dave dies early because he did not have money to pay the doctors. His wife becomes the cat lady.

In a lot of EU countries, renting is more expensive than buying. It's just that not everyone gets a loan. Obviously, part of the price difference is the risk you do or don't assume.

I don't think I've ever heard of buying being that much more expensive than renting, so I don't see your example reflected in daily life.

Renting can be cheaper, than buying a house to live in (not buy to let) in some countries, where the interest rate is high, and house prices are fairly constant or falling. Don't assume it's the economic situation is the same for everyone in the world.

[Mr. Scram]

Renting can be cheaper, than buying a house to live in (not buy to let) in some countries, where the interest rate is high, and house prices are fairly constant or falling. Don't assume it's the economic situation is the same for everyone in the world.

I'm well aware of that. People assuming their situation is the same for everyone is one of my pet peeves and I've taken care not to do that. That why I've specified "in a lot of EU countries", which is a lot more specific than the whole world. For most of Europe, there's a very strong upwards trend, with the obvious hiatus during the 2008 crisis and the years after. The more developed parts of the EU seem to follow that trend more strongly.

[Simon]

In the UK renting is always more expensive, you are either renting from a large landlord who owns a large property management company with overheads and wanting to make a profit or an individual that in turn is paying rent with what you pay them and want to make some money.

[Mr. Scram]

In the UK renting is always more expensive, you are either renting from a large landlord who owns a large property management company with overheads and wanting to make a profit or an individual that in turn is paying rent with what you pay them and want to make some money.

It makes sense that's the general trend too. Owning a house has certain costs. Now, if someone else is living in that house, you will need to redeem at least those costs, plus something for your trouble. That makes it unlikely renting is going to be cheaper than owning it yourself.

There are a lot of reasons why it might pan out differently in specific siuations, but this won't change. We're not even talking about the fact that you will eventually own a house either.

[Simon]

Yes eventually you own a house and become mortgage free, however we were talking about affording to buy a house in the first place. And yes you may end up with a house at the end, you then sell that to pay for care costs in the UK.

[Mr. Scram]

Yes eventually you own a house and become mortgage free, however we were talking about affording to buy a house in the first place. And yes you may end up with a house at the end, you then sell that to pay for care costs in the UK.

Yes, I'm talking about your monthly costs when renting versus buying. That will be most important to most people.

[Simon]

Yes and buying in the UK is always cheaper, that is why I never went into renting, the mortgage was initially enough to deal with.

[Mr. Scram]

Yes and buying in the UK is always cheaper, that is why I never went into renting, the mortgage was initially enough to deal with.

Yes, that's the case in more places and as explained, a fairly natural state. It's generally not a case of being able to pay a mortgage, but whether the bank is prepared to lend you the money. Renting is more expensive, but the barrier to entry is lower. Oddly enough, proving you've paid similar amounts of money every month for the past years isn't always enough to convince a bank you are able to sustain the mortgage. If the big boys don't want to play, you're stuck.

[Zero999]

Renting can be cheaper, than buying a house to live in (not buy to let) in some countries, where the interest rate is high, and house prices are fairly constant or falling. Don't assume it's the economic situation is the same for everyone in the world.

I'm well aware of that. People assuming their situation is the same for everyone is one of my pet peeves and I've taken care not to do that. That why I've specified "in a lot of EU countries", which is a lot more specific than the whole world. For most of Europe, there's a very strong upwards trend, with the obvious hiatus during the 2008 crisis and the years after. The more developed parts of the EU seem to follow that trend more strongly.

Renting is also better for someone who often moves from one place to another, because they don't incur the costs of selling any buying property: estate agents, solicitor and mortgage fees.

[Mr. Scram]

Renting is also better for someone who often moves from one place to another, because they don't incur the costs of selling any buying property: estate agents, solicitor and mortgage fees.

Sure, there are compelling reasons to rent. A lack of stability or a need for mobility can be good reasons. Not buying when in a fresh relationship makes a lot of sense, for instance.

[Simon]

Yes renting has it's place, my sister and her husband rented for a year then got married and bought another house. but these days many are forced to rent due to job insecurity and low wages meaning no deposit. I made sure i didn't get stuck in that loop.