Renting Or Buying

[ZAP]

The Sub Prime Finance crunch affecting the world is not due to people borrowing 100% for their houses, but money being lent to non prime borrowers, like single income poor people or unemployed. The finance companies were signing up anyone and everyone and this was spurring a housing boom. Then people started to lose their jobs and cannot pay for their houses. Now there are 18,000 forclosures per week happening in the USA.

It is different here in Oz, our finance companies have been lending too much money to people and when the rates have gone up, they cannot afford the repayments.

Below I have tried to work out the differences, taking into account there is no change in interest rates or capital growth in the property price.

My basic maths for renting vs buying:

House value = $800,000 (I live in sydney's northern beaches)

10 year commitment

8% fixed interest rate

30 year loan

Owning it:

Mortgague payments $5,500 per month

House value after 10 years 5% capital growth $1,368,271.00

Payments over 10 years = $660,000, equity after interest approx $300,000

Capital growth = $868,271.00

Renting it:

Renting for $500 per month, but saving the rest.

Monthly rent $2,166.00

Monthly savings $3334.00

Savings after 10 years $428,085.60

This is a VERY ROUGH calcualtion on working out the difference between rent vs buying. I am sure someone who knows how to work out real capital gains and mortgauge payments will make the figures more accurate. When you rent you also do not have to pay:

Repairs or improvements on the house

Council rates

Water rates

Stamp duty on purchase

Interest

Just rates alone will save you another $2k per year.

While I have sold and are now renting, we are looking to buy again, the main problem is a cheap house in my area is over $800k

[Flukey]

The Sub Prime Finance crunch affecting the world is not due to people borrowing 100% for their houses, but money being lent to non prime borrowers, like single income poor people or unemployed. The finance companies were signing up anyone and everyone and this was spurring a housing boom. Then people started to lose their jobs and cannot pay for their houses. Now there are 18,000 forclosures per week happening in the USA.

It is different here in Oz, our finance companies have been lending too much money to people and when the rates have gone up, they cannot afford the repayments.

Agree.

My point was dont borrow 100% because chances are you cant afford any negative change in the economy.

[Dagabond]

If you are deperate to buy a home, look at Melton or some of the outer suburbs.

Or further out here in the Marsh....

If anyone has the capital this corridor is about to boom with the new Deer Park bypass western link near completion.

While I have sold and are now renting, we are looking to buy again, the main problem is a cheap house in my area is over $800k

I cant believe the numbers some of you guys are talking.... ....The reason I start this thread is because of what now seems like a measly 220k loan thats hitting me at 1600 a month atm, but then I'm single and its only one wage and an over spender trying to manage it....

[markxr6t]

Hey Dags - have you considered keeping your house but moving out, rent your house out for top $ and renting a cheaper place to live in? This will reduce your living costs and you'll enjoy tax benefits and capital growth on your current place.

Trust me, once you reach a certain "hump" in property ownership, life becomes soooo much easier and you will get there eventually.

[TornadoJudd]

It's not hard to buy a house if you're renting with no deposit. People live within their means. Doesn't matter if they earn $50k or $150k a year, they'll live with what they've got, provided they can budget properly.

If you have no deposit, often the best way to get into a property is to take out a personal loan for 5% of the property value, and borrow 95% from the bank. Pay interest only on the mortgauge for the first 5 years or however long it takes to wipe out the personal loan. Then once it's gone you can start paying some principle, and over those 5 years your captial growth is almost 50% (based on house prices doubling every 9.3 years as per stats) of what you paid.

Very, very loose example:

$300,000 property

95% finance = $285,000

5% or so Personal Loan = $15,000

First home owners grant goes towards stamp duty and excess is splashed onto person loan. 5 or 6 years later the property is worth is excess of $450,000. This provides much more financial security than paying someone else's mortgauge. Rent is 100% interest!

P.S. I bet you can't tell what I sell lol

you forgot to mention that if you dont have a 20% deposit you have to pay morgage insurance which is a shut load. Also alot of banks and lenders will lend up to 105%