From: "Andy Pandy"
Newsgroups: uk.finance
Subject: Re: What to do with 15 000 pounds
Date: Sun, 1 May 2005 17:33:08 +0100
"Tim" wrote in message
news:d52tlg$gpe$1@nwrdmz03.dmz.ncs.ea.ibs-infra.bt.com...
> "Andy Pandy" wrote
> > Given that historically (certainly over the last 30 years) house price
> > inflation has been approximately equal to mortgage interest rates, ...
>
> Think of this another way:
>
> If you used a 100% mortgage to buy a house, and constantly re-mortgaged back
> to 100%, then the re-mortgages would almost exactly "pay for" the interest
> on the mortgage. Eg if both house price inflation & mortgage rates are 5%,
> then from a house priced at £100K in one year it would increase to £105K and
> you could re-mortgage to get the £5K needed to pay the mortgage interest...
>
> So, apart from the other costs, you'd be living in the house "for free" !!
Yes.
> [Of course, you'd probably prefer to pay-down the mortgage loan instead of
> increasing it all the time. But this is simply equivalent to saving money
> in a savings a/c which pays interest at the same rate as the mortgage
> interest rate (ie quite good for a savings a/c!) - and what's better is,
> it's even tax-free!]
>
> "Andy Pandy" wrote
> > ... and the additional costs of property (maintenance, insurance etc) are
> about 2-3% ...
>
> This, then, is the only cost for living in the house. Compares nicely to
> the level of rent you'd be paying on a house half the size!!
Absolutely - which is why I bought my house and am not renting.
But, and this is thing British house buyers need to get through their thick
heads - buying a house more expensive than you need does NOT make you money, it
loses you money, based on historical averages (obviously there are short term
periods when this is not true).
Of course you may consider the advantages of living in the more expensive house
are worth the money you are losing - but that's a different issue - you are
*paying* for better accomodation. It is not an investment which will make you
money.
--
Andy
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