Rent or own

[mrcharly]

Not true, boatman. Your view is far too simplistic.

The bank only *theoretically* has to have the euros. They can arrange a credit facility themselves, but not actually draw on the funds. The government offered guaranteed funds to back loans to small businesses for exactly this purpose. The banks don't actually need to take the money from the government, they just need to have the facility to do so.

Its not dissimilar to shorting stocks. Broker X thinks that BigCorp stock is going to drop in price. He therefore wants to sell shares in BigCorp. Trouble is, he doesn't have any to sell. His solution is to borrow some from someone else, sell those shares, then buy some back when the price drops. If the price doesn't drop, then he is in big doodoo. So he sells in a way that triggers other people to sell, driving down the price.

The same thing happens with lending money.

btw - the 'Freemen on the Land' thing? Good luck with that.

 

[boatman]

Not true, boatman. Your view is far too simplistic.

The bank only *theoretically* has to have the euros. They can arrange a credit facility themselves, but not actually draw on the funds. The government offered guaranteed funds to back loans to small businesses for exactly this purpose. The banks don't actually need to take the money from the government, they just need to have the facility to do so.

Not heard of the level of liquidity required by banks and the difficulties that banks are in trying to achieve this? Banks cannot just draw on the Government for money. That was what happened in the bank bail-outs as a last resort in order to save the financial system. I wasn't advocating the Freeman thing just that the simplistic thinking that banks create money by issuing a debt is symptomatic of it.

 

[ex-member BareThrills]

The bank show your loan as a credit on their books. That raises their apparent worth so the bank can then 'borrow' themselves from other sources

wrong, an ordinary loan is shown as both an asset and a liability in the banks accounts. There are also set limits on the leverage, capital and reserve ratios that banks cannot breach. A bank does not top up its 'cash worth' by seeking inter bank, central bank, government or any other form of loan. A banks capitalisation is the key indicator in this instance and loans have a zero impact on it.

 

[Shewie]

We rented for 12 months after moving out of our parents houses, scary stuff but I'm glad we did it when we did. It was 1999 and property prices were about to sky rocket, we rented an apartment at first and then after a year decided to get a mortgage for the same amount as our rent. 14 years later, the mortgage payments have reduced slightly, we still owe a ton in interest but the house is now worth twice what we paid for it.

I really don't envy the young kids trying to get setup on their own these days.

 

[wingstoo]

I bought my first flat for £16,500 with a 100% mortgage, no down payment, not even 1%...

I sold that flat 15 months later for £18,000 so "made" £1500 or £100 a month, my mortgage payments back then were about £103 per month, so in reality I was paying £3 a month for my mortgage.

My next property cost me £18,500, so I needed a mortgage of £17,000 as the "profits" from the first covered the deposit.

For the next 25 years I was paying anything from about £120 to £260 a month as I used the capitol in the property to get further advances to cover other things, I think my total loans came to £25,000.

If I sold it today...I would probably not get £125,000 so I am hanging on to it and passing it on to my two daughters in the next few months, but we will carry on living in it until we "go up the chimney".

I bought it for a home, not as an investment, I have had good times and bad times here, and no one can turn up and say we need this for a family who need three bedrooms and you have two spare...So you are being re-housed.

Many people have said I should move to something bigger...WHY!!! Bigger house, bigger bills...No thanks!!! And the money I am now saving from not having a mortgage means I can invest it else where and hopefully get to retire a little earlier, hopefully in good health and a few good years ahead of me, had I rented it would not have happened, most places around here are about £100 a week, which is about average I guess, one weeks pay for one months rent is about right...

 

[Andy BB]

wrong, an ordinary loan is shown as both an asset and a liability in the banks accounts. There are also set limits on the leverage, capital and reserve ratios that banks cannot breach. A bank does not top up its 'cash worth' by seeking inter bank, central bank, government or any other form of loan. A banks capitalisation is the key indicator in this instance and loans have a zero impact on it.

Umm - sort of! Basic accounting is Cr Cash (payment to homeowner), Cr Secured creditor. So effectively, the bank's liquidity is slightly reduced because cash is clearly more "liguid" than a creditor, secured or otherwise. Effectively transferring one asset on the books - cash - for another - creditor. The bank's profit comes from the difference between their borrowing rates and the rate they charge on the loan to the homeowner. Their security against non-repayment by the creditor is the charge they have over the asset the money is lent for - ie the house. Which is why it is a big risk giving 100+% mortgages to homebuyers!

 

[rik_uk3]

We rented for 12 months after moving out of our parents houses, scary stuff but I'm glad we did it when we did. It was 1999 and property prices were about to sky rocket, we rented an apartment at first and then after a year decided to get a mortgage for the same amount as our rent. 14 years later, the mortgage payments have reduced slightly, we still owe a ton in interest but the house is now worth twice what we paid for it.

I really don't envy the young kids trying to get setup on their own these days.

We've been lucky with several inheritances these last two or three years so we are now landlords renting out properties. At the moment the days of 100% mortgagees are gone and those feeling the need to jump on the property ladder need hefty deposits. Our two children are lucky in the sense that they too inherited some money and can now put down a good sized deposit on a home (our daughter has already done so) but its incredibly hard for many people to work, pay rent and then save the deposits needed these days.

If I was in my twenties and qualified I'd not buy in the UK, I'd be off overseas and see whats on offer to be honest.

 

[santaman2000]

.....If I sold it today...I would probably not get £125,000 so I am hanging on to it and passing it on to my two daughters in the next few months, but we will carry on living in it until we "go up the chimney".

I bought it for a home, not as an investment...

Do you have an inheritance tax there?

 

[rik_uk3]

Do you have an inheritance tax there?

http://www.hmrc.gov.uk/inheritancetax/intro/basics.htm

 

[santaman2000]

http://www.hmrc.gov.uk/inheritancetax/intro/basics.htm

Thanks Rik. It appears similar to the federal inheritance tax here (the individual states then impose their own on top of that) although your amounts for exemption appear to be lower than ours. Both the exemptions in value of the estate and value of gifts.

My will specifies my daughter as my primary heir and my estate is lower than the exempt amount here (for now) so there should be no tax involved. that said, it wouldn't take much of a bump in property value to push it over the exemption (between my home in Florida and the 73 acres in Mississippi) With that in mind, I intend to sell her the property when I get old enough to no longer be able to maintain it. By selling it, we will avoid inheritance tax and only be liable for the state tax on the sale. Currently no law prevents me from selling it for whatever amount myself and the buyer (in this case, my daughter) agree on. With that in mind, there won't be much tax involved if I sell it to her for $10.

 

[wingstoo]

It will be just a simple transfer of deeds (Hopefully), and there isn't enough value to pay inheritance tax on it if I don't die within seven years. Of course the girls can charge us rent when we are older and retired, but then we can claim housing benefit to pay for it... (Just like in bread, TV series of the 80's)...

 

[boatman]

Selling one's house to one's children is fraught with problems. For example, child buys house, child marries, child dies, their spouse inherits house, doesn't have a real affinity with child's parents, evicts child's parents.

 

[Badger74]

I know of a similar thing happening with friends of the wife's parents a long time ago. In that case parents sold to son, the part of the farm which had the water supply, mother passed away, dad re-married and had another child, son though it was too quick and not good of mums memory and not at all happy and turned off water supply and other stuff.

 

[santaman2000]

Selling one's house to one's children is fraught with problems. For example, child buys house, child marries, child dies, their spouse inherits house, doesn't have a real affinity with child's parents, evicts child's parents.

Yes, but those are the same problems that exist if that same child inherits the house. Once he/she owns it (either through buying or inheritance) it's basically his/hers to do with as they please.

The concession I intend to make is that when I sell my property to her, I intend to reserve a "Life Estate" for myself; that is the right to continue to live in any house on the property until I either die or move into a nursing home. This is the plan if there's a house (or more likely, a trailer home) on it to live in at that time. My will already contains a clause leaving such a life estate to a distant cousin with a trailer home on the property so that she can't be evicted in the event of my death.

That said, the property I'm going to sell her is currently unimproved farmland with no structures on it. And of course all of this hinges on the assumption that I don't die suddenly of a car wreck, heart attack, etc. before we do this years from now.

 

[santaman2000]

I know of a similar thing happening with friends of the wife's parents a long time ago. In that case parents sold to son, the part of the farm which had the water supply, mother passed away, dad re-married and had another child, son though it was too quick and not good of mums memory and not at all happy and turned off water supply and other stuff.

Obviously it all depends on how much trust there is in the family. And upon which family member needs it more. Ideally, you'd sell to whichever heir you'd want to inherit it. If I live long enough, it could wind up being my grandson I sell it too rather than my daughter but currently, she's my heir and beneficiary in my will.

 

[wingstoo]

I had thought of that though... It is all being written into the arrangements, so that we live here until we are both departed, and the girls get an equal share, neither can sell without the others permission...

 

[boatman]

Beware the rule against perpetuities, dead hand or mortmain, if trying to determine the inheritance of a house.
The rule is often stated as follows: “No interest is good unless it must vest, if at all, not later than twenty-one years after the death of some life in being at the creation of the interest ." Likewise there can be confusion and failure of a person's wishes if a trust is created by accident.

 

[santaman2000]

Beware the rule against perpetuities, dead hand or mortmain, if trying to determine the inheritance of a house.
The rule is often stated as follows: “No interest is good unless it must vest, if at all, not later than twenty-one years after the death of some life in being at the creation of the interest ." Likewise there can be confusion and failure of a person's wishes if a trust is created by accident.

In plain English please.

 

[boatman]

It is in plain, precise, English.

 

[Tengu]

I fail to understand...As usual

I have my own property, it was owned jointly by me and my parents, Mum died and I bought out Dads share.

So my experience with rent or morgages is zilch.

I think its better to own than to rent, if you can.