Key Post Is rent "dead money"?
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GeneralZod
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Perhaps property hasn't shown real terms capital appreciation in the long term in those countries and they have better security of tenure so it makes more sense for them to invest the difference between rent and mortgage in productive sectors of the economy. Open to correction.
John Rambo
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Is it not just a cultural thing, i.e. that the idea of owning your own home is ingrained in Irish people?Land, Bull McCabe and all that stuff.
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z109
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Yes, it's absolutely dead money. It supports no-one but the landlord. You could instead be supporting the Irish financial services industry and its exotic instruments in their hour of need. They need your money. There are people not able to buy a new Aston Martin this year. Their bonuses are suffering.
Have you ever been to a campsite on the continent? Yes. They are all mad.
Have you ever been to a campsite on the continent? Yes. They are all mad.
What about the service bought from the landlord from which the tenant benefits? How is paying for this service dead money and paying for other goods and services is presumably not?
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z109
Guest
Well, like you are only supporting one person and one persons consumption; whereas, if you buy into the whole ultimately securitized mortgage thing, you are supporting up to 85 times the amount you have borrowed! That's a lot of financial wizardry bonuses!
And, when you run a bit short some month for a holiday and a new car, you can remortgage and withdraw a bit more equity at the lowest rate possible! ECB + a bit? It's a nobrainer! You'd be mad not to get up to your follicles in permanent debt with an illiquid asset that is by no means guaranteed to always appreciate.
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mercman
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It's a cultural thing. If you are getting older you need a base. Personally, I would prefer to pay more or less the same amount to pay a mortgage as pay rent. Long term, history has shown that property is the best investment. Agreeably, what has occurred in the Irish market in the past 5 - 8 years has been mad, which is starting to present tears. But for those living in a property, what difference does it make. We all have to reside somewhere and to hell with it if the value goes down, none of us I think were contemplating selling up and purchasing a luxury tent someplace.
I don't understand any of this. Not all mortgages are securitised. I don't understand whether your post is for or against renting in general or if it's some sort of wind-up or something like that. In short I don't really understand what you're on about. Sorry.
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z103
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With a mortgage, after about 20 or 30 years you can stop paying it off (and you own the property)
With rent, you have to keep paying, even after you retire (and you won't ever own the property).
With renting, you're not going to end up with negative equity. If you want to move on, it's easy, especially if you don't like an area or lose your job etc. Someone else looks after the maintenance of the house.
Both rent and mortgage have their advantages and disadvantages.
With rent, you have to keep paying, even after you retire (and you won't ever own the property).
With renting, you're not going to end up with negative equity. If you want to move on, it's easy, especially if you don't like an area or lose your job etc. Someone else looks after the maintenance of the house.
Both rent and mortgage have their advantages and disadvantages.
Have family living on the continent who cannot understand the Irish obsession with owning property. From the many debates over whether or not this is just a cultural difference, the fact that the majority of properties are rented unfurnished on the continent meaning the tenant can decorate to their own personal taste to make it their home and the huge advantage for tenants of having rent control. People can rent for 5 years + secure in the knowledge that rent will not increase. Depending on the type of tenant s/he has, the landlord is often anxious to retain good tenants rather than risk losing them for the sake of a substantial rent increase. Of course this doesn't answer the question of the landlords own mortgage.
I thought Yoganmahew's initial response was very witty myself
I thought Yoganmahew's initial response was very witty myself
I have to smile at this one mainly because I notice that the estate agents are now trotting this line out, en force.
Of course rent is not dead money as long as you are comparing apples with apples.
As we all know, a single mortgage repayment normally consistes of two components
a) Repayment of the capital which is minute in the early years and b) payment of the interest.
Rent paid to a landlord OR Interest paid to a financial institution are both expenses. Once paid they are gone forever and do not increase our wealth in any way
If I have a choice to borrow 700,000 (2770 interest per month) or pay 1700 rent on the same property then of course I'm better off by 1070 per month by renting. If property prices are falling at the same time then I'm laughing.
So, No, Rent is not dead money. Rents in the current market are typically less than 3% of the value of the property while mortgage interest rates are almost 5%
Of course rent is not dead money as long as you are comparing apples with apples.
As we all know, a single mortgage repayment normally consistes of two components
a) Repayment of the capital which is minute in the early years and b) payment of the interest.
Rent paid to a landlord OR Interest paid to a financial institution are both expenses. Once paid they are gone forever and do not increase our wealth in any way
If I have a choice to borrow 700,000 (2770 interest per month) or pay 1700 rent on the same property then of course I'm better off by 1070 per month by renting. If property prices are falling at the same time then I'm laughing.
So, No, Rent is not dead money. Rents in the current market are typically less than 3% of the value of the property while mortgage interest rates are almost 5%
Brendan Burgess
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Of course, rent is not dead money. You pay for a service.
Compare it with an interest only mortgage where you rent the money to buy a property.
One could rent a property while borrowing to invest in shares. You would end up with a roughly similar outcome after 20 years. You would own an asset which you could exchange for buying a house.
Brendan
Compare it with an interest only mortgage where you rent the money to buy a property.
One could rent a property while borrowing to invest in shares. You would end up with a roughly similar outcome after 20 years. You would own an asset which you could exchange for buying a house.
Brendan
GeneralZod
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Nicely put, agree with that.
Rent can be considered as the equivalent of the interest part of a mortgage repayment. In both cases, you pay for a service.
But people don't think that way. They don't see that their €350k mortgage is going to cost them €700k over 35years.
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mercman
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Its a pure matter of choice. I would prefer to pay a repayment mortgage where I might live and own in a period of time with the possibility of increasing in value, rather than a chunk of money to a third party for the use of a property. Why do the majority of us all purchase cars on loans, (guaranteed to drop in value from Day 1), instead of renting ??? Now that's what I call dead money.
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mercman
Guest
Well if we assume that rent is 1400 per month and it stays the same for 35 years , this equates to 588,000 for 35 years. Remember rents will increase. If the same amount is paid into a repayment mortgage over the same period the bulk of the equity portion of the property would be owned. And Capital Values should increase over this period. At least there is something to show after 35 years.