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Guy at work.. Should i tell him?
neas
Posts: 3,801 Forumite
I know a student interm at work (2 years into his uni degree with 1.5 years left as a student) who managed to get a joint mortgage with his partner... he is at uni and on 650 interest free mortgage. His 2 year fixed rate deal (at about 5%) is gouing to expire in about a years time. He thinks he is going to make 5k on the original price of the property... He knows theres problems with the financial market as adviced me to 'wait a few months' before trying the house market... he is only 20 but he has made one of the biggest financial decisions of his life to buy at the top of the market... with no income. His partner will obviously be servicing alot of the debt.
His idea was to get an interest only mortgage and then turn to a repayment mortgage once he gets a full time job after being a student. He expects it to to rise by 5k... I didn't dare break his heart by suggesting his house might be worth less 20%... so he will be in negative equity... And... when he thinks he will be able to remortgage he will be forced onto a higher SVR pushing his mortgage up to 1000+ per month because he is in negative equity and can't pay the shortfall. He even accepted he couldn't service anymore than a 150 jump. He intends to just "sell up" once he moves after graduating.
Its a 1 bedroom flat in Exeter... worth about 120-150k...they put down about 10k deposit.
Do i break it to him or just let him delude himself? Of all the people inflating the housing market this guy I feel the worse for because he is only young... and prob has just taken a 30-40k hit on an unsaleable property
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What do i do?
His idea was to get an interest only mortgage and then turn to a repayment mortgage once he gets a full time job after being a student. He expects it to to rise by 5k... I didn't dare break his heart by suggesting his house might be worth less 20%... so he will be in negative equity... And... when he thinks he will be able to remortgage he will be forced onto a higher SVR pushing his mortgage up to 1000+ per month because he is in negative equity and can't pay the shortfall. He even accepted he couldn't service anymore than a 150 jump. He intends to just "sell up" once he moves after graduating.
Its a 1 bedroom flat in Exeter... worth about 120-150k...they put down about 10k deposit.
Do i break it to him or just let him delude himself? Of all the people inflating the housing market this guy I feel the worse for because he is only young... and prob has just taken a 30-40k hit on an unsaleable property
.What do i do?
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Comments
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I know a student interm at work (2 years into his uni degree with 1.5 years left as a student) who managed to get a joint mortgage with his partner... he is at uni and on 650 interest free mortgage. His 2 year fixed rate deal (at about 5%) is gouing to expire in about a years time. He thinks he is going to make 5k on the original price of the property... He knows theres problems with the financial market as adviced me to 'wait a few months' before trying the house market... he is only 20 but he has made one of the biggest financial decisions of his life to buy at the top of the market... with no income. His partner will obviously be servicing alot of the debt.
His idea was to get an interest only mortgage and then turn to a repayment mortgage once he gets a full time job after being a student. He expects it to to rise by 5k... I didn't dare break his heart by suggesting his house might be worth less 20%... so he will be in negative equity... And... when he thinks he will be able to remortgage he will be forced onto a higher SVR pushing his mortgage up to 1000+ per month because he is in negative equity and can't pay the shortfall. He even accepted he couldn't service anymore than a 150 jump. He intends to just "sell up" once he moves after graduating.
Its a 1 bedroom flat in Exeter... worth about 120-150k...they put down about 10k deposit.
Do i break it to him or just let him delude himself? Of all the people inflating the housing market this guy I feel the worse for because he is only young... and prob has just taken a 30-40k hit on an unsaleable property.
What do i do?
mind your own business ?
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No-one really knows what WILL happen. We all know what we THINK will happen.
I like to express caution but let others make their own decisions. I do not have crystal balls.
GGThere are 10 types of people in this world. Those who understand binary and those that don't.0 -
play dumb, honestly stay out of it. These situations can turn nasty.0
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What do i do?
Laugh so hard milk comes out of your nose?
Edit: Saying that, the student will just declare himself bankrupt anyway...Gorgeous_George wrote: »No-one really what WILL happen. We all know what we THINK will happen.
True, but we know what has happened roughly every 18 years for the last couple of centuries... is usually a good guide.Bankruptcy isn't the worst that can happen to you. The worst that can happen is your forced to live the rest of your life in abject poverty trying to repay the debts.0 -
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Gorgeous_George wrote: »I do not have crystal balls.
GG
i chuckled to myself at the thought of having crystal balls.:rotfl:'Lose' - as in "I hate to lose" only has one 'o'.
'Loose' - as in 'Loose change' is not the same word!0 -
True, but we know what has happened roughly every 18 years for the last couple of centuries... is usually a good guide.
Errrr, no it hasn't.
Maybe about 18 years ago it happened once i.e., 1990 but not on the scale predicted now (by some). But in 1972, 1954, 1936, 1918, 1900, 1882, 1864, 1846, 1828 and 1810, did we really have noteable house price falls?
I don't think so.
GGThere are 10 types of people in this world. Those who understand binary and those that don't.0 -
i could laugh but its not his fault... He is young and will be a victim of this HPI...
Although saying that he figured "hous prices can only go up". Hehe so i can be a little smug that he thought he a student could afford a house and it was wiser than renting. Nevermind.0 -
Leave the poor lad alone. He may be smarter than you and could end up sitting pretty while you are still wondering whether to buy or not.
Worth reading these articles in the guardian: one from 2005
http://www.guardian.co.uk/business/2005/jan/05/housingmarket.houseprices
And this one from this week:
http://www.guardian.co.uk/money/2008/feb/12/lendingfigures.mortgages
And this one from last month: http://www.guardian.co.uk/money/2008/feb/20/lendingfigures.mortgages said the value of borrowing went up by 11%.
According to this the market peaked in 2001... this was written in 2004
http://www.findaproperty.com/displaystory.aspx?storyid=5790&edid=00&salerent=0
Just goes to prove you can't believe a word you read and you should just go with what you know personally to be true and follow your instinct. Also found some economist telling everyone to sell and rent in 2002 as the market was going to crash during 2003-2005. It was front page on the house price crash forum in 2004. I love the wayback archive
All the doom and gloom that was written before is being written again. It didn't crash and burn it just quietly went a bit stagnant and picked up again when everyone realised it wasn't going to and the investors had cleaned up.
Has anyone thought that the link between house prices and average earnings has been broken and they are no longer a decent indicator of anything so all this hot air about property being unaffordable is irrelevant if enough is being sold to keep things chugging along? Someone is buying. STC signs are appearing on rightmove in my area so someone has the money. FTBs may have dropped out of the market but others have happily taken their place so unfortunately it means FTBs may no longer be needed to keep the market going. This is probably why stamp duty for FTBs wasn't abolished - they are no longer needed. If it suddenly is then you know you might be 0
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