My house lost £100K today!

Dithering_Dad

I love my spreadsheets too, but I never record the 'value' of my house. I simply compare what my mortgage was when I got the house and what it is now. The supposed value of the house is pretty irrelevent, the amount of debt attached to it isn't.

I'd advise anyone to keep an eye on the debt rather than the value because then you won't be lulled into a false sense of financial security. The best 'feel good factor' for me is to know that with the mortgage overpayments I've made so far I've saved £58046 in interest payments (over the term of the mortgage) and have reduced the mortgage term by 7.5 years.

mewbie_2

I agree with you DD. However I have pointed out some reasons why a vague estimate of current value might be useful. I remembered one other, funny how you forget these get rich ideas so quickly. A few years back looking at the equity available, and the possibility of buying a BTL or two. Don't shoot me, everybody else was doing it!

Thankfully - I couldn't make the sums add up.

So yes - look at the debt. Debt is the sum to focus on.

Dithering_Dad

mewbie wrote: »

... funny how you forget these get rich ideas so quickly. A few years back looking at the equity available, and the possibility of buying a BTL or two.

When we first started the Mortgage Free challenge on the MFW board, we had loads of people coming into the thread telling us we were mad to pay off our mortgages because they were the 'cheapest debt you can get'. Instead we were advised to buy BTLs or to buy shares. I beleive the term is called 'gearing' where you borrow money to invest and hope to get a better return on your investment than you pay in interest.

We don't get [strike]many[/strike] any of these people on the MFW board anymore. I wonder why?

mewbie_2

Dithering_Dad wrote: »

mad to pay off our mortgages because they were the 'cheapest debt you can get'

One small voice of caution though. My feeling with credit crunch, etc. at the beginning of this year was that now wasn't necessarily such a good time to be clearing a relatively cheap debt, in case it became harder to raise a loan if subsequently required.

Sorry if this is very boring for other listeners.

It needs a joke. Two sausages in a frying pan. One says to the other "it's hot in here". And the other says "eek, a talking sausage", and runs away.

Sorry.

PasturesNew

Your house didn't lose £100k today, you just guessed its worth wrongly yesterday.

I know somebody in a road of identical houses, they're sure their house is worth £275k, yet the MOST ANY house in their road has ever sold for was under £250k at the peak.

WTF?_2

mewbie wrote: »

One small voice of caution though. My feeling with credit crunch, etc. at the beginning of this year was that now wasn't necessarily such a good time to be clearing a relatively cheap debt, in case it became harder to raise a loan if subsequently required.

Priority is to maintain six months cashflow no matter what. So before paying down any debt, I'd want to make sure I had enough cash in the bank to meet six months of living expenses. Not much good if you have overpaid 4 years worth of the mortgage, lose your job and then get repossessed for missing payments before you can get a new job.

After that, all depends on the debt. If it was a long term, low interest fix on a mortgage (I heard tell of 10-15 year fixes at 4-4.5%, not sure if anyone got them) you'd be as well putting your overpayments in something like one of the tax-free NS&I cert schemes or a 7% savings bond if you were a lower rate taxpayer.

On the other hand you may prefer knowing for sure that you're saving x amount of interest and have y fewer years to pay.


Personally, my goal is to buy mortgage free.

fc123

mewbie wrote: »

I agree with you DD. However I have pointed out some reasons why a vague estimate of current value might be useful. I remembered one other, funny how you forget these get rich ideas so quickly. A few years back looking at the equity available, and the possibility of buying a BTL or two. Don't shoot me, everybody else was doing it!

Thankfully - I couldn't make the sums add up.

So yes - look at the debt. Debt is the sum to focus on.

Thank goodness someone else felt the same.
I used to feel Really derrr, being the only one not 'using' our 'equity'.

One paticular evening, we were bombarded with sums and charts and the phrase ' debt equals wealth' and the wonders of getting strangers to service your debt (tenants) which would end up in your pocket as 'wealth'.
They geared up and bought 2 X houses in early 07 costing around (we think) £300k each. Ouch.

I remember OH saying 'Debt equals..err debt? And while you have debt, you are always skint and vulnerable' and the howls of laughter at such an old fashioned view.

BTW our house has dropped £80k so far but I guess more as you don't know the value of something until you try to actually sell it.

And having spent 3 years paying down debt (mainly from the business and some very bad luck) I can honestly say, debt is deffo NOT wealth.

PasturesNew

I was repeatedly told to develop my last house by somebody who is now sitting on probably at least £1million of debt, with an income of £50k and no sign of a buyer at a ridiculous £1.75million (they actually raised it £500k in the last month when it got further PPs, to develop the property even further than they'd done). Bizarrely, the new PP will probably involve a full demolition of their development in the last 2-3 years, that they've never broken even on .... c'est la vie.

I might pop round there for coffee in the next month ... see what the word is.

SingleSue

My parents own their house outright and it has never come into their calculations of their net worth.

They always talk about it as our inheritance instead! Which is amazingly annoying as I keep trying to tell them that it is theirs and not ours, when my dad had his heart attack, I told them to sell it, go on a world cruise first then live in their holiday caravan for 10 months of the year (ground rent of £1500 per annum), late holiday for November on one of the pensioner specials and then spend Christmas and New Year staying at the kids houses before going on another pensioner special.

They were tempted but are old school and think they need to leave something for us when they go.

As for any kind of borrowing against the house or equity release...that is a def no go as far as they are concerned, no matter how desperate things became when we were younger.

fc123

SingleSue wrote: »

My parents own their house outright and it has never come into their calculations of their net worth.

They always talk about it as our inheritance instead! Which is amazingly annoying as I keep trying to tell them that it is theirs and not ours, when my dad had his heart attack, I told them to sell it, go on a world cruise first then live in their holiday caravan for 10 months of the year (ground rent of £1500 per annum), late holiday for November on one of the pensioner specials and then spend Christmas and New Year staying at the kids houses before going on another pensioner special.

They were tempted but are old school and think they need to leave something for us when they go.

As for any kind of borrowing against the house or equity release...that is a def no go as far as they are concerned, no matter how desperate things became when we were younger.

I wish my old Grandpa had done that too....my mum told him to. But it's old school. In the end a load of his life long savings and house money went straight to the Govt. and he was scrimping right up until the end (though he didn't need to...just habit)..so as to leave something for his daughters.