How do you intend to pay off your interest only mortgage?

Charterhouse

50/50 Interest Only/Repayment. I pay it down using my gigantic once-yearly bonuses.

Blacklight

princeofpounds wrote: »

Oh you don't need to worry about that, house prices double every few years and inflation will diminish the real value of the principal debt.

Now if you'll excuse me i'm just off to go and smell the coffee...

Show me one period of, say, twenty five years where this statement isn't true.

Give anyone a Delorean and the change in their back pocket and who wouldn't go back twenty five years and buy all the property they could?

mlz1413

Blacklight wrote: »

.Give anyone a Delorean and the change in their back pocket and who wouldn't go back twenty five years and buy all the property they could?

Your comparing two different things, Delorean's are worth soooo much because there are so few of them.

If 25 people had one stored in the garage then the price would drop as it would not be as rare. If 250 people had one then the price would be further reduced.

Housing is on a cyclical trend so will rise and fall at regular intervals, regardless of how many people buy or sell them.

RLH33

mlz1413 wrote: »

Your comparing two different things, Delorean's are worth soooo much because there are so few of them.

If 25 people had one stored in the garage then the price would drop as it would not be as rare. If 250 people had one then the price would be further reduced.

Housing is on a cyclical trend so will rise and fall at regular intervals, regardless of how many people buy or sell them.

I think Blacklight was referring to Back to the Future - not the price of a Dolorean!

Interesting thread - but it does rely on you downsizing once the children leave home/you get old - what happens if you get too comfy in your big house? Plus in our area bungalows are really expensive and about the same price as a large 3 bed house so you may not save that much money by downsizing.

mlz1413

RLH33 wrote: »

I think Blacklight was referring to Back to the Future - not the price of a Dolorean!
..

that makes more sense!!

Really2

pingu2209 wrote: »

Out of interest, other than BTL, has anyone out there bought a house in recent years on an interest only mortgage but with no means of paying off the capital sum?

How do you intend to pay it off eventually?

I have an offset that is classed as IO.

I pay the IO part and pay the equiverlent of 6% IR in to the offset as repayment.

At the moment that is working out at around 7% repayment per year. (Well paid 7% off the mortgage last year)

So don't forget anyone in an offset mortgage is classed as IO even though the reality is they are most probably making capital repayments.

princeofpounds

Japan

princeofpounds

America (now this is a real rather than nominal price series, but the great depression was hardly an inflationary event).

princeofpounds

I post those not to point out that housing is going to go down, simply that it can and does, and usually after a bubble, similar to the one we have just had.

Relying on inflation alone to pay down the real value of your debt is not always a winning strategy, and ignores the fact that interest rates account for expected inflation (so if you are on a variable mortgage and inflation strikes, it may erode your principal value but you are paying for it through the interest, as anyone who has suffered through high interest rate periods would know). Of course, you can get lucky and have a once-in-a-lifetime boom without inflation, which is what we have just had, so it can work out.

Another point - when it comes to real estate relying on only UK and (at a push) American price series from the post-war period along is actually a very misleading way of looking at how house prices behave.

Really2

princeofpounds wrote: »

Japan

But what was base rate for those 15 years? has that given them he chance to pay back debt quickly?