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Debate House Prices
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Is your lender coming after your IO mortgage?
Comments
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Thrugelmir wrote: »And what's your plan B. If wage inflation fails to materialise ?
As you seem to have placed all your bets on a one horse race.
I have got savings and i will have a works pension which will pay out a lump sum that will cover my mortgage.
I just planned for the next 5 years last year, im due a wage rise this year, and to be honest if i needed to get extra money each week by going on shifts, but i packed in doing shifts when we started renting the house out as we dont need the extra cash.
rents always go up like house prices especially when your talking 15 to 20 years.
And if it stagnated as we are now for the next 20 years and interest rates stayed the same i would have made from my rental property 72000 pounds.
Now thats 72000 pounds i will not need to find and thats if im still charging 650 pound a month for 20 years.
i think the risk is worth taking and i reckon 9 out of 10 people would have done the same if they was in my situation.
I know a lot of first time buyers hate landlords and people who have second properties, but hopefully my second property will be my repayment vehicle.
I currently have 55,000 pound equity in it and i will be taking rent from it, house prices will have to go down 33% before i lose the equity, and if they do go down im willing to bet both my houses they will be worth more than what both of them are worth now in 10 years.0 -
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new_home_owner wrote: »I have got savings and i will have a works pension which will pay out a lump sum that will cover my mortgage.
I just planned for the next 5 years last year, im due a wage rise this year, and to be honest if i needed to get extra money each week by going on shifts, but i packed in doing shifts when we started renting the house out as we dont need the extra cash.
rents always go up like house prices especially when your talking 15 to 20 years.
And if it stagnated as we are now for the next 20 years and interest rates stayed the same i would have made from my rental property 72000 pounds.
Now thats 72000 pounds i will not need to find and thats if im still charging 650 pound a month for 20 years.
i think the risk is worth taking and i reckon 9 out of 10 people would have done the same if they was in my situation.
I know a lot of first time buyers hate landlords and people who have second properties, but hopefully my second property will be my repayment vehicle.
I currently have 55,000 pound equity in it and i will be taking rent from it, house prices will have to go down 33% before i lose the equity, and if they do go down im willing to bet both my houses they will be worth more than what both of them are worth now in 10 years.
I admire your confidence in these difficult economic times. As many are still saying what recession even now. I hope your plans work out and look forward to reading how you fare in the years to come.0 -
Thrugelmir wrote: »I admire your confidence in these difficult economic times. As many are still saying what recession even now. I hope your plans work out and look forward to reading how you fare in the years to come.
I was affected by the recession where i worked they offered people sabaticals to go on 80 percent pay and i did that, we also had a pay freeze, now this year the profits are back up and most of the plant are on shifts and they can not produce enough products in 24 hours of a day.
i had a repayment mortgage for 10 years and i seen 12000 pounds come off my 70,000 pound mortgage.
I will never go back to repayment if i can help it, if i rent my house out for 10 years and i decided to save it i could just pay a lump sum of 36000 pounds straight off.0 -
IN response to Generali's comments re the issue being risk to the bank, I suspect it is more of a signaling risk, like saving for a deposit, it shows financial responsibility. The banks can not differentiate between those choosing IO for rational investment purposes and those choosing IO as that is all they can afford and therefore most likely to default if the economy turns down. The same argument can be seen in banks wanting to know whether deposits were gifted or saved and in Northern Rocks difficulties, there higher defalt rates may not just be because of the higher LTVs offered but also because those looking for additional borrowing (100%+ LTV) were already indicating that they were not label to manage their finances.
Yes, currently my mortgage and savings are about in balance - however my mortgage is about as large as can be to get the most preferential rate so that I can maximise what I earn on the spread between borrowing and savings rates. Yes this is an issue for benefits as the benefits agency does not consider re-balancing your assets and loans in order to maximise your benefit entitlement as a valid activity.MissMoneypenny wrote: »Was that your thread I saw on the benefits board a couple of months ago, asking about the extended mortgage taken out and how this would affect benefits? If your savings are the additional mortgage you took, then that isn't really savings. Apologies if it wasn't you; I haven't got time to look back at your posts.
Wanted to quote your reply to JulieQ but you put your reply in to her quote. However I refer to my earlier post in this thread. I have had a mortgage for 9 years and in that time gross rates available on instant access savings accounts have always exceeded the cheapest mortgage rate - currently for instance you can get 2.8% instant access from the AA and borrow at 1.99% from HSBC.Sorry, disagree on some points. Pity, but I guess we cant fight the bulls/bears battle all the time.I think....0 -
Wanted to quote your reply to JulieQ but you put your reply in to her quote. However I refer to my earlier post in this thread. I have had a mortgage for 9 years and in that time gross rates available on instant access savings accounts have always exceeded the cheapest mortgage rate - currently for instance you can get 2.8% instant access from the AA and borrow at 1.99% from HSBC.
And so that must include the Icelandic banks?0 -
Graham_Devon wrote: »If there was nothing wrong with IO mortgages, and they posed no problems, there wouldn't be ongoing consultations currently about banning them.
it's the purpose and the circumstances of the people that take them being the problem.0 -
there's absolutely nothing wrong with IO mortgages.
it's the purpose and the circumstances of the people that take them being the problem.
I could almost agree with that if it weren't for a couple of minor omissions. Allow me...there's absolutely nothing wrong with IO mortgages provided that an appropriate repayment vehicle is in place and regularly monitored to ensure that it achieves its target.
it's the purpose and the circumstances of the majority of people that take them being the problem.
When I bought my first house, when I was young and naive, I was sold an IO mortgage by an "expert" IFA, along with a repayment vehicle. It took me 12 months to realise that the repayment vehicle was never going to work and that I would end up paying considerably more interest over the long term. I moved swiftly to a repayment mortgage, I shouted so loudly that all fees for doing so were waived.
Since then I have bought and sold houses a few times and I had forgotten about IO mortgages until I was furballed some "advice" by a struggling BTLer that I should borrow the most that I can possibly afford on an IO mortgage as "house prices only ever go up." A somewhat self-defeating argument.Hi, we’ve had to remove your signature. If you’re not sure why please read the forum rules or email the forum team if you’re still unsure - MSE ForumTeam0 -
I took an IO mortgage originally, the reason being house prices were rising at 10%+ YoY, and at least with an IO mortgage you could lock the house price down.
Worked out pretty well for me, 2 years of IO allowed us to buy all the stuff we needed for our first place, like furniture etc and after 2 years we cleared a big whack of capital at the end of the term and moved to repayment, plus we were both earning a fair bit more.This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com0 -
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Wanted to quote your reply to JulieQ but you put your reply in to her quote. However I refer to my earlier post in this thread. I have had a mortgage for 9 years and in that time gross rates available on instant access savings accounts have always exceeded the cheapest mortgage rate - currently for instance you can get 2.8% instant access from the AA and borrow at 1.99% from HSBC.
When I look on the HSBC website the standard rate for IO mortgages is 3.94%. I guess somewhere there may be a special offer, but the majority of your repayments wont be under those terms.0
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