Is your lender coming after your IO mortgage?

System

RenovationMan wrote: »

I'm cetianly not going to help my grandkids by sitting wringing my hands at the unfairness of life while house prices continue to rise, regardless of my own feelings on whether this is a good thing or not.

That pretty much sums everything up, we can close the forum now!

Bullfighter

RenovationMan wrote: »

I have no control over HPI, interest rates or the economy. What I do have control over is how I manage my finances to take best advantage of the economic climate that exists at the time. If the climate changes, then my plans will change.

I'm cetianly not going to help my grandkids by sitting wringing my hands at the unfairness of life while house prices continue to rise, regardless of my own feelings on whether this is a good thing or not.

I never suggested that you are controlling inflation (although buyers influence HPI when purchasing a house), however I'm stating that to base future financial earnings on what I consider to be unsustainable house price growth is risky.

I'm not wringing my hands, I'm just not going to buy a house at these prices. I could be wrong, but arguments like 'House prices always go up' just don't convince me.

RenovationMan

Bullfighter wrote: »

I never suggested that you are controlling inflation (although buyers influence HPI when purchasing a house), however I'm stating that to base future financial earnings on what I consider to be unsustainable house price growth is risky.

I'm not wringing my hands, I'm just not going to buy a house at these prices. I could be wrong, but arguments like 'House prices always go up' just don't convince me.

I agree that it is unsustainable and have thought so for many years, but then theory and practice often differs and HPI does seem to carry on regardless of what I think. Each person has their own viewpoint on risk and I would never encourage anyone to follow what I have done, but I also cannot deny the fact that I have done very well (so far) out of the 'risks' I have taken.

However if someone was determined to follow the same model then I would therefore advise them to put the necessary insurances in place, get an interest only mortgage that is equivalent to what they would be paying each month on a repayment mortgage, to have zero debt and zero interest in a luxurious lifestyle (cars, top notch holidays, etc) and to make sure they did indeed overpay/save during the good times, in readiness for the bad (something the Labour government didnt do!) and NEVER EVER remove any money from your equity unless it is going to be used to add value to your property.

It's all about risk management. If you take a risk in one element of your life, you have to balance it out by taking less risks in another area. I have always wanted a really nice, character home. To balance the risk of the large jumps up the housing ladder, I have made sure that our outgoings are minimal and that we have sufficient savings and insurances in place. My aim is to have a prestigious house, not a prestigious lifestyle.

I wasnt implying that you or anyone else was sitting wringing your hands, I was speaking about myself and how I would be if I didnt act on my own instincts and convictions.

Linton

Bullfighter wrote: »

I never suggested that you are controlling inflation (although buyers influence HPI when purchasing a house), however I'm stating that to base future financial earnings on what I consider to be unsustainable house price growth is risky.

I'm not wringing my hands, I'm just not going to buy a house at these prices. I could be wrong, but arguments like 'House prices always go up' just don't convince me.

If your view on house prices is wrong you may never buy a house. If it's right, buying a house you can afford now will mean that you paid a bit extra than you need have done, but you do have a house you can afford.

However general inflation which has existed for the past 100 years http://safalra.com/other/historical-uk-inflation-price-conversion/ will come to your aid.

So if you have a strong wish to own a house what's the rational course of action?

chucky

Linton wrote: »

So if you have a strong wish to own a house what's the rational course of action?

probably gold - his posts are very typical of a gold or precious metal ramper

Bullfighter wrote: »

I have had excellent service from:

http://www.sarniasilver.com/
http://www.cisilver.com/

and for bulk tubes I have had a great service from
http://bullionuk.com/store/

I have also bought on ebay, haven't bought a fake yet. To be safe on ebay, follow the usual rules and steer clear of Chinese Panda's!

Bullfighter

Linton wrote: »

If your view on house prices is wrong you may never buy a house. If it's right, buying a house you can afford now will mean that you paid a bit extra than you need have done, but you do have a house you can afford.

However general inflation which has existed for the past 100 years http://safalra.com/other/historical-uk-inflation-price-conversion/ will come to your aid.

So if you have a strong wish to own a house what's the rational course of action?

I do have a strong wish to own a house, but an aversion to taking on debt of hundreds of thousands of pounds in the current and foreseeable economic climate.

In my opinion, the last 100 years have been the 'blip'. Incredibly cheap energy and a monetary system based on continuously expanding credit can only end one way. You cannot have infinite growth in a finite system, I believe that we are on the verge of this paradigm shift.

I could be wrong, of course I could. However I have yet to hear real evidence why HPI can carry on. If evidence and reasoned logic convinces me that I am wrong and that prices will always go up and wages will increase in line without equal price inflation then I'll borrow & buy. Then in a few years I'll rue the 20k odd missed 'profit' and enjoy the HPI/Wage increase ride with you guys until I can sell my BTL empire for 10x profit when I retire, and sail off in a Sunseeker.

Generali

chucky wrote: »

do you realise that your mortgage outstanding stays the same?
but the value of the property goes up or down over that time - do you really think that house prices will be lower in 2032?

with average HPI of 2.9% over 25 years you would probably have double the mortgage outstanding in equity on that property.

The trouble from the banks' pov is many fold if there is no repayment vehicle in place. Those that spring to mind are:

1. They don't know chucky from Chuck Norris or Generali from John Major, all they can go on is generalisations and averages. You can bet that they insist on a repayment vehicle because experience has shown they are more likely to experience a loss if there isn't one.

2. Land appreciates in value but all other assets depreciate is an accounting truism. If you lend against a house or more especially a flat, you are lending against a depreciating asset (if the owner doesn't make continual improvements that is). What would happen to the value of a block of flats over time if no maintenance was done for example?

3. After xx years they want repaying with actual cash. They don't want some flim-flam about how terrible the market is and how the offers you've had so far have been an insult.

BTW I accept 100% that the most likely outcome by far is that house prices are much more expensive in £ terms in 25 years than today.

Generali

RenovationMan wrote: »

With life insurances, critial illness and income protection insurances in place, and with a mortgage where you pay the minimum each month if things are tight and overpay when you're flush, it's a great way to get up the housing ladder fast and without too much effort or too much risk. After all, we're only paying the same each month as someone with a repayment mortgage, but we're living in a much bigger place and the HPI multiples are obviously much higher.

I admire what you are doing. However you must be earning substantially more than average or even than many feel they can aspire to if you can afford all those insurances and still overpay to the extent you are.

new_home_owner_3

I have two interest only mortgages one for 150,000 and one for 100,000.

The one for 100,000 is on a property i used to live in and i am currently renting it out, i have it on a 5 year fixed rate and the payments are about 350 pound. This property was valued in may 2009 for 155000 pounds. We now have consent to let and have been renting this property out for 650 pounds a month.

My second property is where i currently live we have a mortgage for 150,000 pounds on a three year fixed rate and the payments are about 550 pound., this house was valued at 250,000 pounds two months ago, but it doesnt really matter as this is where we plan to live for a very long time.

Now the way i see it is the profit from my rental property pays towards my second propertys mortgage so 300 pound - 550 pound makes my mortgage 250 pound a month.

Now rent will always go up over long term periods and so will house prices.

so as my rent goes up on my rental property ,my interest only mortgage on my own home will eventually be paid by the rental income from my btl property.

Not only this my btl propertys price in 10 to 15 years should have gone up, and if it goes up like previous years i should be able to sell this property and it should pay both mortgages off.

The way i see it if im not paying much out each month and i can work it that someone else is paying the interest on my mortgage then great.

Interest rates could change and it could alter my plans, but i have four years until i need to go on a btl mortgage, in that time im sure rents will have gone up a bit and any interest rate rise should be wiped out with the rent increases.

chucky

Generali wrote: »

The trouble from the banks' pov is many fold if there is no repayment vehicle in place. Those that spring to mind are:

of course

but the bank will should be making some sort of margin on the mortgage rate being borrowed which results in profit.

if it's on a fixed rate - their margin will be against whatever they have put on top of the tranche of money they may have purchased for that fixed rate issue.

if the borrower is on a SVR or tracker - their margin will be whatever the difference is between the Libor rates and what they're paying their savers for their rates.

as long as they are turning over profit it's all fine.
issues arise if there liquidity issues in the money markets - something which Northern Rock found out...