UKs biggest lender ends IO mortgages without evidence.

DervProf

Parnott, welcome to our sometimes strange world of twisted logic.

I don't know the details of your current situation , apart from what you have said in your few posts here.

All I know is that you are living in your first property (which you like) and seem to be thinking about a second property, while being concerned about possible negative equity, and you acknowledge that you feel fortunate to have a roof over your head and a bit of money left at the end of the month.

Phew ! You seem to be all over the place !

I suggest you carry on living in the property that you like, concentrate on paying your mortgage, and don't get too fixated on acquiring more property just yet. And please consider that your struggle (if that is what it feels like) has not been made any easier by those who have gone before you, and bought more than one property.

DervProf

Really2 wrote: »

If your after tax savings rate can't beat your mortgage interest rate you are better off overpaying.
There are little exceptions to this rule in my mind.

Better still, look into offsetting. If you haven't got an offset mortage, then it is worth making sure that if you do make overpayments, you don't leave yourself short of funds for other purposes.

Cortinaa_GTR

DervProf wrote: »

Parnott, welcome to our sometimes strange world of twisted logic.

I don't know the details of your current situation , apart from what you have said in your few posts here.

All I know is that you are living in your first property (which you like) and seem to be thinking about a second property, while being concerned about possible negative equity, and you acknowledge that you feel fortunate to have a roof over your head and a bit of money left at the end of the month.

Phew ! You seem to be all over the place !

I suggest you carry on living in the property that you like, concentrate on paying your mortgage, and don't get too fixated on acquiring more property just yet. And please consider that your struggle (if that is what it feels like) has not been made any easier by those who have gone before you, and bought more than one property.

Thanks DervProf.

A wee bit of background for reference. Initially I rented a flat with my mate because we both wanted out of our parents. He then bought at the end of 2006 and my bills obviously doubled so I thought this was the time to get on the property market. It took me until May 2007 to have an offer accepted to get a place. It is in a very nice street but is only a small 1 bedroomed flat but I was so chuffed to have my own place.

It was valued (then and I cringe as I type at £80,000 and I managed to secure at £80,500:() but at this point I was thinking about the equity I would have in a few years time. I had a modest deposit so my mortgage was £76,699 and off I went. I initially took an IO mortgage (5.75%) because my IFA mate said that with a repayment mortgage you take very little off the capital in the first two years anyway. Go IO then move onto repayment after two years once there is some equity built up.

Well the market dropped from there and remained IO until May 2009 when the rates had dropped back but I still had my £76,699 balance. It was then with more reading up on this site that I let myself switch to the SVR rate (2.99%, so payments virtually halved) and I started trying to OP when I could.

I will now have my balance down in the next few days to £64,888 which means I have took a chunk out of the capital but might only just be out of negative equity now (don't officially know). I would like to keep this place if I could but to rent it out I would need to upgrade the bathroom (3-4k). However to buy anywhere else I would need to save a substantial deposit (15-20k?). Instead of ploughing any excess into the OP maybe I should split it into saving as well but seeing the balance reduce has been quite addictive (as per the MFW forum) I have been happy / relieved from a selfish perspective that IR haven't risen to keep my SVR rate low to allow the OP's.

The thread suggested locking money away into OP's might not always be ideal especialy if I want to keep the property. I realise I'm not in the worst position ever but every possibility seems pretty far away at the minute.

Anyway I seem to have rambled on after intending to make a few brief points.:p

Cheers

DervProf

Here's a list of some Offset mortgages.

http://www.knowyourmoney.co.uk/offset-mortgages/

A quick glance, and the rates don't look too bad.

When I had mine, the rate premium was minimal, compared with "normal" mortgages. It now feels like it was the right thing for me to do, given the way things have panned out.

DervProf

Parnott,

I wouldn't worry if you are in NE or not. Keep paying the mortgage, and enjoy your property. If the motivation to buy was to make money, then maybe you will feel "twitchy". Even if you are in NE, I doubt that will last for much longer. You haven't got a massive outstanding balance on your mortgage, so I wouldn't worry. Yes, you may have been able to buy your flat cheaper if you had waited, and some people may have suggested that would have been a better thing to do. My advice would have been - "you can't guarantee that the value of the flat you want to buy will increase(or fall) in the short term (or maybe the medium term), but if you can afford it, and you want it now, then buy it. Don't buy it if you are going to worry about it's value in the next few years".

That's not hindsight, that's the same advice I'd give anyone today. Not that I know what's going to happen to property prices for sure, and that anyone should take my advice.

DervProf

I wonder what geneer would advise ?

Hey, RM, you'll note that this thread has been running a few days now, and I've only logged in under "DervProf". I wonder why that is ?

DervProf

RenovationMan wrote: »

Because I outted you and you are keeping a low profile?

Yes, that's the reason.

Or maybe it's because I didn't need to resort to such measures.

Or maybe, just maybe, I only have one account* (no, that's not my offset mortgage).

I'll give you a clue to the correct answer, it isn't the first one.

*Technically we don't have accounts here, but I used that term to enable the smarta**e comment afterwards.

property.advert

In practice lenders would far rather have a serviced IO mortgage ad infinitum. Their risk of default is negligible and for mortgages past 5 years duration, they almost certainly have greater equity than when they stated out, again reducing the risk. In essence they are being paid a premium over the actual risk they have on their books.