My Interest rate gamble pays off again!

Graham_Devon

Four years on and we are still at the same point...

chucky

Graham_Devon wrote: »

Four years on and we are still at the same point...

Yes we are at the same point where you run away from discussions and questions. There's a few here which you have run away from from.

wotsthat

Graham_Devon wrote: »

Four years on and we are still at the same point...

You might be...

System

I hadn't seen that thread before, the misskool factor certainly explains why he keeps getting banned. misskool doesn't care about duplicate accounts so it must be a personal thing rather than a specific rule break.

RUN_RABBIT_RUN

sabretoothtigger

How does paying down a mortgage make a house worth more?

This has got to be fairly simple. When a house is bought via a bank its money that has to be paid for properly (via earnings, work done).
Sure its a real sale but the bank is only giving this money out for the moment, they have no interest in buying themselves and we do see banks will sell housing at discounted prices if forced into ownership

So is a person buying a house with their own cash bullish for a market, very much so. You could say these are the only real sales, we might get a proper running price if excluding anyone but private owners

Its not just housing, most money in shares is called hot money. The people who buy are not owners, they are traders. So prices can very easily half, even in a few months.
The price is real but its also extremely 'soft' you want a hard price; its far lower then you might imagine.

Another analogy might be waves and the tide. Both can get you wet, its the tide that really matters more. Obviously timescales vary so go figure and dont ask me about coastal erosion

MFW_ASAP

sabretoothtigger wrote: »

This has got to be fairly simple. When a house is bought via a bank its money that has to be paid for properly (via earnings, work done).
Sure its a real sale but the bank is only giving this money out for the moment, they have no interest in buying themselves and we do see banks will sell housing at discounted prices if forced into ownership

So is a person buying a house with their own cash bullish for a market, very much so. You could say these are the only real sales, we might get a proper running price if excluding anyone but private owners

Its not just housing, most money in shares is called hot money. The people who buy are not owners, they are traders. So prices can very easily half, even in a few months.
The price is real but its also extremely 'soft' you want a hard price; its far lower then you might imagine.

Another analogy might be waves and the tide. Both can get you wet, its the tide that really matters more. Obviously timescales vary so go figure and dont ask me about coastal erosion

I'm not really sure how this relates to OFG's post (which you quoted)?

As far as I can make out, OFG (aka RenovationMan) used a combination of housing crash, low interest rates and recession (which equals tradesmen willing to do renovation work at almost cost prices) to get himself and his family a dream home that would normally be out of the reach on an ordinary working class bloke.

He felt that interest rates would be low for a long time, due to the severity of the credit crunch, but also was level-headed enough to know that they would not stay low forever. He therefore got himself a 3 year discounted mortgage (figuring that rates would stay low during this period) with the view to then move to a 5 or 10 year fix when his mortgage redemption period was over.

He knew that he had to reduce his mortgage significantly to at least a 60% LTV so that he could get the widest range of mortgage deals when it came time to remortgage. He therefore set himself a challenge to overpay enough (with a little bit extra for safety) to hit 60% LTV.

Fast forward three years and he hit the 60% LTV, got himself the cheapest 5 year fix that was (and perhaps has ever been) available. He's now continuing to pay down his mortgage safe in the knowledge that he doesn't have to worry about rate rises. He doesn't have to worry about LTV anymore, so his next challenge is to reduce his mortgage so that when he comes out of his 5 year deal and if rates are sky high, he and his family will be safe.

Basically he will have pulled off the gamble. He will have a 5 bed farmhouse with a 3 bed semi mortgage. I personally think it's great when you hear success stories for people who are just ordinary folk, trying to do their best for their families. Why, he's practically a modern day working-class hero.

sabretoothtigger

I was relating time to money basically which is roughly what rates is about. It does matter to pay off the house cost, the banks operate via money taken out on rates. If a guy reduces his exposure Im applauding it like you and it does knock onto an economy, this reduction in leverage alters worth in the house, houses in that area, the market

MFW_ASAP

sabretoothtigger wrote: »

this reduction in leverage alters worth in the house, houses in that area, the market

I'm not sure I understand how that can work?

I can concede that if someone reduced the mortgage debt, he would increase his ownership of the 'worth' of the house, and decreases the bank's. However, it does nothing to the price of the house, the price of other houses in the area and does nothing to the worth of those house to the people that own them.

sabretoothtigger

Of course a millionaire at that time will not buy most houses in London. I think it was ML who slammed his iron gauntlet on the chess table sending pieces flying while screaming off with his head

MFW_ASAP wrote: »

However, it does nothing to the price of the house, the price of other houses in the area and does nothing to the worth of those house to the people that own them.

Yep not prices but value. Some will say nothing much matters beyond the price but I would say its the other way round and in fact the price is nothing more then a tag that will swing on the houses actual value

Or you could ignore the figures and go on the house owners demographics. Does it make no difference who actually owns housing in the area, Im not talking about occupiers but fully vested owners. Im not being a snob but the 'quality' of owners does matter, if its working class made good and 100% owners then great or if its all council owned or private landlords who in turn owe money to banks which are themselves unable to lend long term. This suggests lower values are most likely