Cheapest Houses since 1999

Pimperne1

Graham_Devon wrote: »

Have you got proof of this?

Only Lloyds TSB themselves suggested the majority DON'T have repayment vehicles, and it was a big enough issue for Lloyds to re-check their entire interest only mortgage book and start contacting the owners for details of said vehicle. If they didn't have one, they were too encourage the owner onto a repayment mortgage.

FSA were also worried about it and were looking to take action.

Not sure what happened however, as it was one of those stories that did the rounds for a few days and then died out.

All of my properties are IO with no repayment vehicle (if you don't count that they would most probably be worth well over double what I paid for them if I kept them for 25 years). Not such a good idea if you only have one property that you wish to stay in forever but quite sensible if you realise that in 25 years you might have to downsize somewhat to pay off the mortgage.

The average house price in 1961 was £3k, in 1986 it was £38k today its around £165k (so thinking it might double could be a bit too conservative considering we have just had an almighty crash).

Interest Only - agree the price today, pay for it in 25 years.

Caveat_Mortgagor

CBA to read the whole thread, but I assume the upshot is something like this......

Mortgage payments only at a 12 year low despite a 300 year low in interest rates.

HAMISH_MCTAVISH

Thrugelmir wrote: »

Anybody with a 25 year repayment mortgage taken out in 2007 would have repaid 7.5% of the original capital balance in the 4 years since.

No, I don't think that's quite right.

It's my understanding that interest is front loaded, but the front loading changes with rates.

OptionARMAGEDDON

Which is why if you frontload the overpayments, you can nail the term. An increase of 500 per month in ny case will reduce the term by 10 years. Making 6 months of capital payments this month despite what julie says. Putting the cash where I cant touch it is a far better plan imho than having it to spend. The real savings come if and when rates rise significantly due to compound interest.

mcc100

julieq wrote: »

Well not very many people do have interest only mortgages with no repayment vehicle

What do you mean by not very many people ?

DervProf

mcc100 wrote: »

What do you mean by not very many people ?

Good question, not yet answered I see.

JonnyBravo

HAMISH_MCTAVISH wrote: »

No, I don't think that's quite right.

It's my understanding that interest is front loaded, but the front loading changes with rates.

Hmmm...

I get what you're trying to say.

Yes it's true that if interest rates are lower you'll end up paying a larger %age of your loan off in the early years than you would with a higher rate.
But the "interest is front loaded" bit makes it sound that it's been designed in as a feature, which of course it hasn't. It's simply that you owe more money at the start so pay more interest.

JonnyBravo

OptionARMAGEDDON wrote: »

Which is why if you frontload the overpayments, you can nail the term. An increase of 500 per month in ny case will reduce the term by 10 years. Making 6 months of capital payments this month despite what julie says. Putting the cash where I cant touch it is a far better plan imho than having it to spend. The real savings come if and when rates rise significantly due to compound interest.

Well that depends on your self control and return.
I get exactly the same return on my savings as my mortgage so put them in savings for flexibility.

Thrugelmir

HAMISH_MCTAVISH wrote: »

No, I don't think that's quite right.

Absolutely fact. Check it out.

Mathematically its called rule of 51.

Until year 15 of a repayment mortgage more interest is paid than capital is paid every month.

At year 20, 40% of the original capital balance is still owed.

the_flying_pig

JonnyBravo wrote: »

Hmmm...

I get what you're trying to say.

Yes it's true that if interest rates are lower you'll end up paying a larger %age of your loan off in the early years than you would with a higher rate.
But the "interest is front loaded" bit makes it sound that it's been designed in as a feature, which of course it hasn't. It's simply that you owe more money at the start so pay more interest.

Thrugelmir's figure [7.5% paid off after 4 yrs] is correct for interest rates at 6.5%.

e.g. if rates are zero you'll have paid off 16% of the balance [since all mortgage payments go straight towards capital repayments].

e.g. if rates are 15% you'll have paid off only a couple of percent.

etc.

here's what the repayment schedule looks like for 5% and 10% rates.