Home Equity increases by 2.7% in 2011

chucknorris

RenovationMan wrote: »

Or more likely the house will be valued higher at remortgage time and I'll have exceeded my target. Remember, apart from removing the roof, installing 100mm of kingspan and breathable multi-foil insulation and replacing the roof, raising the height of the chimney, fitting more energy efficient chimney pots (and ones that stopped rainwater coming down the chimney) and insulating the chimney with LECA we have also created a 1 bed self-contained apartment with underfloor heating, limecrete floor, 150mm kingspan in the roof, woodwool & sheeps wool internal insulation, a £8k fitted kitchen with quarts worktops, fitted oak wardrobes and a new wetroom. We've also done more but that's enough to get started.

Besides, even if the house valuation is lower than the £450k and I don't achieve my target, it's not like I actually 'lose' anything. I'll have paid off £75k of my mortgage in 3 years. Hardly a disaster is it?

What's the idea behind the 1 bed annexe? Is it for rental income or a family member?

RenovationMan

chucknorris wrote: »

What's the idea behind the 1 bed annexe? Is it for rental income or a family member?

Family members. My mum and dad moved into it once it was completed, hence the reason we went a bit overboard on the spec. I forgot to add that we installed lime hemp plaster painted with limewash, flagstone floors and my favourite toy; a heat recovery ventilation system. The apartment is a converted stable and has exposed oak beams. It looks really nice with the roughish lime plaster and the white limewash. We're all really pleased how it turned out and it's really healthy because of the natural, breathable materials and the warm, fresh country air provided by the HRV.

RenovationMan

Thrugelmir wrote: »

Repayment mortgages are now accounting for over 96% of all new advances. Perhaps the penny has actually dropped after many years that for the majority of people this is actually the best option. Too many people are now coming to the end of their mortgage terms, close to retirement, with a balance they are unable to settle.

The repayment vehicles would have to be reviewed more often than 5-7 years. That's far too infrequent for correctove action to be taken.

Well, according to the CML (council of Mortgage Lenders), whose membership account for something like 96% of the UK mortgage lenders, they are against over-regulation of IO mortgages and say the following:

"So far this year, 14% of mortgages have been interest-only with a repayment vehicle not specified.

It says that does not mean, however, that all these borrowers do not have a repayment plan in place; they may have plans for repaying the capital but have not outlined them to the lender. The FSA’s current view is that interest-only should be used only where there is a “genuine” repayment method in place, and the consultation paper casts doubt on whether sale of the property should qualify as an acceptable method.

The CML says with the prospect of more heavy-handed regulatory intervention it is difficult to see how a lender could do anything other than take a very cautious view of any investment or savings plan with an uncertain outcome.

The CML says: “The approach described in the FSA paper is likely to lead to interest-only mortgages being withdrawn from the market.

“We do not believe lenders will be prepared either to bear the additional costs of regular assessment of the repayment plan, or accept the new regulatory risk that the plan does not achieve its objective at the end of the mortgage term and that the lender will be “blamed” for this outcome.
“The FSA’s risk-averse approach will have a major negative impact on product choice for UK consumers and the flexibility of the market to meet the needs of borrowers with different income and employment profiles.

“In our view, the reforms on interest-only mortgages outlined by the FSA risk excluding an option from particular groups of consumers for whom it is a logical choice, and delivers clear benefits.”

It says underlying the FSA’s views on interest-only mortgages is a fundamental assumption that owning a property outright is the only outcome that can be desirable or in the interests of the borrower. "

They also point out:

"The number of borrowers that have a shortfall at the end of their term is extremely low. Generally, where they do, the lender will seek to extend the term of their mortgage and, if possible, move the borrower onto capital repayment terms.

It is extremely rare that the lender will move to take possession of the property. To further mitigate this risk the CML is proposing to produce good practice for members when dealing with customers who have a shortfall in their mortgage at the end of their term"

It seems to me that mortgage providers are happy with IO mortgages and want them to continue pretty much as-is. The risk of not owning the mortgage is placed at the borrowers door, not the lender and as Jonny Bravo correctly sai on this thread, it's not as though it's a sudden surprise at the end of the 25 year term that the mortgage needs to be paid off. If people don't have the funds in place they can either sell the house or use their pensions/ pensions credit to continue to pay the mortgage into retirement, as we are discussing on the other thread.

shortchanged_2

RenovationMan wrote: »

The risk of not owning the mortgage is placed at the borrowers door, not the lender and as Jonny Bravo correctly sai on this thread, it's not as though it's a sudden surprise at the end of the 25 year term that the mortgage needs to be paid off.

I think there are plenty of people about that took out an IO mortgage that didn't/don't fully understand what product they have taken out.

RenovationMan

shortchanged wrote: »

I think there are plenty of people about that took out an IO mortgage that didn't/don't fully understand what product they have taken out.

There are lots of people who don't understand lots of things. It's not the fault of the product but the fault of the salesman selling the product and the person buying it. Wioth the advent of the internet and, dare I say it, MSE, there are no excuses anymore for not learning about finances.

Lots of people find the questions on the TV program "University Challenge" too difficult to understand. Should we pull it off the air and dumb everything down to the lower common denominator?

shortchanged_2

RenovationMan wrote: »

Lots of people find the questions on the TV program "University Challenge" too difficult to understand. Should we pull it off the air and dumb everything down to the lower common denominator?

Yes but they are not risking theirs and possibly their families financial security are they.

Pimperne1

shortchanged wrote: »

I think there are plenty of people about that took out an IO mortgage that didn't/don't fully understand what product they have taken out.

I think you are being a bit unfair to people then. If they have had the nous to go out and buy a house then they will have been intelligent enough to understand that they would only be paying interest on the loan (indeed their solicitor and lender would be in neglect of their duty if they didn't point it out).

RenovationMan

shortchanged wrote: »

Yes but they are not risking theirs and possibly their families financial security are they.

Well as its their families financial security, then perhaps it's important to learn about it?

Do you really believe that there are large numbers of people who have IO mortgages and don't know that they are only paying off the interest and not the capital of their mortgage? Really?

Some people don't understand 'pensions drawdown', should we remove that option and only allow people to have annuities. It seems to me that more savvy people would suffer because of a few 'sheeple' (another word so beloved on here) have an inability to grasp basic financial concepts.

shortchanged_2

RenovationMan wrote: »

Well as its their families financial security, then perhaps it's important to learn about it?

Do you really believe that there are large numbers of people who have IO mortgages and don't know that they are only paying off the interest and not the capital of their mortgage? Really?

Yes I know there are quite a lot of people who don't understand what an IO mortgage is.

Pimperne1

shortchanged wrote: »

Yes but they are not risking theirs and possibly their families financial security are they.

I doubt if there is any person who bought a house who found that 25 years later it wasn't worth considerably more than they had paid for it. For example, the average house price 25 years ago was something like £62k, its now £166k. Even if you had to sell it you would still have £100k to see your family over this tough patch.