Home Equity increases by 2.7% in 2011

Pimperne1

shortchanged wrote: »

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

Because they don't have one?

shortchanged_2

Pimperne1 wrote: »

Because they don't have one?

Oh dear, another either naive or in denial bull.

DervProf

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.

You may be right, but I suspect that those taking out, or switching to IO are likely to be doing so to reduce their monthly payments. They probably know that they won't be repaying the outstanding balance, but 25 years (or less if they are switching to IO) is a long time, and the property will be worth much more than the outstanding balance. The possible problem will be a sizeable lump sum to find at the end of the mortgage term. Also, by switching to IO, I believe that the cost of buying the property will be higher, unless overpayments are made at a later date to offset the increased amount paid in interest due to a higher average outstanding balance during the mortgage period.

RenovationMan

shortchanged wrote: »

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

Do you have proof that there are quite a lot of mortgage holders who don't know what an IO mortgage is? Really?

RenovationMan

shortchanged wrote: »

Oh dear, another either naive or in denial bull.

Oh dear, and we were doing so well without the 'bull'/'bear' name calling rhetoric. I guess when you're on the back foot in a discussion, it's a convenient fallback.

Ho hum, that was an interesting debate for a while.

DervProf

Pimperne1 wrote: »

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.

Are you sure about the average price 25 years ago ?

I think you'd have a little more than £100k, but even so, you'd still have a financial issue to solve.

I think the best advice for most people is the advice given to me by my parents, friends and family - go for a repayment mortgage. I happened to take out an endowment mortgage when I first bought. In a way, this was a bad decision, which turned out to be a very good one (long story). After a few years I realised that the endowment policy was not likely to perform as well as expected, so I switched to repayment to ensure no nasty suprises.

Pimperne1

DervProf wrote: »

Are you sure about the average price 25 years ago ?

I think you'd have a little more than £100k, but even so, you'd still have a financial issue to solve.

I think the best advice for most people is the advice given to me by my parents, friends and family - go for a repayment mortgage. I happened to take out an endowment mortgage when I first bought. In a way, this was a bad decision, which turned out to be a very good one (long story). After a few years I realised that the endowment policy was not likely to perform as well as expected, so I switched to repayment to ensure no nasty suprises.

You're right, misread the spreadsheet! Average price about £32k 25 years ago.

chucknorris

Pimperne1 wrote: »

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.

I still own two flats that I bought in 1991 for 58k and 70k (spent about 15k on improvements on the latter) they are worth approx 315k and 365k now.

DervProf

chucknorris wrote: »

I still own two flats that I bought in 1991 for 58k and 70k (spent about 15k on improvements on the latter) they are worth approx 315k and 365k now.

And ?

I think I know where this is going, but at this point it just seems like a random bit of info about your personal financial situation.

chucknorris

DervProf wrote: »

And ?

I think I know where this is going, but at this point it just seems like a random bit of info about your personal financial situation.

I am merely backing up pimp's assertion of equity acquired on property bought decades ago with real life examples (I thought that was rather obvious tbh)

EDIT: I was only joking though actually I don't own any property I live in parents garden shed