msn money artical

simploerob

http://money.uk.msn.com/mortgages/mortgageguide/article.aspx?cp-documentid=3215931



was abit surprised to see this wondered what you thought ?



simon

LisaT186

hhmmmmmm I can see the point of gearing to a degree, but gambling with the roof over your head, I don't think I could do it. I like his example of If you bought a £200K house that is now worth £400K with a £100K mortgage and £100K investment it would be better than a £100K house bought outright now worth £200K. BUT what if house prices didn't go up that much? As for the interest only mortgage and use the 'repayment element' as savings, you would have to actively manage your savings to ensure the return was more than interest paid and how many of us are likely to do that on a monthly basis (if not more often)?

Food for thought and discussion!!!

Ian_W

No great secret simon - if you put the money that's the repayment element in your mortgage into a S&S ISA and IF it grows by more than the interest rate you're paying you would end up ahead, perhaps considerably ahead. Depends on your attitude to risk though and also, to what degree you consider the place you live to be your home rather than your investment.

But you have to factor in the health warning - Past Performance is no guide to future performance, the value of your investments can go down as well as up and you may not get back what you invested. No matter how many 5, 10 or 18 yr periods you quote - that's what happened in the past, no matter how unlikely it seems it may not happen in the future.

The bit I thought was comical was:
The buyers of endowment mortgages got the whole concept wrong, because they were advised to pay too little into their savings plans.
Actually it was the insurers who got it wrong - but the buyers who ended up paying!!

Rick62

If you subscribe to the view that property always goes up by 10% per year. In which case we'll all be billionaires soon - I read that apparently if you had invested just 1 cent when jesus was born at 5% compound you would now own a sphere of gold 140 times the size of the world (or in money $3 followed by 40 noughts).

MortgageMamma

Rick62 wrote:

If you subscribe to the view that property always goes up by 10% per year. In which case we'll all be billionaires soon - I read that apparently if you had invested just 1 cent when jesus was born at 5% compound you would now own a sphere of gold 140 times the size of the world (or in money $3 followed by 40 noughts).

:rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl: :rotfl:

SonOfPearl

I just spotted the article, came here to vent my fury and discovered that someone had posted a link already. Money savers are on-the-ball!

In my opinion the article is dangerous nonsense. It assumes house prices will always rise - not so, of course. Whilst gearing increases 'paper' returns because the value of your house has gone up, the only way to access this equity is to sell it - and then what do you live in? Unless you are trading down to a smaller house or a cheaper area, the 'increase' in value is meaningless. If house prices fall, gearing is a very sharp double-edged sword.

My house has more than doubled in value in the last 7 years, but so has every other house around here (and most in the country), so I'm not any richer.

Also I can't quite believe that the article suggests that it is incorrect to say that 'if you owe money on something it isn't really yours'. This is of course, true. Until you pay off your mortgage the house you live in really isn't really yours. Unless you keep up mortgage payments, the title deeds aren't worth the paper they are written on.:rolleyes2

simploerob

i don't have a morgage. i'm lucky enought to have a houseing assosiation house.

but was interested to see what people had to say about the artical. it seem to me it would confuse and miss lead people rather than help!!!


simon

dunstonh

Loads of people do it. You would get people doing it without realising they are doing it. Anyone with an investment and a mortgage is doing it. They may not have borrowed the money to invest but they still have the end result.

Mortagaged buy to lets are doing it.

The bit I thought was comical was:
The buyers of endowment mortgages got the whole concept wrong, because they were advised to pay too little into their savings plans.
Actually it was the insurers who got it wrong - but the buyers who ended up paying!!

I agree. The demise of endowments had nothing to do with amount being paid into them. Most endowments from around 1995 onwards had sensible target growth rates.