Lazy repost - Interest only, the ticking timebomb say Daily Mail

RenovationMan

Emy1501 wrote: »

No I borrowed the 175K I needed. If I had borrowed the lot I would be in trouble now. The point is that I know a fair few who did go for the max.

What were the implications of borrowing less? I'm assuming you bought a cheaper house (ie. smaller or in a less nice area than you could have), how did that work out?

Why would you be in trouble now, have you lost your job or had your pay reduced?

Thrugelmir

ukcarper wrote: »

Most people with endowments have had them for over 20 years and will have time to make arrangements for shortfall.

There's an inherent danger with assumptions to back one's view. I prefer to see how the game plays out. Lenders may well take a fairly hard line with those that made no provision.

Emy1501

RenovationMan wrote: »

What were the implications of borrowing less? I'm assuming you bought a cheaper house (ie. smaller or in a less nice area than you could have), how did that work out?

Why would you be in trouble now, have you lost your job or had your pay reduced?

We could have bought a bigger house. It would have been in the same area. We always knew that borrowing at 5x+ joint realistic wage was madness. Since then we have had 2 kids and there is no way we could have paid the mortgage on one wage for any length of time and my wife would have been forced back to work at probably 6 months full time.

Also we would have been stuck on the SVR of the lender which which seems to be just lower than 5% compared to 3% we are on now. So over the last few years the extra mortgage payments would have probably cost us about 20-30K. Prices are only about 10% up on 2004 and once you take into account stamp duty we would be in worse place than we are now.

We would also only be able to pay of the IO part at best now so would still have the same mortgage.

As I said the IO borrow as much as you can idea has worked for some but I also know people stuck in properties worth less than they paid for it now needing to move to be near decent schools but have little chance of doing it. They are also now at the mercy of the SVR rises. For these people the big stretch never paid off. For these people unless their finances change hugely they will struggle to ever be able to pay off the mortgage over the next 20 years when the term ends.

ukcarper

Thrugelmir wrote: »

There's an inherent danger with assumptions to back one's view. I prefer to see how the game plays out. Lenders may well take a fairly hard line with those that made no provision.

The average house price 25 years ago was £45k so a 90% mortgage would be about £40k my endowment paid out 85% of target which would be about £6k short. If you convert that to a 5 year loan the repayments will be less than mortgage. I can see a few things that could make prices fall but with this I think you are clutching at straws.

Graham_Devon

We'll see, but my mum and dads endowment policy was projected to only reach 70% of the value of the loan.

Also people have mew'd.

As with everything, some will be, as UKCarper suggests, just fine.

Some won't.

ukcarper

Graham_Devon wrote: »

We'll see, but my mum and dads endowment policy was projected to only reach 70% of the value of the loan.

Also people have mew'd.

As with everything, some will be, as UKCarper suggests, just fine.

Some won't.

I would say the vast majority will be ok if people have mewed the chances are they would have taken the extra on a repayment mortgage.

robmatic

Graham_Devon wrote: »

We'll see, but my mum and dads endowment policy was projected to only reach 70% of the value of the loan.

Also people have mew'd.

As with everything, some will be, as UKCarper suggests, just fine.

Some won't.

Even a shortfall of 30% on a mortgage taken out 25 years ago isn't all that big a deal in today's monetary terms.

Even if you ignore HPI and the fact that the shortfall represents a tiny proportion of the property's current value, the RPI index has more than doubled in that time.