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

RenovationMan

shortchanged wrote: »

So are you agreeing that Renomans statement is somewhat disingenuous?

That wasn't my statement and never has been. You're just creating a strawman argument that has no bearing in reality and wondering why no one answers you.

Please show where I made such a statement.:cool:

wotsthat

Graham_Devon wrote: »

If finances allow being the key point that it's not a plan, rather a gamble.

How many others took interest only mortgages with this mindset?

It's not a plan recognised by the FSA or one you approve of but it's a plan nonetheless.

Calling it a gamble is silly and emotive. Take out any mortage and you're making a gamble that you'll be able to pay it back.

Graham_Devon

wotsthat wrote: »

It's not a plan recognised by the FSA or one you approve of but it's a plan nonetheless.

Calling it a gamble is silly and emotive. Take out any mortage and you're making a gamble that you'll be able to pay it back.

By that theory, every single person who took out an IO mortgage has a plan. That's great eh, how you can come to such conclusions.

Different strokes for different folks. But it's all getting a little silly now.

wotsthat

shortchanged wrote: »

You to are obviously not answering my point in that how is Renoman £26K better off now just because he has an IO mortgage?

I'm not answering because I think he said his mortgage is £26k less than if a typical repayment mortage had been used.

I'm not sure I saw a claim that IO had improved his net worth by £26k.

DervProf

nearlynew wrote: »

This is how it used to work up until about 5 years ago ...

Mortgage Applicant (MA): I've seen a house I want to buy and need a mortgage
Mortgage Broker (MB): No problem. How much is the house?
MA: £100k
MB: How much do you want to borrow?
MA: How much can I borrow?
MB: How much do you earn?
MA: 20k
MB: No problem. Right (after doing some calculations), if you choose a repayment mortgage 100k will cost £600 per month. However an IO mortgage will only cost £500 per month.
MA: I can afford that
MB: If you can afford £600 a month, what you should do is take out an IO mortgage for 120k and buy a more expensive house.
MA: Good idea. Go for it.

MB: Hang on a second. You say you earn 20K
MA: Yes
MB: Well, being as you can't go wrong with property, and it only goes up in price......
MA: So I hear
MB: It might be an idea to borrow a bit more for a more expensive house
MA: But I don't earn enough to afford any more
MB: Well, you can actually afford a bit more, if you cut down on the booze and take one less holiday a year. The lender will want to see a higher income though
MA: I only earn 20K
MB: Not if I write down 25K. You`ve just had a pay rise
MA: Sweeeeet !
MB: Now off you go, and make sure you cut down on the booze and holidays
MA: Thanks, but what if interest rates increase
MB: Unlike property only going up in price, interest rates never do. BTW, please send the cheque for my fee. If you can't afford it, we'll just put it on the mortgage

I know, pure fantasy, but it might, just might have happened.

shortchanged_2

RenovationMan wrote: »

That wasn't my statement and never has been. You're just creating a strawman argument that has no bearing in reality and wondering why no one answers you.

Please show where I made such a statement.:cool:

That's because no one can actually answer as to why you are £26K better off by being on an IO mortgage.

RenovationMan

pinkteapot wrote: »

I do agree with you and others here when they say that people who are financially savvy enough can benefit from IO under various circumstances.

However, the point above doesn't make sense to me. If you were on a repayment mortgage your monthly repayments would have been higher and your overpayments less by the same amount. The mortgage balance would however be exactly the same at this moment in time (assuming you had spent exactly the same on the mortgage as you have done).

What IO has given you is flexibility. With the amount you would have been repaying on a repayment mortgage (for the capital), you have the choice of whether to overpay or do something else with the money.

The point I was making was that you need to separate the froth on here from reality. The usual suspects on here will have you convinced that the 80% of IO mortgage holders identfied by the FSA as having no 'recognisable' vehicle are all living beyond their means and will end up having their houses reposessed at the end of the term.

The example I gave with my overpayments shows that far from being in financial distress on my IO mortgage, falling behing on my capital repayment, I'm actually ahead of where I would be on a straight repayment.

I have no 'recognisable' mortgage repayment vehicle according to the FSA and yet three years into my mortgage I am already 3 years ahead of someone on a comparable repayment mortgage.

For the frothers, this DOES... NOT.... COMPUTE!!

the_flying_pig

nearlynew wrote: »

This is how it used to work up until about 5 years ago ...

Mortgage Applicant (MA): I've seen a house I want to buy and need a mortgage
Mortgage Broker (MB): No problem. How much is the house?
MA: £100k
MB: How much do you want to borrow?
MA: How much can I borrow?
MB: How much do you earn?
MA: 20k
MB: No problem. Right (after doing some calculations), if you choose a repayment mortgage 100k will cost £600 per month. However an IO mortgage will only cost £500 per month.
MA: I can afford that
MB: If you can afford £600 a month, what you should do is take out an IO mortgage for 120k and buy a more expensive house.
MA: Good idea. Go for it.


This is how "financially savvy" people end up in the 5h1t.

I'm not sure it tended to be as complicated as that.

A primary school friend of mine has had a mortgage for a while. I asked him if it was repayment or io. He said "what do you mean?" I asked him if the amount he owed stayed the same or whether it was going down. He said "don't know". I helped him check. It was io. He said he "chose the cheapest one" at the time.

Graham_Devon

RenovationMan wrote: »

The point I was making was that you need to separate the froth on here from reality. The usual suspects on here will have you convinced that the 80% of IO mortgage holders identfied by the FSA as having no 'recognisable' vehicle are all living beyond their means and will end up having their houses reposessed at the end of the term.

The example I gave with my overpayments shows that far from being in financial distress on my IO mortgage, falling behing on my capital repayment, I'm actually ahead of where I would be on a straight repayment.

I have no 'recognisable' mortgage repayment vehicle according to the FSA and yet three years into my mortgage I am already 3 years ahead of someone on a comparable repayment mortgage.

DOES... NOT.... COMPUTE!!

it does compute. But you keep painting the picture that everyone else is like you.

Clearly they are not.

The BOE figures also back this up!

nearlynew

DervProf wrote: »

MB: Hang on a second. You say you earn 20K
MA: Yes
MB: Well, being as you can't go wrong with property, and it only goes up in price......
MA: So I`ve hear
MB: It might be an idea to borrow a bit more for a more expensive house
MA: But I don't earn enough to afford any more
MB: Well, you can actually afford a bit more, if you cut down on the booze and take one less holiday a year. The lender will want to see a higher income though
MA: I only earn 20K
MB: Not if I write down 25K. You`ve just had a pay rise
MA: Sweeeeet !
MB: Now off you go, and make sure you cut down on the booze and holidays
MA: Thanks, but what if interest rates increase
MB: Unlike property only going up in price, interest rates never do. BTW, please send the cheque for my fee. If you can't afford it, we'll just put it on the mortgage

I know, pure fantasy, but it might, just might have happened.

You got it.

And before you know it, the 100k house (unchanged in any way) now costs 200k and everyone is in more debt.
And the idiots who bid up these prices using imaginary money are the ones getting rescued from the carnage brought about by their own greed and stupidity.

Genius.