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

shortchanged_2

RenovationMan wrote: »

I took out my latest IO mortgage in 2010 for £300k. If I had a repayment mortgage it would now stand at £276,290.32 but it actually stands at £250k, which is £26k less on my IO mortgage than on a repayment.

Look at what renoman has written wotsthat and what does it say to you?

nearlynew

DervProf wrote: »

To both of you, it's all about interpretation.

What is more worth debating is that RM is saying that because he is a "good" IO mortgage holder, then IO mortgages are OK. OK, he's not actually claiming that, but he is making a case for IO.

What others are saying is that IO mortgages can be a "dodgy" financial product. The fact is that we have one "concrete" (if he's telling the truth) example, RM, who shows how to use an IO mortgage, but we don't have anyone here who is in the ess H eye tea with such a mortgage. And that's hardly suprising, not because nobody every gets into trouble with IO mortgages, but because people will tend to "crow" when things re going well for them, but stay quiet when things take a turn for the worse.

There's hundreds of them on the other boards.

And 9 times out of 10, you will find that any mortgage holder in financial difficulties will be an IO mortgage holder.

It just goes with the territory.

Conrad

In case it's not been mentioned, plenty of folk have an offset mortgage on interest only. The current account / savings balances together with deliberate overpayments are what reduces the capital.

Myself and my Accountant both have I/O. We want to invest capital in other property / the business, so having I/O on main resi makes sense.

Even though I've not paid a penny capital, the house has doubled in value, so this argument I/O is akin to renting, is not always accurate.

shortchanged_2

Conrad wrote: »

Even though I've not paid a penny capital, the house has doubled in value, so this argument I/O is akin to renting, is not always accurate.

Would this be the case for someone who bought with an IO mortgage in 2006 - 2007?

wotsthat

Graham_Devon wrote: »

If anyones misinterpreting it's you. I didn't say you had said it. I just stated by that theory you could suggest. "You" doesn't mean you personally. It means someone. I'm sure you understand the use of the English language.

Well if that 'someone' interpreted what I said as having a theory that 100% of IO mortgages have a repayment plan then that 'someone' would be a frikkin idiot and have a very poor understanding of the English language.

Conrad

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.

In the majority of cases people fair perfectly well with I/O. Even cases of hardship I come accross, more often than not have still benefited from capital gain, so even if they loose the home they've still banked £50k they would never have had if they had been renters (rent is no cheaper than mortgage in the main).

wotsthat

shortchanged wrote: »

Look at what renoman has written wotsthat and what does it say to you?

He's made a £26k overpayment and, yes, he could have done that on an overpayment mortgage too.

I can see why the FSA are very worried about him.

DervProf

nearlynew wrote: »

There's hundreds of them on the other boards.

And 9 times out of 10, you will find that any mortgage holder in financial difficulties will be an IO mortgage holder.

It just goes with the territory.

That does not suprise me.

IMO it's a good thing that IO mortgage availability has decreased. I'm sure that without the credit crunch, the need and availability of IO mortgages would have gone on increasing until Gordon wouldn't have been able to blame the Americans for all of our financial troubles.

Yes, I can see that IO mortgages can work, but I also think that shouldn't be made widely available.

shortchanged_2

wotsthat wrote: »

He's made a £26k overpayment and, yes, he could have done that on an overpayment mortgage too.

So what point do you think he is trying to make?

Conrad

shortchanged wrote: »

Would this be the case for someone who bought with an IO mortgage in 2006 - 2007?

It's a lot less rosy of course, but on the other hand you would still find most that took I/O in say 2006, would still do the same again if the clock was rewound as it was thier only affordable option, and they still got to dwell in a place where they are more stability and autonomy than was the case when they were renting.

Funnily enough my only mortgage complaint relates to this. She was a Police Woman who took int only in 2006. She came back recently asserting she might claim for miselling, until I showed her the fact find notes (every page sighned by her) where her option was I/O or carry on renting and she at that time plumped to become an owner.
Because she had little deposit a repayment mortgage was not affordable - so what should I have advised her - stay in rented, unable to save and make a middle class landlord richer - is that good advice? Sh'e not in arrears and stands every chance of benefiting from equity gains in the comming years, none of which would be possible had she stayed renting.