MSE News: Help for struggling mortgage borrowers urged

grey_gym_sock

wymondham wrote: »

Why should the tax payer fund someones private purchase? Do they fund your car purchase, and would you expect them if you could not afford it? ok I know it's not a great comparison, but what I'm trying to get at is we are mixing social responsibility and private financal decisions.

I would be happy to pay someones rent in a council house if they could not afford their mortgage, after all this is social housing and social responsibility. The person is not gaining a financial asset at my expense, but is getting housing.

I'm not happy to pay for someone to live in a purchased house that they cannot afford, for whatever reason.

It's one direction or the other..... the two are incompatible... nobody should gain financially from this.

i agree that the aim of this kind of benefit should be to keep ppl in housing, not to buy a financial asset for them. it's just that the lines between the 2 are a little blurred when they are an owner-occupier with a mortgage.

AIUI, SMI covers interest, not capital repayments, and the interest is calculated based on a rate which is currently 3.63%, regardless of the actual rate on the mortgage. some ppl have suggested it should use the actual rate instead. clearly there can be some financial gain from having just the interest paid on the mortgage - an interest-free loan is an advantage - but there isn't really a simple answer to how much SMI is merely letting ppl retain their housing, versus how much is helping them to buy an asset.

so there's a valid debate about how to fine-tune SMI to match its aims. but some form of SMI is cheaper, more practical and more humane then none (and letting them lose the house, and then paying housing benefit).

rtho782

Homeowners bleat about not being able to afford their mortgage so get all/part of the interest paid?

Who got themselves into these massive mortgages of many times their salary and 100% or more LTV? Oh right, the homeowners.

Why should my taxes pay for someone elses debt interest? This should be financed through a mortgage tax if at all.

Otherwise, I look forward to the government paying my credit card/loan interest for me, and/or a percentage of my rent.

grey_gym_sock

under some circumstances, they will pay of percentage of your rent. it's called housing benefit.

it's about keeping ppl in housing when they're in real need. perhaps you didn't read the thread.

Archiequeenie

wymondham wrote: »

Why should the tax payer fund someones private purchase? Do they fund your car purchase, and would you expect them if you could not afford it? ok I know it's not a great comparison, but what I'm trying to get at is we are mixing social responsibility and private financal decisions.

I would be happy to pay someones rent in a council house if they could not afford their mortgage, after all this is social housing and social responsibility. The person is not gaining a financial asset at my expense, but is getting housing.

I'm not happy to pay for someone to live in a purchased house that they cannot afford, for whatever reason.

It's one direction or the other..... the two are incompatible... nobody should gain financially from this.

I disagree, Social housing WAS for the poorly paid, we see loads of council houses with nice cars in the drives, so these people could afford to buy or rent privately. Social housing is not for the Poor anymore.

It also is wrong that someone could be struggling to pay a £400 mortgage (example) and have their house repossessed, and then be put in private rented for us to pay more in rent than they were paying in mortgage payments, does not make sense to me.

Also when all the social housing was sold off, who benefitted, yes the council tenants, who had been paying a low rent and were now able to buy a very cheap house/flat.

Does it not pay to work in this world, or would we all be better off claiming benefits and living in rent subsidised council houses?

I cannot understand why people would rather pay their taxes to some people who have no intention of ever working and yet begrudge helping people, short term, to stay in their hard worked for homes. Yes some people got mortgages well above their means, but most were hopefully sensible and bought what they could easily afford at the time.

We bought what we could afford, we at one stage when looking to purchase a property were told we could have a mortgage up to £600k, being cautious we stuck to our very modest budget of £160k.

beckythemadcow

jamesd wrote: »

You can buy a flat outright for £30,000 if you want it enough to accept what comes with that price, like location. If you don't want to make those choices blame yourself, not others. If you don't know about such prices, visit globrix, give any postcode and set the maximum price to 30k then zoom out to the whole UK. You'll find quite a few whole flats for £30,000 around the country and at least one for £25,000.

As you have repeated your ridiculous suggestion several times, I have visited your webpage, and for thirty grand in Birmingham (a rather large area) I have the choice of:

2 x plot of land
2 x 25% share of a flat
2 x retirement shared ownership

Not really a great choice. Even if allowing for a 2 hour commute, it only increases my options by a few static caravans and properties that are not currently fit for human habitation.

squeeks

Archiequeenie wrote: »

I
It also is wrong that someone could be struggling to pay a £400 mortgage (example) and have their house repossessed, and then be put in private rented for us to pay more in rent than they were paying in mortgage payments, does not make sense to me.

Why is this wrong? If you have a bill to pay, but only have an asset in a form of a house and no cash. It is time to cash in your chips. Sell the house pay off the debt you can no longer afford. In 99% of cases I imagine it would be cheaper to the tax payer as you are not eligible for any benefits if you have cash/assets over a certain value. Most people have more equity above these limits.

rtanswell wrote: »

This story is good news, however in my recent experience, I find that many lenders are asking for the moon on a stick when it comes to getting a mortgage/remortgage these days.
...
I'm in the process of re-mortgaging
....
I run my own Limited Company and have done for nearly 5 years and making a very good profit.
...
I do have a couple of high credit card bills mainly because of the wedding which I plan to pay off when re-mortgaging.
...

At a guess your first mortgage was a self cert. as you would only have had books for 2 years. Credit cards are traditionally buffers for day to day spending. Large outstanding balances indicates you are unable to manage your finances, unless your on a 0% jobbie its a rather uncomfortable position.

Why would they lend you more money at a lower rate of interest? You're on a SVR mortgage, maxed out on credit cards and still paying them for the pleasure while not reducing your borrowing. You're the perfect customer and they can up or lower your profitability on a whim. Good ere in't it.

jamesd

beckythemadcow wrote: »

for thirty grand in Birmingham (a rather large area) I have the choice of:

2 x plot of land
2 x 25% share of a flat
2 x retirement shared ownership

Not really a great choice. Even if allowing for a 2 hour commute, it only increases my options by a few static caravans and properties that are not currently fit for human habitation.

Flats exist for that price. Not in the area where you were searching. If you want one that would require going to where they are, with all that implies about changing jobs, say. Or you can increase your budget if you have the money to do that.

A property that's currently unfit for human habitation may well be an excellent choice, since those are the ones where there's greatest potential for value increase and another step up the ladder later. If you choose not to take on a place that needs work, that's a choice you're making.

If you're constraining yourself to that price in that area then your choice is preferring to rent rather than move.

So, I took a look at the broad area centered on BL8 and came up with these options from those available:

£34,950 one bedroom flat
£40,000 offers over, one bedroom flat

What is the minimum price you can buy for in the possible commuting area? It's easy to change the price range and explore on globrix, that's why I used it for these searches. But maybe you don't care enough to do the searches and find out.

If shopping by price you can count on the cheapest properties needing work or being in less than desirable areas. It's a choice you can make - stay renting or start with a place that needs work or is in a less than ideal area.

If the prices still aren't possible then maybe it really would take a choice to move to a cheaper area.

The suggestion isn't ridiculous, nor is your personal preference not to do what it takes. But that is a choice you're making, not a lack of properties at affordable prices. Maybe it'd take job changes and moving but there are places available at quite modest places.

I started doing searches like this for a family member who'll have a fixed value inheritance to buy a place with, or lose most of the money to a benefits means test. It's a case of finding out what is doable within the budget. Then they get to choose which alternative they want. Their choice but it won't be because there are no places available to buy. In their case there are some places within the likely budget that won't require leaving the city they want to be in, barely. But if thee weren't any they would face that move or lose the money choice.

squeeks

jamesd wrote: »

Flats exist for that price.
...
A property that's currently unfit for human habitation may well be an excellent choice.
...
If you're constraining yourself to that price in that area then your choice is preferring to rent rather than move.

So, I took a look at the broad area centered on BL8 and came up with these options from those available:

£34,950 one bedroom flat
£40,000 offers over, one bedroom flat

Okay, so you couldn't find a property for sale at £30k. It might be cheap but you still have to live in the thing. If you are single and a student - and these places were near a university. Or perhaps retiring and downsizing, these might be great. Not something you would want to live in as a couple, or with children.

Flats typically are harder to sell than houses, so using them as a step on a mythical housing ladder isn't great. - people rarely choose a flat in preference to a house, given a choice. If the cost of living in one of these offset the opportunity costs of your cash sitting in an ISA, then go for it as you'll save money - assuming:
a) you can actually live in it
b) leasehold isn't to steep
c) place isn't about to be condemned
d) you do the bare minimum maintenance and only change things if it is to keep your own sanity - as you'll never add any real value to these properties regardless of what you do to the interior.
e) hope nothing major fails - if you need a new boiler in the first two years, you'd have been better off financially renting.

I really wouldn't count on using it as a stepping stone to something better and greater by itself, house prices are stagnant and going down slightly if the figures are to be believed. Getting on "the ladder" at any cost isn't the road to riches it used to be.

jamesd

I could find properties for sale for £30,000 but not with the constraints that beckythemadcow was choosing to apply. For those who want to buy there are many things they can vary, including location, type of property, quality of property and price. What I've done is illustrate that there are inexpensive properties out there, even in that general area. Maybe beckythemadcow's choices will eliminate those places and want a place closer to the center, then the cheapest might be a third floor flat with no lift and smaller than is desirable. As a stepping stone that's the sort of thing that's fine, for someone who's really keen not to continue renting. Whether a particular person is more keen to rent and not take what's available or to stop renting is a personal choice. But if that personal choice not to make it is made, that's not something that can be blamed on an absolute lack of properties.

I'm a fairly recent first time buyer. Before buying I was deliberately living in a low rent area. I deliberately bought one of the cheapest properties in the street in the same low rent area. That made everything easily affordable for me and my mortgage interest bill is typically less than my Council Tax bill. And that in turn helps to mean that I'm still able to save a massively high proportion of my income to improve my position. Maybe others won't want to do things like this but they are doable for someone who's sufficiently interested in not renting.

While many people won't prefer a flat, a flat can be significantly cheaper than continuing to rent. That saved money is more money for the next place. Buy a place that needs work, chat with an estate agent and do the refurbishment that the state agent recommends and that can increase the chance of making money, as well as getting a place customised somewhat to what you want for the time you're here.

Mortgage interest for the place I bought is around £4,000 a year less than rent. That'll cover a few boilers and the full refurbishment bill after being there for a few years even if I don't sell the place. Or a lot of extra money each year to go towards a deposit on a better place.

This doesn't mean that everyone can or is willing to do this. But the most motivated people can, or can at least start saving enough deposit to do it later.

Agreed about the ladder not being the way it was say in the late 90s to 2007 but it's still possible to save serious money even without lots of capital growth.

beckythemadcow

Thanks squeeks for summing up exactly what I felt!

Currently my husband I are better off renting as our rent is relatively low.

We have no plan to step up the housing ladder as we know that many FTBs are skipping the traditional "starter homes" (james - that means small homes, not dilapidated properties) and we would therefore (as squeeks mentioned), find it more difficult to sell.

I will certainly be buying a do-er upper house, so I can add value to it, but it needs to be habitable, and as I currently live in one of the most deprived postcodes in the whole of the UK, I can appreciate that "Location, Location, Location" is certainly an important consideration when investing a serious amount of money (and can have a massive impact upon one's health and wellbeing).