Windfall fears for over 1m interest only mortgage holders

ILW

Graham_Devon wrote: »

Hamish, are you being serious?

You are seriously going to sit there and classify someone who's just lost their home through a reposession is actually the beneficiary of a windfall?

I cannot compete with that level of idiocy. You WILL win the argument on this one if those are your true beliefs and how you want to spin it.

Seems others are happy to fall to this level of idiocy too though. I thought it was just a joke if I'm honest, though it appears you are serious.

Think Hamish does have a point.

If you had rented for the last 20 years paying a similar monthly amount, you would be in a similar position to the IO buyer except they would have possibly a hundred grand or so in their pocket when they move into a rental.

That said, I would prefer a slightly smaller house and the mortgage all paid off.

greggymagic

black_taxi wrote: »

guy on bbc site

interest only mortgage

"im worried i owe £188k when my term finishes"

maybe its because you bought a big house bud

The Guy on the BBC website is a doughnut!

He's complaining that in 18 years he'll still owe 188k!!!!

Erm...... YOU"VE GOT 18 YEARS TO PAY IT BACK!!!

Jump on a repayment mortgage asap and increase your term.

Or continue on your interest only mortgage and flog the house at the end of the term - the chances are your property will be worth considerably more than he paid for it at the end of a 25 year mortgage.

Or just whine about it.

This is a complete non story that somehow got top billing on the news this morning.....

HAMISH_MCTAVISH

ILW wrote: »

Think Hamish does have a point.

Yep.

If you had rented for the last 20 years paying a similar monthly amount, you would be in a similar position to the IO buyer except they would have possibly a hundred grand or so in their pocket when they move into a rental.

The renter would have started out paying a similar amount, but rental inflation over two decades would have ensured they ended up paying a whole lot more.

The I/O buyer is massively better off than the renter over two decades in terms of monthly outgoings, PLUS they get a windfall at the end.

black_taxi_2

the guy bbc site cant afford repayment mortgage---thats why hes paying interest only

Graham_Devon

ILW wrote: »

Think Hamish does have a point.

If you had rented for the last 20 years paying a similar monthly amount, you would be in a similar position to the IO buyer except they would have possibly a hundred grand or so in their pocket when they move into a rental.

That said, I would prefer a slightly smaller house and the mortgage all paid off.

But why are we comparing to renters?!

These people wanted to BUY a home. Not rent one.

And how many rent over 20 years, without housing benefit paying for them anyway? I'd guess it's tiny numbers.

ILW

Graham_Devon wrote: »

But why are we comparing to renters?!

These people wanted to BUY a home. Not rent one.

And how many rent over 20 years, without housing benefit paying for them anyway? I'd guess it's tiny numbers.

You either buy or rent, cannot think of many other alternatives.

IveSeenTheLight

Graham_Devon wrote: »

But why are we comparing to renters?!

These people wanted to BUY a home. Not rent one.

And how many rent over 20 years, without housing benefit paying for them anyway? I'd guess it's tiny numbers.

If I was to consider being in a position where I could not afford a repayment mortgage on a home so have the choice of buying on interest only or renting, I know which one I would choose for financial security and stability of tenure.

The fact I'd get an HPI refund over the term would be a nice bonus going into retirement

greggymagic

black_taxi wrote: »

the guy bbc site cant afford repayment mortgage---thats why hes paying interest only

Can't afford at the moment?

If he were to slowly chip away by small amounts every year then his interest liabilities will be coming down and therefore his ability to pay more off the debt would increase.

He pays 900 a month interest only on 188k - he must have an interest rate of 5.8ish - surely he could remortgage to a better rate and pay off the difference - if he can't because of equity problems then it makes even more sense to try and chip away at the capital as he'll benefit from better LTV after a while which will in turn lower his interest rate and increase his ability for capital repayments even more.

Nevertheless he's effectively renting (from the bank) and benefitting from any HPI from the next 18 years (25 if he originally took a 25 year mortgage.

mrginge

He does have a (small) point.

Theres nothing wrong with I/O if you have a reasonable IQ. Unfortunately a lot of people don't.

Its the combination of interest only and high ltv that puts people at a disadvantage in the short to medium term.

black_taxi_2

ok---but if he had to sell house in 25 years---how does that help him