whats going to happen in years to come with interest only mortgages?

Cornucopia

There is no end to the property nay-sayers' desire to talk down the market and talk up the "problems".

OffGridLiving

scousedave wrote: »

The title says it all......with so many people only managing to pay their mortgages on interest only and no savings plan any thoughts when these mortgages come to the end of their period and have to be repaid?

Banks are happy for pensioners to have mortgages provided they can prove that their pension income is adequate to cover the mortgage. In that case, the pensioner can continue to live in their home, pay the IO mortgage and when they die, whoever inherits the house will then use some of the capital to pay off the mortgage.

Not quite the drama that the media paints, but then what is?

OffGridLiving

michaels wrote: »

Haven't we done this topic to death on the board already?

You could say that about pretty much everything discussed in here.

Lovelyjoolz

wotsthat wrote: »

They'll be laughing all the way to the bank. The same bank that has been renting them a house on the cheap for 2.5 decades.

^ This. I've done rather well out of it, thank you very much :rotfl:

OffGridLiving

grizzly1911 wrote: »

When they end they end. I am sure some lenders may be happy to renew/extend for a price.

Yep, when we recently re-mortgaged to a new lender they asked if I wanted to take out a 30 year mortgage. I pointed out that so long a term would take me well into retirement. They didn't have a problem, just wanted to see my personal/company pension projections to see if I could afford the repayments.

There is an interesting discussion over on the pensions board about early retirement. One chap was advising keeping on an IO mortgage so that you could maximise your pension contributions, with a suggestion that you keep your mortgage running into your 80s and using your increased pension to pay the monthly repayments***.

It'd be like a rented house, but with a rent that never increases and with complete security of tenure. Not a bad idea, especially when you see the number of pensioners that are signing up to equity release schemes at great expense. Far better to have retained that equity than to have to apply to release it, especially if the equity is retained in a tax efficient shelter such as an ISA or NSANDI account.

** Actually, thinking about it. If you were a higher rate taxpayer, then 40% of the pension would consist of tax rebate, which means that if you used your pension to pay the IO mortgage payments, it'd be like paying rent where you pay 60% and the taxman pays 40%.

Pensions. Is there nothing they can't do?

abaxas

Most will be fine, some will be totally !!!!!!ed.

If you look at repo data and the corresponding resale values. At 2-3% inflation lots will be NE when their term ends.

OffGridLiving

abaxas wrote: »

Most will be fine, some will be totally !!!!!!ed.

If you look at repo data and the corresponding resale values. At 2-3% inflation lots will be NE when their term ends.

Are you sure? Unless the householder has been MEWing, I can't imagine a scenario where a house bought +25 years ago could be in negative equity?

abaxas

OffGridLiving wrote: »

Are you sure? Unless the householder has been MEWing, I can't imagine a scenario where a house bought +25 years ago could be in negative equity?

Compounded 2.5% = 44% increase over 15 years.

Lots of people bought 10 years ago at hugely inflated prices and espeically flats are 30-40% down on peak(talking about the North here).

So 100k *0.65 = 65k (assuming 35% drop)
65k * 1.44 = 93.6

OffGridLiving

abaxas wrote: »

Compounded 2.5% = 44% increase over 15 years.

Lots of people bought 10 years ago at hugely inflated prices and espeically flats are 30-40% down on peak(talking about the North here).

So 100k *0.65 = 65k (assuming 35% drop)
65k * 1.44 = 93.6

If someone bought 10 years ago, they would have at least 15 years left on their mortgage, are you saying they'd still be in NE by then?

Plus, if they have fallen 35% from peak, are you saying peak was 10 years ago when they bought? If not, then they would have had some growth after they bought, so wouldn't have seen 35% drops from their purchase prices, but from their peak price.

abaxas

OffGridLiving wrote: »

If someone bought 10 years ago, they would have at least 15 years left on their mortgage, are you saying they'd still be in NE by then?

If we assume houses will inflate at the same rate as inflation, yes.

Which is probably a good assumption as we hit a ceiling of what actually was possible to pay.