Paying the mortgage

OffGridLiving

DELETED USER wrote:

They best they will do is £145,000. That is over 30 years and with the Government's Help to Buy scheme boosting the deposit to otherwise unaffordable levels. At that rate I might just finish paying it a year before I retire.

According to some of the guys on the pensions board, you should be looking to have your mortgage paid off the day before you retire, one or two even suggest continuing the mortgage into retirement. The logic behind this is to maximise the money going into your pension, which maximises the return (and it compounds over the decades), rather than worrying about overpayments to a mortgage.

For what it's worth, I was given a 5x mortgage 3 years ago by Santander. I made overpayments and changed to a better paid job and now my salary multiple is down to x3.47. Life isn't static and neither are your financial circumstances. It's unlikely you will remain in your first house for 30 years, so don't worry so much about the term, focus on your monthly payments and do what you can to either reduce your outgoings or increase your income (even better, do both!)

CLAPTON

DELETED USER wrote:

It may surprise you to learn that before the 80s a lot more people rented. During the 80s there was a big drive to own, and people lapped it up. I hear them talking about how they wanted to buy and how Thatcher helped them do it, and how wonderful all that was. Wonderful for them.

So why did your parents and grandparents vote for a party dedicated to increasing house prices in 1997 and again another couple of times. Was it to spite you?

black_taxi_2

I blame the buy to let crowd

high rents ect,now they have moved into the 1 bedroom flats because of this bedroom tax

PURE SCUM

[Deleted User]

OffGridLiving wrote: »

According to some of the guys on the pensions board, you should be looking to have your mortgage paid off the day before you retire, one or two even suggest continuing the mortgage into retirement. The logic behind this is to maximise the money going into your pension, which maximises the return (and it compounds over the decades), rather than worrying about overpayments to a mortgage.

For what it's worth, I was given a 5x mortgage 3 years ago by Santander. I made overpayments and changed to a better paid job and now my salary multiple is down to x3.47. Life isn't static and neither are your financial circumstances. It's unlikely you will remain in your first house for 30 years, so don't worry so much about the term, focus on your monthly payments and do what you can to either reduce your outgoings or increase your income (even better, do both!)

I think that will be the plan. I don't want to become one of those people with huge debt who will be screwed if anything goes wrong (like interest rates rising), but basically I have no choice.

The banks won't give me more than 30 years though. If I could I would take 35 or even more. I'm too old now.

[Deleted User]

CLAPTON wrote: »

So why did your parents and grandparents vote for a party dedicated to increasing house prices in 1997 and again another couple of times. Was it to spite you?

Self interest, and lack of an alternative. It's always been basically a choice between Tory and Labour, and from 1997 they were both in favour of pushing house prices up.

OffGridLiving

DELETED USER wrote:

I think that will be the plan. I don't want to become one of those people with huge debt who will be screwed if anything goes wrong (like interest rates rising), but basically I have no choice.

You could get a fixed rate mortgage. For the first 3 years in our new home I was happy to go with a discounted tracker because I felt that rates wouldn't rise in that period. When it came time to remortgage (end of May) I hedged my bets and got a 5 year fix (fee free fixed at 2.79%) as I felt that rates were likely to rise over the next 5 years.

A large mortgage can seem daunting, but if it's actively managed then you can reduce your risk. Over the next 5 years of our fix we'll be making more overpayments so that when we remortgage again we'll have to worry much less about interest rates.

ash28

JencParker wrote: »

But they have to afford the rent on top of that, so it is not just the mortgage repayments they are paying. Rental charges in London, at least, can double the cost. And... it also assumes that anyone buying is a couple. The worst affected are single people. The rot set in when unmarried couples were given tax relief and could pool their salaries - this led to house prices increasing, and since then, apart from the highest earners, two salaries are required.

PS - Are banks lending x4 times salary now?

There was a bit of a crash after the Lawson boom, caused by his announcement of the withdrawal of individual tax relief for single people buying jointly.

Property was cheaper than it had been for years.......I knew people who bought in the boom and bought after the crash....and the lower prices lasted for a number of years (people were able to jump a step and if I remember 1 bed properties where we lived didn't sell because people could afford a 2 bed)....prices seemed to bottom out in our corner of the south east around 1993/4 but took years to reach pre crash levels. We lost on one property and gained on the bigger house we bought around the bottom of the crash.

[Deleted User]

OffGridLiving wrote: »

You could get a fixed rate mortgage. For the first 3 years in our new home I was happy to go with a discounted tracker because I felt that rates wouldn't rise in that period. When it came time to remortgage (end of May) I hedged my bets and got a 5 year fix (fee free fixed at 2.79%) as I felt that rates were likely to rise over the next 5 years.

A large mortgage can seem daunting, but if it's actively managed then you can reduce your risk. Over the next 5 years of our fix we'll be making more overpayments so that when we remortgage again we'll have to worry much less about interest rates.

You are correct, and that's the plan. I'm just aware that this kind of thing is what caused the credit crunch - people borrowing and relying on things going well.

PaulF81

wymondham wrote: »

Hi All

Just had a good read about and the price of houses is sinking in with me. There is a newbie who is quite casually talking about getting a 300k property for their very FIRST home (it's a 50% scheme, but never the less)!

How on earth are these people:

a. Going to pay for it
b. Hope to pay it off without going into their pension years?
c. Cope when rates rise, as they will.....

I'm pretty sure if I was buying now there is no way I could even imagine finishing the mortgage - I had enough of a struggle on our 30k house and I had a good wage!

How times have changed in quite a short space of time, and I fail to see how this can be considered good (house prices rise so fast)?

First home cost 325k, recently valued at 400k after only 35k in renovations.

What do they earn? Our mortgage interest is less than what we were paying in families married quarters in the military.

Loughton_Monkey

OffGridLiving wrote: »

According to some of the guys on the pensions board, you should be looking to have your mortgage paid off the day before you retire, one or two even suggest continuing the mortgage into retirement. The logic behind this is to maximise the money going into your pension, which maximises the return (and it compounds over the decades), rather than worrying about overpayments to a mortgage.

Personally I see nothing wrong with the strategy of keeping the mortgage into retirement. I retired 8 years ago and still have mine. It's IO, and I spent all the endowment money years ago on other things. Let the mortgage inflate away, as long as you can afford interest and final payback. I must, however, pay it back in a couple of years at 65.

But I will repeat my rant that that the benefits of an 'Offset' mortgage must be at least considered by everyone. I cannot recommend them too highly. If you want, you can make it 'perform' exactly like an ordinary repayment. In which case you've lost nothing.

But over the 25 years, you just cannot fail to have an 'edge' sometimes which can be very lucrative. Over the last 3 or 4 years, the 'edge' [for me] has been an interest rate of 1½%, which allowed me to take out every single penny and bung it in 4% (or so) savings.

This particular 'edge' has almost gone, since all my fixed savings are shortly maturing. But 1½% is equivalent to a 1.875% gross interest rate on savings, which is starting to look 'healthy'. But imagine a more recent offset borrower. Probably paying 3% or more. If a higher rate taxpayer, then that's like a 5% instant access saver account. Why, oh why, oh why, would anyone in this position open up a 1.6% savings account?

It's truly 'money for old rope', but you need to have the financial discipline to ensure that you're on track to pay it back. Using today's low savings rates to 'overpay' a traditional mortgage is OK, but usually this is one-way traffic, and you can't undo it when the financial tide changes.