The rise of the 40 year mortgage

michaels

wymondham wrote: »

yes and you're a savvy person... I wonder what percentage of people paying the mortgage have overpaid or even know they can do it..?

Spending a day every two years making sure you have the best mortgage deal is likely to save you the equivalent of 10 or more days work in your normal employment. I would have said that was a no brainer way of using one's time.

princeofpounds

Err.........I/O mortgages have bee stopped.

err.... no they haven't.


http://www.theguardian.com/money/2015/oct/12/interest-only-mortgages-house-prices-controversial-loans

The majority of lenders now offer interest-only mortgages in some form, although some such as the Nationwide, Coventry and Yorkshire building societies have so far refused to re-enter the market

But I wasn't just referring to the here and now. Even before the slump you would have discussions like this where people would lambast the idea of mortgage terms beyond 25 years with far more passion than anyone talked about interest-only mortgages.


I think people assume that if you go for a repayment mortgage, even if really long term, then your objective must be to repay. Whilst if you are on interest only, there is probably a financial reason for it.


That might even have an element of truth to it. But it's the relative degree of fervour that always interested me.

jamesd

That story also says that "those recently launched come with various caveats and only wealthy borrowers are likely to be accepted" and gives as examples:

"Kensington relaxed its lending criteria to allow smaller deposits. It will now accept those with 25% deposits, down from 50% for either new loans or those remortgaging. However, borrowers must have an income of £75,000 a year or more"
"NatWest has re-entered the interest-only mortgage market after a three-year absence, but requires somebody to earn £100,000 excluding bonuses, and have a repayment plan in place. Borrowers will also need a 25% deposit"

Such deals are available in the market but not available to the vast majority of suitable candidates for an interest only mortgage.

For example, I don't meet either requirement even though my repayment methods are already sufficient to repay my current mortgage around six times over.

Why interest only? When I can pay into a pension via salary sacrifice £10,000 to save 40% income tax, 12% employee NI (the 40% is on non-work income, the sacrifice is basic rate pay) and get 6.9% added by my employer that leaves gross £10,690 in the pension for a net cost to me of only £4,800. I can also make 10% and up on my investments, far more than my mortgage rate.

Jon_B_2

Bit of a non story.

I could afford a 25 year repayment term, but chose a 30 year term and I'm currently overpaying at a rate that I'll be mortgage free after 22 years. I have a lot of peers that have done similar.

If I lose my job or something drastic happens I know I can drop to my standard mortgage payment with no issue.

Regarding FTB'ers going straight to forever homes. I think this is largely driven by the fact that most have spent a long time building a deposit that by the time they buy they may be married and/or have kids so skip the traditional FTB house and go straight to something worth keeping. It's what I've done and I'm 27.

MobileSaver

ukcarper wrote: »

So property is unaffordable but many FTB are going straight to 4 bed houses.

wymondham wrote: »

yep.... prices are too high, and with the 'help' being offered first timers are often setting their expectations and budgets higher as a result....

I agree with ukcarper, your statement is nonsensical. Prices being too high is contradictory to FTBs buying 4 bed houses.

Is there any evidence that a significant number of FTBs are buying 4 bed houses?

Thrugelmir

MobileSaver wrote: »

I agree with ukcarper, your statement is nonsensical. Prices being too high is contradictory to FTBs buying 4 bed houses.

Is there any evidence that a significant number of FTBs are buying 4 bed houses?

My son has by using Help to Buy. The alternative was a 2 bed flat in Newbury for the same price. So moved further south and now commutes.

J_i_m

Whilst I acknowledge the desire to pay a mortgage off as soon as possible I don't understand why some people feel the need to be snooty towards those who take longer.

I'm sure earning lots of money and being in a position to over pay is great, but not everyone has high incomes and furthermore not everyone are in a position to drastically improve their career prospects either.

Surely then a longer term and lower monthly payments can be more manageable? While also retaining the flexibility to overpay if so desired. Yes, it'll cost more over the long run but it'd help keep realtime expenses more manageable.

It doesn't have to be about an annual iPhone upgrade either, I have an iPhone and haven't upgraded for about five years, actually.. My phone is no longer supported by the iOS updates.

Personally, as long as my mortgage is settled by the time I retire then it can take as many years as I need.

wymondham

I feel the need to state my mortgage is paid off and I've never owned an iPhone ... not sure if the two are connected?

jay213

wymondham wrote: »

I feel the need to state my mortgage is paid off and I've never owned an iPhone ... not sure if the two are connected?

No, I think you will find it has more to do with when you were born. If you was buying your first house now and was doing the same job as you were doing x years ago when you bought, you probably couldn't afford the same house you bought, regardless if you had an iPhone or not (that statement may not be true for you, but is true for a lot of house owners from the eighties, nineties e.g. butcher, 1 salary, 3x income prices and mortgages existed in that time frame, not today).

An one off iPhone is nothing in the grand scheme of things, that 500 quid ain't going to affect your ability to get a 250k mortgage. I have no idea how old you are but I'm sure that there was technology that existed in your days that didn't exist in your parents days.

wotsthat

jay213 wrote: »

An one off iPhone is nothing in the grand scheme of things, that 500 quid ain't going to affect your ability to get a 250k mortgage. I have no idea how old you are but I'm sure that there was technology that existed in your days that didn't exist in your parents days.

Iphones are a metaphor for poor prioritisation and they're up there with Sky, £20k weddings, city breaks and new cars on PCP.

Anyone with an item from this list and complaing they can't afford to buy because of when they were born probably needs to give themselves a shake.

An IPhone contract and Sky could easily be £75/ month. That's a good chunk towards a £250k mortgage.