100% or more mortgages

meanmachine_2

For once I agree with doug (!!!).

You seem to have quite low rent, and yet you have stacked up debts. By taking on higher outgoings, in the form of a mortgage, I can see you getting even further into debt.

None of us can really know which way the housing market is going to go, but in your case it looks pretty cut and dry to me - stay where you are, try to wipe out your debts, and only when that is done, should you thnk about moving on.

As far as I can see it, the only way you could afford your house is if - sometime down the line - you get a joint mortgage. But use that ultimate goal as a motivator to clearing your debts.

MarkyMarkD

I think that owner occupation is over-blown, and cliches like "renting is dead money" ought to be banned!

In any sort of flat or slowly rising house price environment, there is not a lot to be said for owning rather than renting. In many parts of the country, rental yields are lower than mortgage rates - or not much higher - meaning you can rent a house for less than buying it.

Renting brings huge benefits of mobility, flexibility, no responsibility for repairs (normally) or buildings insurance ... ownership is not a one-way bet.

Whilst I own my own house, I have owned 2 in the past and lost money on them BOTH times! Given my financial circumstances at those times, I really shouldn't have bothered buying at all, but fell for all the "dead money" blarney fed to me by my parents and others.

So, I agree with most of the other posts - pay off your debts, reduce your outgoings, and re-consider buying once you are more financially secure.

deemy2004

I think people tend to forget that you only own the bit of the property AFTER you take the mortgage off.. i.e. the equity

Eventhough house prices have risen, many people have remortgaged to increase their debt levels.

The problem with this is say your mortgage is 60% of the value of the house... now say if house prices fall by 15% - Ineffect you have now just lost 37.5% of your equity ! As the mortgage has now risen to 70.5% of the house value !

People tend to forget the gearing on the downside, which is why a small house price drop of 10% will have a big impact on the economy, because at this point in time people are not comprehending what actually a 10% drop in house prices actually means.

Now lets take someone who has just mortgaged to the hilt at say 90% !, a 15% drop equates to a 150% loss !!!! Imagine the impact that would have on their spending ! As they are now in negative equity. How do they feel about renting against buying now ?

It is very dangerous to buy houses when they far exceed 3.5X earnings, as the risks are now to the downside !!!

Ros72

Hi, well, I'm in exactly the same kind of quandry at the moment and was thinking along the same lines and looking into seeing what I can get from Northern Rock on their "together" mortgage.

Whilst I hear all the protestations about paying off debts, having it easier when renting (i.e. more flexible, low maintenance etc), negative equity etc, etc - what about the other pitfalls of renting?

My rent is very high, £700pcm + utilities, thanks to where I live (Surrey) and I could easily be using the same amount in paying a mortgage. I hate the idea of being "flexible" with renting - always worries me about landlord giving me notice and having to start all over again. I suppose I don't like change and I would prefer to have my own home, with all the costs incurred because then it is mine (yes, esentially only after it's paid off).

The flip side of the coin in renting is that because it's high I can't afford to save for a deposit and live (meagrely), I have debts (yes, yes, yes my fault and I'm desperately trying to pay them off but will be here for another 10 years it seems to clear them) which are ridiculous (I went through a bad phase of being made redundant, landlord service notice, breaking up etc, etc and when found new job spending seemed way to "make me happy" - of course I regret it immensely and wish I could turn back the clock to when I had spare reserves of cash!). My salary has remained almost the same in the last 3 years due to my redundancy and difficulty in finding decent new job. Only now am I in the process of hopefully getting a decent increase as am studying for qualifications, and changing direction in career.

So, after all that waffling, what I'm trying to say is that if we look at all the pro's and con's in an ideal world of course it's good to pay off debts and start fresh, but when faced with what seems a situation which can't be resolved, this mortgage may be one way of helping.

If I use this mortgage the payments are cheaper than my rent, the consolidated loan payment is cheaper, therefore the extra cash I have at the end of the month CAN be used towards paying off more on the mortgage (it's fully flexible and there are no fee's for this), reducing the interest amazingly (worked out one of those goodies on Excel). Stick with them for the 3 fixed years and then hopefully will be able to move to better mortgage, whilst being cash positive for a change, and making up the loss of negative equity.

I've been watching our housing market around here for the last 2 years, and there is always speculation that the prices are going down and that there has to be a reduction in prices - I haven't seen it, if anything around my area they're getting bigger.

I have a spare 10K in savings (from overseas property I made money on when I was cash positive!!) which I can use too, but not sure what to do. So, people in our circumstances are in such a quandry that it seems a good enough deal, besides, buying a house has always been a risky business! Sorry I've waffled....

Phonix

Turns out house wasn't such a good buy (it would have been £74,950) nice house but it wasn't an area I would want to live in.

I know it's a bad idea having a 100% mortgage but the houses were I live are still rising. At the month I am renting and that is just dead money, I don't think the house prices around here are going to drop too much.

In november I have a chance to buy my housing association flat (£9,000 off valuation at time), there has been one sold for £69,950 where they owned 3/4 and there is another up for sale for £109,000. Do you think this would be a better idea? Try & pay off debt in meantime.

Has the world gone crazy? Putting down a deposit on a house with debt?, to secure more debt.....

Just use this site to save money wait a few years and buy a house when ou can afford it. I know the market is nasty at the moment but you shouldn't take these risks just to have a house you can't afford.

meanmachine_2

Ros72 wrote:

I have a spare 10K in savings (from overseas property I made money on when I was cash positive!!) which I can use too, but not sure what to do. So, people in our circumstances are in such a quandry that it seems a good enough deal, besides, buying a house has always been a risky business! Sorry I've waffled....

I'm confused. You have debts, and yet you have "savings". Which is it? You can't have both.

The first, second, third, fourth and fifth rule of debt is that savings are a waste of time. Use these "savings" to pay off the debt, and then you won't be in debt.

Or am I missing something?

dougk_2

MeanMachine, I agree.

The only exception is where the debts are at a lower rate than the interest on the savings eg 0% credit cards or 0% loans.

Ros72

Thanks meanmachine.

I have the 10k savings which I haven't touched for almost a year since I sold my property over seas. I haven't used it yet, either to pay off the debt, or to use as a deposit as I am, as you no doubt can see, confused as to what I should do! ;-)

Unfortunately if I used it to pay off the debt, there would still be debt remaining (don't even ask!) - but I suppose it would be more manageable - but then what about a deposit then for a property? That would still take an age to accumulate.

mountainofdebt

Please don't even consider a 125% mortgage let alone a 100% mortgage.

We had a 100% mortgage in the 1990's, the last time house prices rocketed, but by the time we come to sell the house 5 years later we had to take a loan out just yo clear the mortgage!!!

Fortunately the house that we bought was going cheap and as a result of that and increasing house prices this time round we have about £100K equity.

However we did have the loan for about 5 years.

Take the advice of someone who has read the book and seen the film!

dougk_2

I can see the catch 22 situation!

The advantage of paying off the debt is you acn save more quickly in the long run (less interest to pay).

I think also it would be easier to get a 100% mortgage than a 95% mortgage with debts., though neither would appeal to me as I think a 90% mortgage is the most I would ever go (just so there is a small amount of value that i own outright).