House Price Crash Discussion Thread

geraint85

debtistheft wrote: »

If your struggling to pay your repayment mortgage over a 25 year period then maybe you need to buy a cheaper house, or wait until house prices fall enough. If you are desperate to own at any cost, then get an interest only mortgage. Lots of people who cant really afford a house go down that route. Lots of people also get repo'd tho.

hehe.. I actually wanted to get an interest only mortgage for the first few years, and only re pay the loan via overpayments, but my stubborn girlfriend couldn't see the benefits of that... surly it would allow for the same amount of re payment will less risk.

and I can afford a repayment at 25 years, but who's to say i'll still be able to afford that next year? extending the life of the loan and re-paying through overpayments lowers the risk of getting yourself into the repossession trouble

Thrugelmir

geraint85 wrote: »

hehe.. I actually wanted to get an interest only mortgage for the first few years, and only re pay the loan via overpayments, but my stubborn girlfriend couldn't see the benefits of that... surly it would allow for the same amount of re payment will less risk.

The risk is that the "overpayments" will either be lower than need be or missed altogether. As funds are required for emergency spend or a deserved luxury treat.

What gets overlooked. Is that after 20 years of hard graft paying your mortgage. You'll still owe 40% of the original capital advance (this gets paid off in the final 5 years). So once behind with the capital repayments. Every month increases the amount you'll need to find.
So 25 years sounds a long time at the outset, but the clock soon ticks down on the 300 payments. Something many of those on i/o find to their peril.

ukcarper

Thrugelmir wrote: »

The risk is that the "overpayments" will either be lower than need be or missed altogether. As funds are required for emergency spend or a deserved luxury treat.

What gets overlooked. Is that after 20 years of hard graft paying your mortgage. You'll still owe 40% of the original capital advance (this gets paid off in the final 5 years). So once behind with the capital repayments. Every month increases the amount you'll need to find.
So 25 years sounds a long time at the outset, but the clock soon ticks down on the 300 payments. Something many of those on i/o find to their peril.

That 40% will be reduced in real terms by inflation.

geraint85

Thrugelmir wrote: »

The risk is that the "overpayments" will either be lower than need be or missed altogether. As funds are required for emergency spend or a deserved luxury treat.

you can calculate how much overpayments are needed to pay the loan off in a certain period of time., so there's no risk there as far as i'm concerned..
overpayments shouldn't be missed just for the sake of a luxery treat. I'd pay the mortage overpayments first and then treat myself with whatevers left.
an emergency spend is just that.. and emergency. I'd rather have the option of missing a months overpayment and be able to afford an emergincy spend than not have any money for the emergency... it increases ones options.

does any1 else agree with me, or am i on my own?

shortchanged_2

geraint85 wrote: »

you can calculate how much overpayments are needed to pay the loan off in a certain period of time., so there's no risk there as far as i'm concerned..
overpayments shouldn't be missed just for the sake of a luxery treat. I'd pay the mortage overpayments first and then treat myself with whatevers left.
an emergency spend is just that.. and emergency. I'd rather have the option of missing a months overpayment and be able to afford an emergincy spend than not have any money for the emergency... it increases ones options.

does any1 else agree with me, or am i on my own?

I'm sure many people feel as you do, but don't always maintain the discipline needed with an IO mortgage.

Reactor_2

ukcarper wrote: »

That 40% will be reduced in real terms by inflation.

You will need to hope you have a job with a salary going up with inflation to benefit from this at the end.

Reactor_2

Stovin wrote: »

How long do you think it will be before house prices might start increasing again?

Ten years from January 2009 for anything meaningful as we are currently in a cycle of debt deflation. When we eventually start getting debt inflation, house prices will start going up as house prices are a function of credit expansion.

ukcarper

Reactor wrote: »

You will need to hope you have a job with a salary going up with inflation to benefit from this at the end.

I think that is likely over 25 years

harryhound

Reactor wrote: »

Ten years from January 2009 for anything meaningful as we are currently in a cycle of debt deflation. When we eventually start getting debt inflation, house prices will start going up as house prices are a function of credit expansion.

Unless the British government gets into a 1970's cycle again.
This time round there would be no N.Sea oil or lucky Falklands war quick win to pull the economy out of the mess.
We could do a Greece, (go bust) or even a Japan (stagnate for a decade).
At the moment our money, our houses and our debts are falling in value in real terms.

barefootinvestor

Personally I think the fall of home prices is a good thing unless you own investment property.

It's especially a good thing if you have yet to buy your first home.

If you have already purchased a property, especially at the peak and its the home you live in you have to try and anticipate the chances of house prices falling further and if so by how much. And if the drop in the price of your home justifies selling and renting and waiting till the market bottoms out. For most people who have already purchased a home I think its wise to sit tight and pay as much off their mortgage as possible.

But if your finding it hard to keep up with re-payments, do some in depth research and sell up rent budget accommodation and save as much as you can for a deposit when property consolidates to ultimately keep interest re-payments low and take out more of the principal debt.

Here in Australia the property market has only just started on its downward slide, which many said would never happen.

Like gravity, what goes up must come down!