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    • solidpro
    • By solidpro 7th Feb 18, 12:44 PM
    • 106Posts
    • 24Thanks
    solidpro
    People who end up with nothing after 30 years
    • #1
    • 7th Feb 18, 12:44 PM
    People who end up with nothing after 30 years 7th Feb 18 at 12:44 PM
    Listening to you and yours on the radio today about people who have reached 65+ and been on an interest only mortgage for 3-30 years and hit a point where they can no longer obtain a mortgage of any sort and ending up being forced to sell.

    Do you have any sympathy?
Page 1
    • kingstreet
    • By kingstreet 7th Feb 18, 12:59 PM
    • 33,156 Posts
    • 17,899 Thanks
    kingstreet
    • #2
    • 7th Feb 18, 12:59 PM
    • #2
    • 7th Feb 18, 12:59 PM
    To a certain extent, yes.

    As you get older, you become more attached to things which have good memories.

    Sometimes circumstances prevent people doing what they should, when they should. To own the property at the end of the term would have cost them money they were unwilling or unable to spend.

    They've had the utility of their own home for those years and they may have equity left over after the sale.

    Not much more anyone can do, or could have done.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
    • davidmcn
    • By davidmcn 7th Feb 18, 12:59 PM
    • 7,301 Posts
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    davidmcn
    • #3
    • 7th Feb 18, 12:59 PM
    • #3
    • 7th Feb 18, 12:59 PM
    Few of them are likely to have "nothing", are they? At the end of a normal mortgage term they'll generally have a fair amount of equity in the property, as well as additional savings (or at least the opportunity to have accumulated them) due to having had smaller mortgage repayments compared with a repayment mortgage. And they've also had somewhere to live for all those years!
    • amnblog
    • By amnblog 7th Feb 18, 1:21 PM
    • 10,402 Posts
    • 4,115 Thanks
    amnblog
    • #4
    • 7th Feb 18, 1:21 PM
    • #4
    • 7th Feb 18, 1:21 PM
    The reality is that people today have a focus on a lifestyle rather than on getting monthly income paying bills and keeping debt down.

    The early baby boomers benefited from strong company pensions and free education for their kids. The late baby boomers are running into little pension provision and Bank of mum and dad loads. Many rely on inheritance to pay off debt which is increasing late in arriving.
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • dimbo61
    • By dimbo61 7th Feb 18, 1:30 PM
    • 9,844 Posts
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    dimbo61
    • #5
    • 7th Feb 18, 1:30 PM
    • #5
    • 7th Feb 18, 1:30 PM
    There are about 1.7 million Interest Only mortgages currently in the UK and many people face the prospect of either using lump sums and pensions to pay off mortgage debt or trading down to a smaller property or renting.
    How you spend your income, how much you earn and job, pension, savings are different for everyone.
    • dunstonh
    • By dunstonh 7th Feb 18, 4:06 PM
    • 92,131 Posts
    • 59,286 Thanks
    dunstonh
    • #6
    • 7th Feb 18, 4:06 PM
    • #6
    • 7th Feb 18, 4:06 PM
    Listening to you and yours on the radio today about people who have reached 65+ and been on an interest only mortgage for 3-30 years and hit a point where they can no longer obtain a mortgage of any sort and ending up being forced to sell.

    Do you have any sympathy?
    Originally posted by solidpro
    Not really. There may be some who have had circumstances that put them in that position but for many, it was a lifestyle choice.

    Plus, they haven't really ended up with nothing. 30 years of owning a property whilst paying interest only means they have paid less than renting and have built up significant equity that they will realise when they sell up.

    What have they been doing with all that money over 30 years? A lot use it to spend on a consumer lifestyle. Frequent holidays etc. Their priorities were different.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • silvercar
    • By silvercar 7th Feb 18, 4:37 PM
    • 37,087 Posts
    • 156,237 Thanks
    silvercar
    • #7
    • 7th Feb 18, 4:37 PM
    • #7
    • 7th Feb 18, 4:37 PM
    At worst the vast majority will have ended up with equity, something they wouldn't have got by renting. In some cases their homes will have earned more than they did.
    • PasturesNew
    • By PasturesNew 7th Feb 18, 4:41 PM
    • 62,158 Posts
    • 363,882 Thanks
    PasturesNew
    • #8
    • 7th Feb 18, 4:41 PM
    • #8
    • 7th Feb 18, 4:41 PM
    They'd have known for 30 years .... and will, in a lot of cases, have the option of selling up and buying something for cash from the difference between the mortgage they first borrowed and what they sold for.

    If you bought in, say, 1987, at 50k and it's now worth 300-400k, there are a lot of houses that can be bought for 250-300k.

    If you bought in 1987 at 10k and it's now worth 65k your options are more limited, but if you've not bothered to pay off 10k in 30 years then few would have "sympathy".

    It's unfortunate .... but the majority of these people will have been in a position to change their outcome at many points in the last 30 years. At least during that time, paying interest only, they'll have been settled in one spot and not had to fork out agent fees and moving costs every 3-4 years to move on the whim of a landlord.
    • ringo_24601
    • By ringo_24601 7th Feb 18, 4:42 PM
    • 17,150 Posts
    • 27,896 Thanks
    ringo_24601
    • #9
    • 7th Feb 18, 4:42 PM
    • #9
    • 7th Feb 18, 4:42 PM
    10 years ago, I got myself on the ladder with an IO mortgage. I can see how tempting it would have been to stay on one of those. My current repayment mortgage in my new home is 4x the amount of the old IO mortgage.

    But to have no repayment method at all, for 25 or 30 years? Well, that's just stupidity, isn't it?

    Sell up, use the equity towards renting while you're a pensioner I guess. You can't have your cake and eat it.
    • Edi81
    • By Edi81 7th Feb 18, 5:38 PM
    • 424 Posts
    • 285 Thanks
    Edi81
    Plus many of those people would have had endowments that were meant to cover the principle.
    When the warnings came out 15 years ago about putting alternative repayments in place some of these people may have chosen not to. I don!!!8217;t really feel sorry for them - unless they genuinely couldn!!!8217;t afford a repayment mortgage at that time.

    They have had a number of years of low interest rates (likely on trackers) so had plenty of opportunity to pay down the principle.
    • Thrugelmir
    • By Thrugelmir 7th Feb 18, 5:40 PM
    • 58,173 Posts
    • 51,532 Thanks
    Thrugelmir

    Do you have any sympathy?
    Originally posted by solidpro
    Yes and no. I'd judge each case on it's merits. The run up to the GFC was a period when people were allowed to overburden themselves with debt. Those employees working for HBOS tasked with selling mortgages found a cabbage on their desks if they didn't hit targets. A culture that's had to believe existed in a bank. Though if you sack your head of risk and employ a sales director instead (who had zero financial background) then the consequences are unsurprising.

    Hopefully interest rates will remain low long enough to allow an orderly exit from the past.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • enjoyyourshoes
    • By enjoyyourshoes 7th Feb 18, 5:57 PM
    • 1,044 Posts
    • 1,280 Thanks
    enjoyyourshoes
    Ah come on !

    No sympathy at all.

    I got my first mortgage aged 23, I implicitly knew that an interest only mortgage would be a bad thing, and I am not that bright.

    people who took interest only did so with their eyes wide open and in full knowledge of the facts ahead of them.

    They had option, like the vast majority of us, to have a repayment or endowment (then subsequently reevaluate the product and obtain an more suitable alternative)

    No one can be that naive and then moan about their decision later in life.
    Debt is a symptom, solve the problem.
    • margaretx9
    • By margaretx9 7th Feb 18, 8:15 PM
    • 26 Posts
    • 8 Thanks
    margaretx9
    Compared to 30 years ago house prices in some areas have risen by 10 fold and more.

    That house in London they bought for 75k may now be worth 750k. Less dramatic elsewhere but still significant.

    Sympathy - not really as they have almost certainly made huge equity growth. They can sell up and buy somewhere cheaper - they still get to own a home.

    Sympathise with the poor first time buyer today on the same equivalent wage they earned who has to rent as they can't afford to pay 750k for that house as they don't earn seven times the average wage! They would love such 'problems'!
    Last edited by margaretx9; 07-02-2018 at 8:18 PM.
    • AnotherJoe
    • By AnotherJoe 7th Feb 18, 8:58 PM
    • 8,969 Posts
    • 9,856 Thanks
    AnotherJoe
    In what way is all the equity tax free from 30 years of house price growth, plus no rent increases, plus not being at the beck and call of a landlord for 30 years, "nothing" ?
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