People with Interest Only Mortgages

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mattyg said:
No. When you buy a house you are also liable for wear and tear and repairs etc.
Its not as simple as that.

As for if they can rent then can afford to buy. There was a house near me up for sale at 1.2 million or £2k per month rent. I'd rather rent @2k that mortgage at £4k +

I know a couple of families that don't want to be saddled with a mortgage.

We have an obsession with having to own our home in this country.

When I was 18 I rented a flat for £30 per week there is no way I could have afforded to buy it even if it were £30k
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And anyone who has rented will tell you all about how landlords fix wear and tear issues in timely and quality manner every time :)

The reason why everyone is obsessed with owning property in this country is because renting sucks - you have very few rights and are always at risk at being told to leave your property when your contract is up (happened to me). I'd be quite happy to discuss boosting tenant's rights, but the powerful landlord lobby isn't likely to let that happen any time soon.

There's a place for landlords and renting in this country, but it's got out of hand - BTL might have been good for the economy but has been a disaster for society. Don't even get me started on the ludicrous tax-breaks BTLers get on their mortgages.
 
No sympathy at all I'm afraid.

Clearly the people who have the mortgages... also have a job. If they're intelligent enough to hold down a job, they're intelligent enough to understand that they wont own the house at the end of the mortgage term.

I don't want my taxes spend 'helping out' people who don't want to pay their own bills. I have had to pay my own mortgage, but I wasn't stupid enough to buy a 4 bed detached with double garage as a first house on an interest-only mortgage!
 
scorza said:
If people can afford to rent then they can afford to live there. Only reason they can't afford to buy is that house prices have been driven up so much in part by BTLers and saving enough for a deposit takes so long because rents are sky-high.
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+1000 I can afford to rent in my nice Surrey village, if I had a 95% mortgage on this house I would actually be £500pm better off, but I can't save as all the surplus goes on inflated rent
 
MrMoonX said:
+1000 I can afford to rent in my nice Surrey village, if I had a 95% mortgage on this house I would actually be £500pm better off, but I can't save as all the surplus goes on inflated rent
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Don't take this the way its going to sound. (I'm asking only to get your viewpoint not an argument)

But you made a choice to rent vs saving up for a deposit and buying.
 
scorza said:
And anyone who has rented will tell you all about how landlords fix wear and tear issues in timely and quality manner every time :)
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And one of those reasons will be because they are cash poor but asset rich.

You know BTL don't get cheap mortgages because they are "trade".
They still have a mortgage to pay which your rent will only just cover.

BTL landlords only really make money when they have no mortgage or sell on
 
There were a lot of people posting on here a couple of years ago boasting about how cheap their interest only mortgages were and not to worry about the future. Well I hope that they have changed their attitude since. Unless they wish to start over with a massive mortgage late in life or just rent.

No sympathy at all.
 
Greebo said:
My mortgage company writes to me every year to remind me to have something in place to repay the interest only part of our mortgage in 8 years time.
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I think most of them do... presumably some of these people throw the annual letters in the bin and there seems to be a campaign for banks to somehow do 'more'.

It isn't like they can force people to make arrangements to cover it.
 
MrMoonX said:
+1000 I can afford to rent in my nice Surrey village, if I had a 95% mortgage on this house I would actually be £500pm better off, but I can't save as all the surplus goes on inflated rent
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Aren't there any schemes you can take advantage of? Help to buy sort of thing... some of them essentially give you a percentage towards your deposit.
 
sometimes peoples financial situation changes and they need a temporary fix, i.e. cheaper interest only payments.

that said it should only be a temporary fix. i believe some lenders do send letters every 12 months reminding borrowers of their situation.
 
No sympathy. They have benefited from crazy low interest rates making their payments minuscule. Maybe they should have saved some money rather than spend it.
 
I would like to say that the idea that people don't realise that they still need money to pay off the actual mortgage/original loan at the end of an interest only mortgage surprises me, but it doesn't.

Some people are really stupid when it comes to money and lending, they may be smart as anything in other things, but just don't care/think/understand about money.

One of my friends used to have great holidays every year when we were younger, his parents had a new car every few years etc, it turns out his parents kept remortgaging the house and IIRC took an interest only mortgage out a few years before they were due to retire.
When they retired they ended up on the council list as they'd basically spent the entire value of the house over the years on frivolities and when the last (interest only) mortgage ended they had nowhere near the money to pay what was owed.

The thing is, as has been said several times in the thread, the mortgage companies do normally make it very clear that you need some way to pay back the original loan at the end of the interest only mortgage, but some people seem to think that they'll always be able to get another such mortgage or the value of their house/other assets will increase enough to cover it (a gamble I wouldn't take having seen friends/family who were doing really well suddenly run into things like health issues or having to go from well paid jobs to minimum wage when companies have gone bust).
 
I wonder if we'll be seeing more stories like this:

http://www.bbc.co.uk/news/uk-england-nottinghamshire-33368398

There will be some people who aren't just in denial but are seemingly not able to understand how a mortgage works and believe they've 'paid enough' over the years and should get to keep their house not have to sell it to pay those evil bankers who lent them the money. Looks like a growth industry for the freeman on the land types and other crazies to go and convince these people that they're somehow victims here.
 
mattyg said:
And one of those reasons will be because they are cash poor but asset rich.

You know BTL don't get cheap mortgages because they are "trade".
They still have a mortgage to pay which your rent will only just cover.

BTL landlords only really make money when they have no mortgage or sell on
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They get comparatively cheaper mortgages because they get 20% tax relief on mortgage interest payments - they used to get 40% until this year! As a home owner why don't I get that? Rent is charged at the market rates, not the cost of the mortgage - for the last few years rents have been going up and mortgages have been getting cheaper which means £££ for landlords.

The problem is that "selling on" is key to the business of BTL. Consider the following scenario:

1. Buy new build flat for £200k for minimum investment (10% @ £20k)
2. Interest-only mortgage of say £600pcm
3. Rent at market rates of £900pcm
4. Wait 10 years, that's £36k gross profit but then like you say you've got costs, tax to pay - so let's be pessimistic and say you've "only" made £25k. I agree that's not a massive profit over 10 years, but still a nice to have (>10% ROI).
5. Sell the flat for £300k - £180k for mortgageco and £120k for you - that's 60% ROI per year for doing basically sod all.

Granted there's risks e.g. voids, and who knows, maybe one day house prices really will crash and all the BTLers will lose out. I can't help feeling though that in that scenario the poor old tenant still loses their home when the mortgageco repossess the property.
 
Why do people rent? Why not stay at home, save the deposit and get a house within your means?

Surely this is common sense? As the son of an immigrant, my father knew that without any education in this country at least.
 
coolsurfer said:
Why do people rent? Why not stay at home, save the deposit and get a house within your means?

Surely this is common sense? As the son of an immigrant, my father knew that without any education in this country at least.
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Sometimes people are forced into that position. Job opportunity somewhere. Parents kicking them out. Various reasons.
 
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