Why would your life be on hold?
People with Interest Only Mortgages
- Thread starter fez
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Why would your life be on hold?
I trust all the "no sympathy" mob have nice houses all paid up or payments under control.
Some people aren't as mobile or location-flexible as others. There are some people who took out these mortgages because that's all they were offered. It's not hard to see how the availability of these types of mortgages pushed up house prices.
It's easy to say "rent", but that's facile.
Cui bono? The banks and those who bought property at lower prices. It's not hard is it?
Some people aren't as mobile or location-flexible as others. There are some people who took out these mortgages because that's all they were offered. It's not hard to see how the availability of these types of mortgages pushed up house prices.
It's easy to say "rent", but that's facile.
Cui bono? The banks and those who bought property at lower prices. It's not hard is it?
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My sister is on an interest only mortgage, she bought for £180k and now its worth £260k +-
I suggested to her that she should extract that equity and instead she said she will remortgage and get a lower monthly rate. I thought extracting the equity would have been the better option but she says that she does not want to move for at least 10 years.
I suggested to her that she should extract that equity and instead she said she will remortgage and get a lower monthly rate. I thought extracting the equity would have been the better option but she says that she does not want to move for at least 10 years.
Whilst I appreciate this, how is the broker supposed to infallibly ensure that the customer understands, other than something like giving them a spot quiz at the end of the session?
If someone knows they wont get the mortgage if they don't understand, do you think they're going to say "I don't have a clue what you're on about" or "of course I understand, when can I have my money?".
What's that got to do with it? I would imagine the majority (other than those who have had windfalls of some kind) of people with "nice houses all paid up or payments under control" have had to make sacrifices and go without various luxuries in order to save for deposits and pay for those non-interest-only mortgages.
If people's priorities are to go out drinking every weekend, buy/lease a new car every 3 years, and go on expensive holidays every year, then IMO they don't really have much to cry about if they're too "skint" to save for a house deposit.
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Why would she want to extract the equity? That would give her an even bigger interest only mortgage.
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I thought if she extracts the equity and then sells it (eventually) she could walk away with like £60k in the bank.
If she negotiates a better mortgage rate would she be better off long term though?
those people who are blaming everything on btl landlords -rule changes now mean they are taxed on the full amount of the rent they charge, not just the profit. couple that with the capital gains tax and there is little money in the btl game now.
They don't. Next.
'Extracting the equity' means loaning more money from the bank and using the increased value of the property as collateral.
It will just give some liquid cash now, but increase her payments and interest.
Remortgaging will mean that her LTV improves, giving her better interest rates, so she 'loses' less on the money she has already borrowed.
Nothing's infallible.
But there's a big difference between saying 'This is exactly what the product means for you, do you understand?' and 'This is the perfect product for you, would you like the big house now?'
Whatever arena you're talking about, from retail bank staff to IB brokers, the point is that they're open and transparent. I suspect many mortgage / investment brokers are relieved that the banks have taken all of the bullets of late because I imagine many of them aren't exactly whiter than white.
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Ok. Wouldn't it better then to sell the house and use the £50k+- to put down on another mortgage that is not interest only?
What would you recommend for my sisters situation?
Is it ever possible to extract equity without raising the monthly mortgage amount?
I agree completely, but when you're borrowing hundreds of thousands, surely you'd check, and double check the paperwork to know exactly what you're signing? I know I did...
It comes down to what was mentioned above, a lack of preparing for the future.
Interest only mortgage means they can get the house they want AND still be able to go to Florida every year, who cares about that pesky repayment, that's not for 30 years!
If she negotiates a better rate then she will be better of short, medium and longer term, but extracting the equity will do exactly what it says - take value out of the house and replace it with debt.
Unless her house as increased in value at a rate higher than whatever she would buy as a replacement (or if she is downsizing), then it's not quite so clear cut.
Chances are that the increased value would allow for a better LTV on a new property that is capital repayment, but you have to factor in the fees associated with selling and buying, and how much that will eat in to her 'profit'.
Only perhaps if she's buying a second property.
Start repaying her mortgage.
Unless the new rate is significantly lower, no. Not on interest only terms.
Me too.
But the point I was making is that if you look at the way the courts have treated financial services salespeople of late, it's clear that there's a specific onus on them to be clear and transparent.
It's not so much about ensuring that the customers understand against their will, but trying to prevent the salespeople from obfuscating the truth.
I imagine that the latter did happen on many occasions, and if you require them to be sure that their customers understand, it's much easier to screw them in the courts if they made no effort whatsoever.