House Prices - Where does it end?

chimaera · 11 Apr 2007 at 16:20

The Mad Rapper said:
OK, thanks for explaining that

Are Interest Only mortgages generally cheaper than the other sort? Capital mortgages?

They're not cheaper as such because you still have to pay back the same amount, but you only pay back the interest on a monthly basis so the payments are lower.

At the end of the term you have to pay the value of the capital outright.

I'm on interest only purely for affordability, when i'm older and earn a bit more money i will either re-mortgage or do a re-finance onto full capital repayment, not many people who go interest only these days end up with a invoice from the bank for £120k after 25 years, its in both parties interest to make it affordable in the long term so i found my bank was very accomodating.

ci_newman · 11 Apr 2007 at 16:21

The Mad Rapper said:
Reads like a great plan to me - Good luck

O, it is a great plan. It'll never work, but i'll do my best to stick to it. It depends on so many factors, it's crazy. The worst thing that can happen to me is a drop in house values, since I won't actually be able to sell my place if it drop into negative equity. I'd be forced to pay £180k for a house worth less than that therefore have no 'spare' money to clear the house.

It's pretty scary, which is why I've put a fair amount of thought into it

scorza · 11 Apr 2007 at 16:22

The Mad Rapper said:
Are Interest Only mortgages generally cheaper than the other sort? Capital mortgages?

Yes, but not by as much as you might think. For example, the capital mortgage I'm looking at will have monthly repayments of ~£950 a month. The interest only version I'd have to pay back £750 a month.

HEADRAT · 11 Apr 2007 at 16:22

brid said:
..... or do you sell your house and expect to buy another one with the 'equity' .. what will that get you?

Well plenty of people "downsize" when they retire as the kids have flown the nest etc.

HEADRAT

brid · 11 Apr 2007 at 16:23

What if, at the end of the mortgage term .... theres a recession and you either CANT sell your house, or the value of it has plunged? You'll be either repossessed in one situation when you cant meet the capital repayment, or left with a tiny amount of equity.

Im sure you'll rue the day you ever thought interest only mortgages were a good idea in that situation.

brid · 11 Apr 2007 at 16:24

HEADRAT said:
Well plenty of people "downsize" when they retire as the kids have flown the nest etc.

HEADRAT

did they have interest only mortgages?

NO.

they owned their houses outright so didnt have to pay back the entire capital sum they borrowed in the first place and had to try and buy a place with the remaining amount.

The Mad Rapper · 11 Apr 2007 at 16:24

The more I read this thread the more I feel I ought to buy. For the last few months I've considered buying a two or three bedroomed home in the North-East and renting it to my sister and a cousin. I doubt I'd ever live there myself, but it gets my foot on the ladder and gives my sister an escape from my Mum's

Do the normal buy to let rules apply if you are renting to family?

Can anyone recommend a good online resource I can visit to make sure I understand all of the implications and what responsibilities/liabilities I may have?

scorza · 11 Apr 2007 at 16:25

brid said:
What if, at the end of the mortgage term .... theres a recession and you either CANT sell your house, or the value of it has plunged? You'll be either repossessed in one situation when you cant meet the capital repayment, or left with a tiny amount of equity.

Im sure you'll rue the day you ever thought interest only mortgages were a good idea in that situation.

Realistically, what are the chances that a house you bought 25 years ago, will be worth less than what you paid for it?

HEADRAT · 11 Apr 2007 at 16:26

brid said:
Im sure you'll rue the day you ever thought interest only mortgages were a good idea in that situation.

I'm sure you would but can you show me figures where a house has not been worth significantly more than the original price it was bought for 20/25 previously.

My Dad bought a house in a boom in 1970 for £8000, even in the worst days of the late 1980's in was still worth >£130K

HEADRAT

brid · 11 Apr 2007 at 16:26

What if your sister moves out, and you cant find a new tenant ... or you lose your job.

HEADRAT · 11 Apr 2007 at 16:27

brid said:
What if your sister moves out, and you cant find a new tenant ... or you lose your job.

Then he gets another tentant, to be honest what would happen to most people if they lost their job, they'd be ******!

brid · 11 Apr 2007 at 16:28

HEADRAT said:
I'm sure you would but can you show me figures where a house has not been worth significantly more than the original price it was bought for 20/25 previously.

My Dad bought a house in a boom in 1970 for £8000, even in the worst days of the late 1980's in was still worth >£130K

HEADRAT

Your assuming 2 things here.

1. you can sell the home.
2. that the 'equity' will actually buy you something decent.

.... with interest only, you have to remember that all your doing is renting from the bank, instead of renting from a landlord.

HEADRAT · 11 Apr 2007 at 16:29

1. Everything has a price it will sell at.
2. If it's a recession time there will be lots of places to buy cheap, your equity will go further

HEADRAT

brid · 11 Apr 2007 at 16:29

HEADRAT said:
Then he gets another tentant, to be honest what would happen to most people if they lost their job, they'd be ******!

What about the average void periods that a landlord needs to figure into his sums.

Or the cost of repairs on the property.

Theres a lot of blue sky assumptions going on here.... a bit of prudence wouldnt go amiss.

HEADRAT · 11 Apr 2007 at 16:30

brid said:
Theres a lot of blue sky assumptions going on here.... a bit of prudence wouldnt go amiss.

Sod prudence get yourself on the housing ladder while you've still got a hope in hell

HEADRAT

Visage · 11 Apr 2007 at 16:30

brid said:
What about the average void periods that a landlord needs to figure into his sums.

Or the cost of repairs on the property.

Theres a lot of blue sky assumptions going on here.... a bit of prudence wouldnt go amiss.

Thanks Gordon.

The Mad Rapper · 11 Apr 2007 at 16:31

brid said:
What if your sister moves out, and you cant find a new tenant ... or you lose your job.

I work for the Government in a very specialised field in which there will never be a decrease of work.

My job is as safe as a job can be TBH.

brid · 11 Apr 2007 at 16:31

HEADRAT said:
1. Everything has a price it will sell at.
2. If it's a recession time there will be lots of places to buy cheap, your equity will go further

HEADRAT

1. really? 10 or so years ago there were properties nobody would touch with a barge pole, or sat on the market for years.

2. if theres a recession. your equity will have went down by a massive chunk. Its stupid to assume that you will win in every situation.

ci_newman · 11 Apr 2007 at 16:31

brid said:
Your assuming 2 things here.

1. you can sell the home.
2. that the 'equity' will actually buy you something decent.

.... with interest only, you have to remember that all your doing is renting from the bank, instead of renting from a landlord.

So what do you suggest I do instead?

a) Rent and pay somebody else to pay off the mortgage on the house?

b) Stay with my parents and inherit their 'estate' when they pop their clogs in ~40 years

I don't have an option BUT to take out an Interest only mortgage. I have no money for a deposit and in the 2 years it'll take me to build up a despoit, the house I wanted will be worth 11% more than 2 years ago- lower than the amount I've saved for a deposit

brid · 11 Apr 2007 at 16:31

I take back what i said.

Go ahead and buy a property - they can only go UP in value!!!!!

Your going to make TONS OF MONEY!!!

... oh yeah. You'd be a fool not to 'get on the ladder' .. its the responsible thing to do!!!!