Deleted User 298457
Deleted User 298457
Bad strategy. By the time you have £30k, the house you want has gone up by £90k.
Mortgage Rate Rises
- Thread starter glenimp617
- Start date
Yeah but its all OK because the amount you need for that deposit has only gone up by perhaps £10k. This is how we have got to the place where the average house price is 9x avg. salary or whatever it is. If you need a £20k deposit for a £200k house then even when that £200k house becomes a £400k house you probably only need £40k and there are plenty of couples who can scrape that together or get help from the bank of mum and dad or who have got a bit of inheritance to chuck at a mortgage.
We can completely ignore the fact that it will take people 35 years to pay off their mortgages and they will pay the bank back well over twice what they borrowed. As long as its technically possible its all OK.
Between me and my partner we both earn a fair whack over the national average and we wouldn't have a hope of being in the house we are in without help from family/some inheritance. We would have been able to buy our first flat but we would have had a far larger mortgage and would probably still be there. The silly thing is that our current house is nothing special and yet we are certainly well above average in our earnings which should suggest that the market is just utterly broken.
As I have said dozens of times to people. There are (probably tens of) thousands of houses around us which are worth well over a million quid which I reckon are owned by people who wouldn't have a popsicles chance in hell of owning something half as nice if they transposed their working lives to the current situation. It all just makes so little sense.
It took ages for me. Granted I didn't help myself with a 8k car. I did love that car.
But I was earning a below average salary until 30. And living at home was horrible. (not bad parents.. Just always house/garden chores to do. Felt like a kid there not an adult.
Then rent trap.
So wasn't until 30ish I could out earn the market. Saved up 40k by time I was 34 and bought here in south Wales.
Soon as I was over the earnings where you outcompete the market things changed quickly.
Last edited:
The ONC survey released last year has stated that wealth people have 30% of their wealth in real estate.
Household total wealth in Great Britain - Office for National Statistics
Main results of household wealth from the seventh round of the Wealth and Assets Survey covering the period April 2018 to March 2020.
www.ons.gov.uk
It's debatable if a person should consider their main dwelling as an investment or it should only be additional properties that should be considered as an investment but one factor that a mortage gives that no other loan offered to us mere mortals is the amount of leverage. you x times your annually income and you can use your house has leverage for other investments.
A mortage percentage wise is one of the cheapest loans you will ever get. It's just the lenght of time and the amount borrowed that makes the loan really expensive.. you can stick it to them and pay of your mortage in the fastest time possible. One of my former collegues managed to pay of his house after a 30% down payment in 7 years, that area of Manchester house prices has rocketed due to the number of private and public schools and their ofsted rating.
I had another former collegue, rent his house out and rented a more minging place for cheaper. The rent on his place basically paid for the mortage and covered some of his rent.
Yes, real estate is not as liquard as other possible investments and as much as I love the idea of living mortage free, I've been told that having a small amount of mortage and only paying the interest is a better scenerio, as it allows you to re-mortage if required and the mortage provider will help with certain issues with the property as they still have a stake in it.
One thing I would suggest is not to over reach. The nicer the area; the more you would have to spend to keep up with the Jones. One of my single mates purchased a four bed room house and now he's trying to fill it with furniture. He was moaning about amount time he has to spend mowing the lawn.. lol.
Soldato
- Joined
- 6 Jan 2013
- Posts
- 22,181
- Location
- Rollergirl
Our 5 year fixed rate is eligible for renewal next month, and I have a question for those who have crunched the numbers:
If I took another 5 year deal over 20 years and then set a regular overpayment to match the cost of a 5 year deal over 15 years, would there be any disadvantage?
If I took another 5 year deal over 20 years and then set a regular overpayment to match the cost of a 5 year deal over 15 years, would there be any disadvantage?
Associate
- Joined
- 3 Jan 2024
- Posts
- 0
- Location
- London
I would advise running it through this schedule as you can do a comparison: https://www.locostfireblade.co.uk/spreadsheet/Index.html
without knowing your mortage amount, we won't know "x". Normally the shorter the overrall term then the lower the mortage rate.
One other thing to consider is that most places will only allow you to make 10% of the amount remaining at the start of each year before you get hit by overpayments fines.
I did a yearly budget to work out what I could pay, then 75% of what I could pay was used to work out my lenght of my mortage term as regular payments and remaining 25% was used as over payments. Checked that the overpayments wouldn't occur any fines with the amount left at the start of year. The 25% is a buffer in case I lose my job or something. The mortage advisor did say I could pay of my mortage in 5 years and gave me the numbers, but I didn't fancy living like a monk, trusting that I get a yearly bonus above a certain amount and stopping all my other investment activities...
Soldato
- Joined
- 4 Aug 2007
- Posts
- 22,003
- Location
- Wilds of suffolk
Plenty have the 10% set at 10% of original amount, Nationwide for example. I think Santander (who I hate with a passion in regards mortgages) are a 10% of 1st Jan balance for the current year.
No is the short answer. In effect the numbers should match within pennies and you have built yourself some buffer.
Nationwide for example allows you to keep your term and payments as per your original agreement (although this isn't the default), which gives you a lot of flexibility should something change whilst you are paying off your mortgage.
Permabanned
- Joined
- 7 Aug 2017
- Posts
- 2,141
- Location
- by the tower the one up north ..
only in the south .... lol his house cost 140k 3 bed semi ... .. so his forever home .. with his wage now will have it paid off by 45-50
Last edited:
Associate
- Joined
- 3 Jan 2024
- Posts
- 0
- Location
- London
Based on the recent discussions, I've been giving some thought to my mortgage situation with First Direct and wanted to get your opinions on my proposed strategy. Here's the breakdown: I have a split mortgage; the smaller part is at a 4.97% fixed rate, due to end in July 2028, and the larger part is at a 3.94% fixed rate, ending in January 2029, both with 22 years left on it.
Considering that First Direct allows for unlimited overpayments without penalty, I'm thinking of extending the terms for both parts of the mortgage to their maximum possible duration. This would reduce my required monthly payments. My plan is to continue making the reduced standard payments on the 3.94% part, but for the 4.97% part, I intend to overpay up to what I was previously paying on a 22-year term. My rationale is that this will allow me to pay off the higher interest part quicker, thereby reducing the interest I'll pay in the long run, and eventually allow me to clear out the smaller part at the end of the 5 year period, thus allowing me to only retain the one part, opening up the opportunity to move a different lender at the end of the fixed term.
Does this sound like a viable strategy? Do you think First Direct would allow me to change my retirement age in order to extend the length of my mortgage to the maximum period possible?
Considering that First Direct allows for unlimited overpayments without penalty, I'm thinking of extending the terms for both parts of the mortgage to their maximum possible duration. This would reduce my required monthly payments. My plan is to continue making the reduced standard payments on the 3.94% part, but for the 4.97% part, I intend to overpay up to what I was previously paying on a 22-year term. My rationale is that this will allow me to pay off the higher interest part quicker, thereby reducing the interest I'll pay in the long run, and eventually allow me to clear out the smaller part at the end of the 5 year period, thus allowing me to only retain the one part, opening up the opportunity to move a different lender at the end of the fixed term.
Does this sound like a viable strategy? Do you think First Direct would allow me to change my retirement age in order to extend the length of my mortgage to the maximum period possible?
Overpaying the highest interest rate part will save you the most money.
Given you are only talking about a few months between the expiration date of both mortgages, the ‘hit’ of moving the one expiring first to a tracker to a few months will be minimal. Once the second larger mortgage rate expires, you are free to leave without penalty.
Given you are only talking about a few months between the expiration date of both mortgages, the ‘hit’ of moving the one expiring first to a tracker to a few months will be minimal. Once the second larger mortgage rate expires, you are free to leave without penalty.
Deleted User 298457
Deleted User 298457
The wildcard would be to push it out and pay into your pension. Then take a lump sum at pension age tax free to ding it hard.
This issue with this gambit is that state of the stock markets at the time of taking the 25%, also it removes a large chuck of investment that is no longer investing and a pension annuity will be much more costly as a large chunk of the tax free amount would have been used.
Yes, the pension pot should way out perform the intreast of the mortages and hind sight will tell us which is the better options... but there's a lot of unknowns to think about.
Probs not the right place to post this but didn't seem thread worthy... We have around 40-50k equity in our current house, i have debt of around 15k (car, kitchen reno) which i should have paid of by the end of the year. A family member has recently passed and we think around the middle of the year the house will be sold, the house is worth around 200k. From getting a mortgage on the other house point of view would they see it better me having less deposit and no debt (sell house, pay debt have deposit of 25-35k, live at parents) or applying for the mortgage with the debt but with a bigger deposit?
Ideal situation is we can persuade them to hang onto the house until we are debt free but not sure that'll happen.
TIA
Ideal situation is we can persuade them to hang onto the house until we are debt free but not sure that'll happen.
TIA
I mean, theoretically the best thing to do is go interest only, pile everything else either into doing the same on multiple rental properties or put it into the markets which certainly until recently have massively outperformed interest rates.
If you had done this 20 years ago you would be worth a fortune. Your house would be probably worth well over double its initial value so even if you sold up and cleared the mortgage you would have made 100% ish profit. Your money in the market would have probably at least 3x'ed. All that vs your money just doubling if you poured that into a mortgage.
That being said, one route is a bit of gambling and the other leaves you with a relatively safe and concrete position.
100% agreed...
I know people who's done that in the past as the stock market tends to out perform the housing market but there's a lot of known unknowns on both sides.
I'm paying 25% extra to my mortage as overpayment and the same amount into my stock and shares.. yes I could get a lot more if I just paid everything into stocks and shares or into my pension which is invested into stocks and shares and it's tax free. but at least I know for a fact that I'm getting 4.01% of savings from paying my mortage.
My mortage advisor did suggest that I could buy another property and rent it out, but I just don't have the risk appetite for it at the moment.
In four years time when the current deal runs out, I will have some big questions to answer...
Whenever to liquidate all or a large part of my stocks and shares to pay of my mortage
Whenever I want to move house or not
Whenever if I want to buy a second place to move into and rent out the current or just to rent out.
Whenever I should just crush the remaining payments and pay it all off within 5 years, which would me sticking to my current job
Whenever I should aim for the same payment amount and have a 10 year mortage, hopefully job salaries will allow me to move to a less demaning job.
Whenever I spread the payment out further, 15 years and it may allow me to work part time.
and so on and so on...
It's all about risk appetite...
Very much so. Despite fully believing the ideas I described we have just been overpaying our mortgage aggressively for the past 7 years and as a result have potentially £350k of equity in our property. Truth be told I have only become vaguely interested in finance in the past few years since I turned 35 and had some money that needed a home.
Now I am paying into my pension, S&S ISA along with our mortgage overpayments. I would love to be mortgage free at some point in the next decade but the next house we move to will probably saddle us with £400k+ of mortgage again so that ain't going to happen!
Even if interest rates stay constant through the mortgage, in real terms (inflation adjusted) your mortgage payments will reduce over time.
Last edited:
My man!! I believe that we are on the same wave lenght and on the same path.
It's about letting people know the options/risks and that is what a good financial advisor and in some away a mortage advisor should be doing.
One thing I would point out about moving houses, it's normally to upscale.. the less developed areas allow for greater investments and increase in value but again it's a risk.
When I brought my current place, it's situated between villages and areas that have already been developed and people have been moving into the area due to the prices and availability of houses in the "better" areas.
We have plenty of brown land and green land. My house on paper has gone up by 44% in five years.
Moving to a nicer street/area can cause life sytle creep.. when your neighbour pulls up with a brand new Merc and your rolling around in an old banger, people tend to start looking at their budget to see if they can afford to buy a new car and take on more loans.
My niece is in that situation at the moment brought a house in a lovely area for their first house, but needed to rip out the windows so that the matched the neighbours, paid a landscape gardener to re-do both gardens, designer furniture to welcome the neighbours.. the list is endless.
She's also sending her kid to the local Catholic school... I had a heart attack when I saw the size of the bill for the uniform and pre/after school club, let alone the air force ones that her kid needs to fit in with the other kids.
But I've been there... Call me tight, but I would rather invest the cash, use it to retire early and then spend it on holidays.. lol
But it's a life style choice.
