Interest only mortgages, your opinions
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Bes said:
Except for the last five years people have been saying 'Any day now there will be a crash', yet in that time prices have moved ever upwards.
The only thing that will cause a crash is a signifgicant rise in interest rates - im talking 3% rise or more. ANd *if* that happens the effects of it wont be felt for at least 12 months. Thats why a crash is unlikely in the next year. Further than 12 months out and you might as well consult a crystal ball, its that uncertain....so i say make hay while the sun is shining. I know I am
Associate
Morba said:
If I had your crystal ball then yes interest only would be well worth it
However, with all due respect crystal balls do not exist...Property is currently approx 8 times the average wage, first time buyers are at an all time low, thus the lifeblood of the market is rapidly declining.
Buy to let's investors will not keep the market advancing at it's current level, let alone the rates seen over the last 4 or 5 years.
A crash? Unlikely, but very possible. Stagnation? Much more likely, & quite probably for a fair while. Thus imo currently 'interest only' loses all benefits associated with expected equity increase.
Rent, & wait it out for a while...Unless you also have a crystal ball of course
Bes said:
Bes,
No disrespect here.
Every single moprtgage related thread you usually pop in and tell us about the property crash.
You've been telling us about it for quite some time now - I was looking to buy 18 months ago (and we finally moved in about 13 months ago).
However your prediction of housing crashes have been posted into the various threads for what - 2.5+ years now?
This crash has always been "around the corner", "coming", "you just wait...."
The thing is - when you make a prediction there needs to really be some kind of time scale with it.
I predict that one day there will be no currency on the planet Earth at all - that society will move on and that wealth will not be what people strive for.
For that reason alone I would recommend not getting involved with currency at all....
House prices went through a what, 4-5 month period of their lowest price increase last year.
No drop in value (becuase the one month they did, they shot back up again the next).
So over a short period of time their value didn't increase as much as they have done.
Yet here we are in 2006, prices are on the increase once more, sure never back to the "good old days" but we will never see that kind of growth again.
So are you ever going to put a firm date or time scale on your "doom & gloom" predictions of the house market falling?
Or is it always going to be "around the corner"?
Because if it suddenly happens in 15 years time and for whatever reason a load of us are still around and you post in 2021 "Told you so" we honestly won't be impressed.
*Edit*
Me bad - On reading the post again it would appear that you've put an 18 month time-scale on.
I should have 3 years of equity in my house by then - not a great deal, but we did put down a major deposit too so with fingers crossed eh.
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stoofa said:
OK.
1. I haven't talked about property AT ALL here until a couple of months ago. I was under a different forum name until about 5-6 months ago so how the hell could that have been me 2.5 years ago?!
2. Yes I have put a timescale on it
and whilst I can't say it will definately happen, everything is starting to point towards it and I think 18 months down the line, prices will have peaked or will just be peaking.Please get your facts straight before you start slating other members and their posts.
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Not necessarily.JonRohan said:
I sold a property portfolio in the UK year or so ago, because the returns were looking dubious and the risk too high. So I'm currently in a rented house. But I'm not going to be in it, or the UK, much longer. Until or unless the market changes substantially, I won't be buying again in the UK, and maybe not even if it does.
Bear in mind it isn't just the £150/month difference. There are substantial costs to just buying and selling a house. Survey fees, legal bills, estate agents commission, etc. Then there's the cost of maintenance, like keeping paintwork up to standard, replacing the boiler if it dies, and so on. I know you said the maintenance was the responsibility of the ground floor people, and I hope you're right about that, but in a leasehold property (as flats, etc inevitably are), that is rather unusual, if you have no shared liability for shared aspects of the building.
There are costs associated with owning (and buying a selling) that you just don't get with renting, and there are risks too .... like the market declining, and it doesn't need to be a crash like last time, just a decline.
The problem is that nobody can tell you what the property market can do. Or rather, they can tell you but you'd be a fool if you believed they knew. We can guess, we can predict, we can expect, and we can analyse trends, but it still remains a gamble.
If you buy and prices rise significantly, you win, because the equity in your house will exceed the outstanding mortgage, perhaps even after several thousand pounds of costs have been taken into account. But, bear in mind that having bought the house (whatever type of mortgage it's on), you then have to sell at some point, unless you plan on living in it permanently. So you MUST consider selling costs, too, and you aren't free of the monthly payments until you do. At least with a repayment mortgage, there's an end to the liability.
But if the property market doesn't rise, you need to consider the monthly payments on your IO mortgage, AND those buying/selling/maintenance costs, compared to rental payments. Because if the market doesn't rise, you have a debt that wipes out the value of your "investment". And if the market falls .....
I'm not saying don't buy. I'm not in your situation. But I am saying that I wouldn't buy, on an IO mortgage, at the moment. The prospect of the returns doesn't justify the risk, in my assessment of the state of the market. But I could be wrong. Any of us could. The market could accelerate again, and then an IO purchase would be a far better bet than renting. Or it could halve, in which case, it was a disastrous decision. Ultimately, you pay your money and take your chance.
All I would say is that you should make your decision with your head, not your heart. And do it because it's what you are convinced is right, not because of what anyone on a forum says. But if it does go **** up, at least you'll only have yourself to blame.
Sequoia I do enjoy reading your posts and thanks for the input.
I have already had the acceptance of my mortgage and everything is going through for exchange next week. The forum hasn't swayed me either way.
It is interesting to read everyones views, I'm getting a nice place with most stuff taken care off so at the monent, such as the buildings maintance and boilers and stuff like that. Its almost like having the best parts of renting but paying for it via a IO mortgage.
So lets hope the market will rise in this area..
I have already had the acceptance of my mortgage and everything is going through for exchange next week. The forum hasn't swayed me either way.
It is interesting to read everyones views, I'm getting a nice place with most stuff taken care off so at the monent, such as the buildings maintance and boilers and stuff like that. Its almost like having the best parts of renting but paying for it via a IO mortgage.
So lets hope the market will rise in this area.
.Thaks for saying so, and you're welcome.JonRohan said:
Good for you. It's refreshing to see youngsters (which I assume you are) with the fibre, and balls, to make up their own minds and stick to their decisions. Whilst it does raise the chances of getting things badly wrong, it's also the only way that most people ever really make big strides forwards in their lives. You have to take chances. It's just a case of carefully picking the right chances to take.JonRohan said:
I bought quite a lot of shares in a small, virtually unknown company about 20 years ago. Friends and family, AND professional advisors, told me I was nuts, and that it was a ludicrously chancy thing to do, I was an idiot, I was going to lose my shirt, wreck my life, and the world was going to end prematurely and the universe explode. Well, maybe I exagerate a smidgeon, but you get the idea. I was vehemently advised against. But I did it anyway.
The company? Oh, didn't I say? Microsoft.
I hope it all works out for you. One thing I didn't touch in my posts, deliberately, was the emotional value of having your OWN place. YOUR home. It's very different, IMHO, from living with parents or sharing with friends. That old saying about an Englishman's home being his castle has a very deep-rooted psychological truth buried in it, however trite the saying may seem.JonRohan said:
Indeed. Or at least, doesn't fall.JonRohan said:So lets hope the market will rise in this area.
But there's one more point I deliberately didn't make.
If the market does collapse, it isn't a total disaster provided you were buying a home, not an investment, and providing you don't suffer any personal reverses and can continue to pay the mortgage. Because ... the value of your home is rather notional. If yours falls in value, so will all the others. Conversely, if yours rises, so will everything else. And we all need somewhere to live. So the value of your home, and the state of the market, only really becomes an issue if you emigrate, move to a substantially differently priced area, sell up and down-size, etc. In the meantime, provided you can meet the payments, what the market is doing is pretty meaningless.
In any event, good luck with your adventure.
Bes said:OK.
1. I haven't talked about property AT ALL here until a couple of months ago. I was under a different forum name until about 5-6 months ago so how the hell could that have been me 2.5 years ago?!
2. Yes I have put a timescale on it
Please get your facts straight before you start slating other members and their posts.
Then I appologise - I don't pay that much attention to actual forum user's names rather the content of their posts.
The "doom & gloom" post was so similar it was scary to a now "obviously another" poster.
Soldato
If its Sheffield you're on about buying in then I would be suprised if house prices didn't increase.
Sheffield has improved it's centre and surrounding estates considerably over the past 10years and in the past 2 - 3 years in particular I have seen a dramatic change to areas that were actually once quite derelict; Unused warehouse and factory spaces being converted to nice apartments or bars/shopping centre's. New hard landscaping of the streets and much redesigning of public green spaces. The winter garden is excellent to. West street in particluar has seen some dramatic change and that's student=ville! Fast becoming a very stylish and desireable city to live. Of course, none of this means anything if the entire housing market makes a change and I have also made absolutely no sense if you are not thinking of buying in Sheffield at all
Sheffield has improved it's centre and surrounding estates considerably over the past 10years and in the past 2 - 3 years in particular I have seen a dramatic change to areas that were actually once quite derelict; Unused warehouse and factory spaces being converted to nice apartments or bars/shopping centre's. New hard landscaping of the streets and much redesigning of public green spaces. The winter garden is excellent to. West street in particluar has seen some dramatic change and that's student=ville! Fast becoming a very stylish and desireable city to live. Of course, none of this means anything if the entire housing market makes a change and I have also made absolutely no sense if you are not thinking of buying in Sheffield at all
Associate
Sequoia said:Good for you. It's refreshing to see youngsters (which I assume you are) with the fibre, and balls, to make up their own minds and stick to their decisions. Whilst it does raise the chances of getting things badly wrong, it's also the only way that most people ever really make big strides forwards in their lives. You have to take chances. It's just a case of carefully picking the right chances to take.
I bought quite a lot of shares in a small, virtually unknown company about 20 years ago. Friends and family, AND professional advisors, told me I was nuts, and that it was a ludicrously chancy thing to do, I was an idiot, I was going to lose my shirt, wreck my life, and the world was going to end prematurely and the universe explode. Well, maybe I exagerate a smidgeon, but you get the idea. I was vehemently advised against. But I did it anyway.
The company? Oh, didn't I say? Microsoft.
Dang, that must have cashed in pretty well.
I Myself got onto the property ladder 15 months ago and i am very glad i did, at the time i was a nervous wreck about finally getting out of my parents (i was 25 when i moved out!). I Still stand a good chance of loosing money but i took a 3 year fixed rate mortgage for my Maisonette flat and when it runs out i may look for somewhere a little bigger and slightly more perminant home.
If i was intelligent like my sister i would have moved out when i was 18 and made loads of money on property (she is 3 years older than me though!). She bought a semi 2 bed for 46k, sold it 2 years later for nearly 80, bought the next house for just under 100k and sold that 3 years later for 170k (lots of work done though be She + husband loves the the renovation thing!)
....and i had to be a 1 bed Maisonette for 80k.. oh well, at least it's mine (you know what i mean!)
Captain Planet said:I have also made absolutely no sense if you are not thinking of buying in Sheffield at all
Sorry matey im not living in Sheffield. Although it is a nice place to live im no hanging around.
Im moving to a village just outside bromsgrove Worcestershire.
Caporegime
djjuk said:If I had your crystal ball then yes interest only would be well worth it
However, with all due respect crystal balls do not exist...Property is currently approx 8 times the average wage, first time buyers are at an all time low, thus the lifeblood of the market is rapidly declining.
Buy to let's investors will not keep the market advancing at it's current level, let alone the rates seen over the last 4 or 5 years.
A crash? Unlikely, but very possible. Stagnation? Much more likely, & quite probably for a fair while. Thus imo currently 'interest only' loses all benefits associated with expected equity increase.
Rent, & wait it out for a while...Unless you also have a crystal ball of course
who needs a crystal ball? we knew it would go up. with more travel links, more work, more shops being built in both areas and with the major city near by becoming stupidly priced, we knew both properties would rise in value.
they have done.
1st house - bought for £35k, sold 3 years later for £55k. (incidently it went on the market again recently and sold for £105k).
2nd house (current) bought for £85k, on market for £130k (priced to sell, its worth more than that).
ok we didnt realise that they would rise so much but knew it would go up.
we have used the market to our advantage, i think others should do the same.
admittedly we have never borrowed anywhere near our maximum as thats running to close to the edge for my liking :]
Soldato
I was reading an article this morning this in the paper regarding Alliance and Leicester's latests mortgage figures and they were actually showing a rise in first time buyer mortgage approvals and a general rise purchases overall.
This may, however, be seasonal since house shift quicker in the summer.
I completed and picked up the keys to my new house on Thursday and I've taken a fixed term repayment mortgage rather then an interest only.
If I was looking at flats and just trying to build equilty though speculating then that would certainly be the way I would go, and I may well consider it if I buy to let in the next few years.
At the moment though I'm content to have a repayment mortgage, simply because I intend to stay in the property for the next 5-7 years and pay off the mortgage in that period. The mortgage itself is less that 3x my salary without taking my wife's into account. I reckon that with steady growth (or even a crash/rebuild) I should be able to make 5% a year in the area I've bought within the M25 and that I'll leave me with a decent lump sum to buy some land and build my own place outright when the time comes.
This may, however, be seasonal since house shift quicker in the summer.
I completed and picked up the keys to my new house on Thursday and I've taken a fixed term repayment mortgage rather then an interest only.
If I was looking at flats and just trying to build equilty though speculating then that would certainly be the way I would go, and I may well consider it if I buy to let in the next few years.
At the moment though I'm content to have a repayment mortgage, simply because I intend to stay in the property for the next 5-7 years and pay off the mortgage in that period. The mortgage itself is less that 3x my salary without taking my wife's into account. I reckon that with steady growth (or even a crash/rebuild) I should be able to make 5% a year in the area I've bought within the M25 and that I'll leave me with a decent lump sum to buy some land and build my own place outright when the time comes.