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How To Get A Fool On The Property Ladder...


Belfast Boy

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HOLA441
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HOLA442
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HOLA443
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HOLA444

I still havn't completely confirmed what is problem with these. I suspect it is that you have to accept their inflated valuation otherwise no deal.

Well just looking at the 'deal' on the webpage...

No deposit required and up to a 40 year mortgage term. Does that not sound subprime to you?

All they need to say is 5x joint income aswell. Then it ticks all 3 boxes for subprime.

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HOLA445

Well just looking at the 'deal' on the webpage...

No deposit required and up to a 40 year mortgage term. Does that not sound subprime to you?

All they need to say is 5x joint income aswell. Then it ticks all 3 boxes for subprime.

Well maybe, but that would not be anything new, I thought most offers where 5.5xjoint. The question is, is it a good deal for the buyer, and how can they not require a 20-25% deposit as they do now for most other deals. What is it that allows them to offer no payback of the deposite and/or reduction if prices drop? Sounds perfect, why aren't all mortgage deals like this?

It looks like a good deal for the buyer, but I have nearly always found there is no such thing when dealing with a large corporation. They have alot of clever people paid to make bad deals look like good deals. Hence I have always suspected that the main problem with these deals is that your ability to negotiate the price is removed.

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HOLA446

This Momentum mortgage product has been around for 14 mths and, whilst I hate it, it has served its purpose and hopefully wont be needed any more.

The house has to be independently valued by the lender. If they get this wrong the bank looses so I have found they are very tight on it, even undervaluing it when similar houses have sold at a higher price just weeks earlier. But that's another story. They are also very thorough on their checks and alot of people get turned down. (perhaps correctly, but it seems to me more difficult than other products)

The developer pays the 5% deposit as a loan. Which he is told he will get back ,in 5 years if the property has increased by more than 5%. The bank we'll reduce your mortgage by up to 10% of the original property value if your property value has fallen after 5 years. Thats plain English. In 5 years if your property has fallen from the sales price the Bank will reduce your mortgage by up to 10%. In that case you wont have to pay the builder his 5%. So that's a safety buffer of 15% against falling prices in the next 5 years. As I said before a purchaser would be mad not to go for it. I don't like it as I loose 5 % and the bank has a hold on us for the other 10%. They will try to come after us for it. Its only the very bearish who are predicting another 15% drop and even most of them believe alot of that, if it were to happen would be recovered in the next 5 years. Yous can laugh at it all you want but if you thought about it you might think different. Remember the guarantee of a reduction (10 +5%) is not coming from the builder it is coming from the bank and the method is a reduction in the Mortgage loan.

For me the big thing was - the Banks wouldn't have done this they thought they could loose out.

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HOLA447

This Momentum mortgage product has been around for 14 mths and, whilst I hate it, it has served its purpose and hopefully wont be needed any more.

The house has to be independently valued by the lender. If they get this wrong the bank looses so I have found they are very tight on it, even undervaluing it when similar houses have sold at a higher price just weeks earlier. But that's another story. They are also very thorough on their checks and alot of people get turned down. (perhaps correctly, but it seems to me more difficult than other products)

The developer pays the 5% deposit as a loan. Which he is told he will get back ,in 5 years if the property has increased by more than 5%. The bank we'll reduce your mortgage by up to 10% of the original property value if your property value has fallen after 5 years. Thats plain English. In 5 years if your property has fallen from the sales price the Bank will reduce your mortgage by up to 10%. In that case you wont have to pay the builder his 5%. So that's a safety buffer of 15% against falling prices in the next 5 years. As I said before a purchaser would be mad not to go for it. I don't like it as I loose 5 % and the bank has a hold on us for the other 10%. They will try to come after us for it. Its only the very bearish who are predicting another 15% drop and even most of them believe alot of that, if it were to happen would be recovered in the next 5 years. Yous can laugh at it all you want but if you thought about it you might think different. Remember the guarantee of a reduction (10 +5%) is not coming from the builder it is coming from the bank and the method is a reduction in the Mortgage loan.

For me the big thing was - the Banks wouldn't have done this they thought they could loose out.

So let me get this straight...

1. They say: "No deposit needed from you - the developer pays your 5% deposit."

Catch: No deposit meaning you pay the interest on the FULL amount borrowed; lets say for talks sake £150,000 over 25 years at 4.5% minus the 5% the developer is paying which amounts to £7500 bringing your total mortgage to £142,500. Thats £800 a month? Crazy!

2. They say: "Peace of mind - you'll only pay your deposit back if the property value grows by 5% or more after five years."

Catch: That's garaunteed to happen in my opinion; and who is going to do the valuation? Them? Thats another £7,500 you'll have to add to your mortgage, an extra £50+ a month; doesn't sound like much but in addition to the near £750 a month (after 5 years of repayments mostly on interest) thats a big financial burden. But hey you're property value has went up... but so has others.

3. They say: "Protection against falling house prices – we'll reduce your mortgage by up to 10% of the original property value if your property value has fallen after 5 years."

Catch: Same as above, can't see them going below the price paid now or the next 2-3 years (perfect time to buy imo - depends on bank lending flexibility)

4. They say: "Choice – competitive fixed and discounted mortgages up to 95% of the property value."

Catch: This is what they want, and will obviously hit you with the interest. Unless you can secure it at 4.5-5% you'll get hit pretty hard with interest repayments. I'm aiming to have as big-a-deposit as I can afford. But with this you'd be better of renting at reduced prices and better standard of living (depending what you go for) whilst attempting to gather a decent deposit.

5. They say: "Flexibility – choose a term that suits you up to 40 years*."

Catch: Couldn't see anyone getting more than a 5-year fixed rate. Total trap.

6. They say: "Free Valuation"

Catch: Not free at all. A portion of your one months interest payments on the mortgage will cover this no problem. If its on sale for £150,000 they'll tell you its worth £150,000.

7. They say: "Extra value – No higher lending charge (normally charged for any mortgage over 90% Loan to Value)."

Catch: See above.

Not sure if you all agree with this, but I just can't see past them wanting everyone to buy now with no deposits maximising their potential income from the sale. Snakes in suits the lot-of-them.

I plan on buying at the end of 2012 with (hopefully) at least a 40% deposit. I understand there are people who currently cannot afford to muster together anysort of a deposit which is perfectly understandable with todays living cost. But then again there is also people who would love a 5-bedroom detached house overlooking glorious landscape at a combined wage of £35,000 but this deal will allow such a purchase to succeed despite the obvious disparity in house valuation and income. 40-year mortgages should be scrapped and some measurement of financial qualification needs applied as this is what has contributed to this mayhem in the first place. The market was tested regarding whether people were willing to get themselves head-over-heels in dept and the result of that test is "yes" they are. Reducing the mortgage life-span to 25 years and a minimum 10-20% deposit will contribute to an a manageable equilibrium of affordability without, completely, stressing the laws of financial common-sense.

But banks can't make money that way so it will never happen... shame.

Good luck

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HOLA448

I'm not sure there is alot of particularly surprising stuff there. Of course you pay intertest on what you borrow from the bank, but the whole point is you are borrowing from the developer aswell, apparently interest free, and borrowing more than you can afford without any thought to how you will pay back the 5%. The developer is lending you money in order to buy his stupidly expensive house, is he regulated, does he check you have the finances/stability to pay?

Free stuff is never free, its use of the word in advertising is misleading.

They have addressed their catches by covering market increases/decreases, although its hard to see what way they will go to kill the developer or the borrower. I guess they (have to) believe the market is recovering so expect the customer will have to pay the deposit eventually.

The more I look at it, the more I see it is a way to lend more money to FTBs who can't afford it and get temporary cash flow for developers who are starting to look like liabilities on their books. It is an attempt to break the stalemate and get developer debt down (that creditors will dilute the pot) and turn it into consumer debt they can reposess. For the banks its a lesser of 2 evils.

Anyway I'm not saying any of that with any authority, just brain storming really.

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HOLA449

I'm not sure there is alot of particularly surprising stuff there. Of course you pay intertest on what you borrow from the bank, but the whole point is you are borrowing from the developer aswell, apparently interest free, and borrowing more than you can afford without any thought to how you will pay back the 5%. The developer is lending you money in order to buy his stupidly expensive house, is he regulated, does he check you have the finances/stability to pay?

Free stuff is never free, its use of the word in advertising is misleading.

They have addressed their catches by covering market increases/decreases, although its hard to see what way they will go to kill the developer or the borrower. I guess they (have to) believe the market is recovering so expect the customer will have to pay the deposit eventually.

The more I look at it, the more I see it is a way to lend more money to FTBs who can't afford it and get temporary cash flow for developers who are starting to look like liabilities on their books. It is an attempt to break the stalemate and get developer debt down (that creditors will dilute the pot) and turn it into consumer debt they can reposess. For the banks its a lesser of 2 evils.

Anyway I'm not saying any of that with any authority, just brain storming really.

It was introduced a year ago to allow the people who believed they were getting a good prive, but were afraid it would get even lower, to go ahead. Even though the person is paying interest on 95% they are assessed (what ever that means) on the ability to serve the total 100% as you say, they may have to. At the end of 5 years, if the property has rissen by more than 5%, which leaves a buffer of over 10% the bank can remortgage at 95% and release another 5%. I am guessing that is the way it will work.

I don't know why you are all against it. For me if I was buying at any time in the future, be that even in a boom I would love to have that 15% safety net behind we.

You are right it was an attempt to get things moving a year ago and the only way to do that was to give the purchaser a 'bank guaranteed' discount to cover any future drops (up to the 15%). The bank delayed it for 8 mths until they believed they were safe to release it.

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