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Help Me To Understand Mortgages

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Help me understand this.

I've been around 15 property viewings

Found one which is perfect

Have roughly 20k deposit

Seek to borrow up to 170k (initial figure)

Property is OIEO 175k

Bank says they can lend me 170k, no probs whatsoever

Over 25 years I end up paying 328k

...

How does paying 328k for a 175k property make me money? Even if house prices were going up, this would still be impossible to achieve.

The only scenario wherein I might be able to make money is if I put it up for sale immediately afterwards and cross my fingers that someone will buy it for 30k extra.

I don't understand this game.

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You are paying interest - which is the cost of borrowing- this replaces you rental payments. So calculate rental payments of 25 years and take away the interest payment from your mortgage payments( if you on a repayment mortage.) Crudely your loss is the difference between interest payments and rent. Do not forget your equity if house prices rise

Help me understand this.

I've been around 15 property viewings

Found one which is perfect

Have roughly 20k deposit

Seek to borrow up to 170k (initial figure)

Property is OIEO 175k

Bank says they can lend me 170k, no probs whatsoever

Over 25 years I end up paying 328k

...

How does paying 328k for a 175k property make me money? Even if house prices were going up, this would still be impossible to achieve.

The only scenario wherein I might be able to make money is if I put it up for sale immediately afterwards and cross my fingers that someone will buy it for 30k extra.

I don't understand this game.

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Help me understand this.

I've been around 15 property viewings

Found one which is perfect

Have roughly 20k deposit

Seek to borrow up to 170k (initial figure)

Property is OIEO 175k

Bank says they can lend me 170k, no probs whatsoever

Over 25 years I end up paying 328k

...

How does paying 328k for a 175k property make me money? Even if house prices were going up, this would still be impossible to achieve.

The only scenario wherein I might be able to make money is if I put it up for sale immediately afterwards and cross my fingers that someone will buy it for 30k extra.

I don't understand this game.

Sounds like you already understand it very well.

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Help me understand this.

How does paying 328k for a 175k property make me money? Even if house prices were going up, this would still be impossible to achieve.

The only scenario wherein I might be able to make money is if I put it up for sale immediately afterwards and cross my fingers that someone will buy it for 30k extra.

I don't understand this game.

You only really net big money in property if you buy near the bottom of the price cycle.

But your house could easily double in value to 350K by 2035.. thats a long time away.

At an average of 3% pay increase per annum, salaries will double in 25 years time.

If you rented a place at 1K a month for 25 years, you will still spend 300K, and having nothing to show for it at the end.

Edited by MonkeyNuts

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You only really net big money in property if you buy near the bottom of the price cycle.

But your house could easily double in value to 350K by 2035.. thats a long time away.

At an average of 3% pay increase per annum, salaries will double in 25 years time.

If you rented a place at 1K a month for 25 years, you will still spend 300K, and having nothing to show for it at the end.

Thank you, this is starting to make sense to me. But let's say that my property increases in value. I realise that interest rates aren't directly tied to house prices but when interest rates do inevitably go up, wouldn't that still leave everything out of balance in terms of value for money, given that interest rates are the lowest they've been and that when they do go up, the additional repayments are likely to be substantial?

I could offset my costs by taking on a tenant, that'd sweeten the deal I suppose. Bit of an uphill struggle this property ladder thing eh? ;p

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Thank you, this is starting to make sense to me. But let's say that my property increases in value. I realise that interest rates aren't directly tied to house prices but when interest rates do inevitably go up, wouldn't that still leave everything out of balance in terms of value for money, given that interest rates are the lowest they've been and that when they do go up, the additional repayments are likely to be substantial?

I could offset my costs by taking on a tenant, that'd sweeten the deal I suppose. Bit of an uphill struggle this property ladder thing eh? ;p

Or you could wait for another 20% drop in prices and buy a similar 175K place for 140K.. the risk is, it might never happen :angry:

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I have to act some time, prices have fallen around the area in question - I don't see them dropping further any time "soon".

HPC supposedly caused by irresponsible lending on the part of banks, sparking house price inflation. Only way to get economy back to normal, as claimed by this community, is by having house prices fall in line with pre-craziness average growth. Recession starts, no one can afford anything. Companies forced to downsize, people lose jobs and the word of the day is "efficiency".

Banks now lending "kind of responsibly", people are aware prices have fallen - provides incentive to invest. Majority do not suspect further crash. Despite houses not selling like hot cakes, demand is still high and a few buyers are "inhibiting the decline in prices" by choosing to buy.

Message is, there is no house buyers union and that no one is on strike, causes confusion and staggers the charts. Because big time investors play cards closer to their chests does not mean that peeps have to.

Misc variable: US is about to plummet into the depths of hell, impact on rest of world?

Predictable outcome = N/A ?

Time scales = ?

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  • 150 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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