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bobdabuilder

Why Equity Withdrawl Is Like A Second Income

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The rising value of house prices mean that millions of homeowners could earn a ‘second income’ from remortaging their property. Under this system – called mortgage equity withdrawal – homeowners can borrow a lump sum from their mortgage provider which is added to the amount they must eventually pay back. But this money is covered by the rising value of the property on remortgaging making the sums borrowed practically a ‘second income’. Thousands have taken advantage in recent years – encouraged by low interest rates and leaping property values – often to buy cars, holidays and electrical goods. Analysts already estimate that £15 in every £100 spent now comes from equity withdrawal. This figure looks certain to rise over the coming decades as house prices increase quicker than wages.

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Guest prudence

The rising value of house prices mean that millions of homeowners could earn a ‘second income’ from remortaging their property. Under this system – called mortgage equity withdrawal – homeowners can borrow a lump sum from their mortgage provider which is added to the amount they must eventually pay back. But this money is covered by the rising value of the property on remortgaging making the sums borrowed practically a ‘second income’. Thousands have taken advantage in recent years – encouraged by low interest rates and leaping property values – often to buy cars, holidays and electrical goods. Analysts already estimate that £15 in every £100 spent now comes from equity withdrawal. This figure looks certain to rise over the coming decades as house prices increase quicker than wages.

and house prices continued to rise and we all lived happily ever after!!

where will the money come from to pay for the higher priced houses if wages increase at a lower rate. Even the most irresponsible of lenders will eventually put a cap on income multiples

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and house prices continued to rise and we all lived happily ever after!!

where will the money come from to pay for the higher priced houses if wages increase at a lower rate. Even the most irresponsible of lenders will eventually put a cap on income multiples

Prudence, are you suggesting there is a flaw in the above?

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The rising value of house prices mean that millions of homeowners could earn a ‘second income’ from remortaging their property. Under this system – called mortgage equity withdrawal – homeowners can borrow a lump sum from their mortgage provider which is added to the amount they must eventually pay back. But this money is covered by the rising value of the property on remortgaging making the sums borrowed practically a ‘second income’. Thousands have taken advantage in recent years – encouraged by low interest rates and leaping property values – often to buy cars, holidays and electrical goods. Analysts already estimate that £15 in every £100 spent now comes from equity withdrawal. This figure looks certain to rise over the coming decades as house prices increase quicker than wages.

Call me stupid but I though the whole point of buying your house was to pay it off so that by the time you retire and have a reduced income you can live a relatively comfortable lifestyle. If you inflate your debt during your working life you are an IDIOT. However if you wish to live in poverty at the age of 65 carry on after all you will be in good campany in a country of equally miguided muppets ...

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This figure looks certain to rise over the coming decades as house prices increase quicker than wages.

I would go and have a sit down and a long think about this if I were you.

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I would go and have a sit down and a long think about this if I were you.

Those words didn't come out of my mouth. I'm quoting from the Centre for Economic and Business Research (CEBR) who told Daily Mail readers the above in 2003. No wonder we are in such a mess if "esteemed" economic think tanks come out with such mickey mouse statements. Incidentally they are currently talking up the housing market again . . .

Annual house price inflation will slow to 4.7% this year and 0.8% in 2006, before rising marginally to 2.3% in 2007 and 3.0% in 2008

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Those words didn't come out of my mouth. I'm quoting from the Centre for Economic and Business Research (CEBR) who told Daily Mail readers the above in 2003. No wonder we are in such a mess if "esteemed" economic think tanks come out with such mickey mouse statements. Incidentally they are currently talking up the housing market again . . .

Annual house price inflation will slow to 4.7% this year and 0.8% in 2006, before rising marginally to 2.3% in 2007 and 3.0% in 2008

God!! these people make me want to vomit!

From the oginal post, I take it we are not talking about borrowing from an asset to re-invest in plant or equipment for a business (which is all well and good) which in turn should produce further income from that purchase which will service the debt and provide extra revenue and profit for that business which will mean your (or your shareholders) stake will be worth more and should enable a pay rise which will increase your disposable income to buy cars and holidays...

What we seem to be talking about is borrowing from an asset to do what?....spend it on cars and holidays? which will produce no further income, will not appreciate over time, will mean that the 30 grand 4x4 you just bought has really cost you £90,000 (mortage over 25 years - pay back aprox 3 times what you borrow) ....very clever.

I stopped going to school at 15 have not one qualification to my name, yet I seem to have spotted a teeny weeny error in their thought process.

Can somebody tell me what I am doing wrong in this 'different' world we live in today!

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The rising value of house prices mean that millions of homeowners could earn a ‘second income’ from remortaging their property. Under this system – called mortgage equity withdrawal – homeowners can borrow a lump sum from their mortgage provider which is added to the amount they must eventually pay back. But this money is covered by the rising value of the property on remortgaging making the sums borrowed practically a ‘second income’. Thousands have taken advantage in recent years – encouraged by low interest rates and leaping property values – often to buy cars, holidays and electrical goods. Analysts already estimate that £15 in every £100 spent now comes from equity withdrawal. This figure looks certain to rise over the coming decades as house prices increase quicker than wages.

bobdabuilder discovers MEW.

Presumably we can rely on him to tell us property prices have collapsed 5 years after the fact.

Previously dscussed on HPC, from "Newbie FAQ's & Answers. Q's from a newbie... ", > 1 year ago.

hi smeagle

MEW= MORTGAGE EQUITY WITHDRAWL . basically people taking equity out of their house in the form of further borrowing (as a secured loan)

... and

the lazy might want to go here:

http://www.graphicinvestor.com/econo/UK/MO...S/Mortgages.htm

or use their eyes now:

04Q4MEWabs.gif

04Q4MEWpct.gif

Those who haven't just discovered this will already know the pit falls of trading property on the margin. Imagine pyramidding your dot-com shares in this fashion. Plenty did. Funny how that is seen as ridiculous ... after the fact.

And bob, if you don't want to be ridiculed for something you didn't write that is 2 years past its sell by date, quote the source and link it for crissakes. Oh, by the way bob, the ftse has bottomed and looks set to rise by ~50%. .... yeah, bloody annoying isn't it to see people trot out 2 year old statements ....

Edited by Sledgehead

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Can somebody tell me what I am doing wrong in this 'different' world we live in today!

You're aiming to die with substantial net assets, at which point they're no use to you. Good financial management would be to die with a 100% mortgage and just enough net assets in your estate to pay for your funeral -- then you'll have had the benefit of the additional money during your lifetime, instead.

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Guest Charlie The Tramp

Call me stupid but I though the whole point of buying your house was to pay it off so that by the time you retire and have a reduced income you can live a relatively comfortable lifestyle. If you inflate your debt during your working life you are an IDIOT. However if you wish to live in poverty at the age of 65 carry on after all you will be in good company in a country of equally misguided muppets ...

Myself being a good example but with prudence a much better lifestyle. ;)

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You're aiming to die with substantial net assets, at which point they're no use to you. Good financial management would be to die with a 100% mortgage and just enough net assets in your estate to pay for your funeral -- then you'll have had the benefit of the additional money during your lifetime, instead.

There's some reasoning in there, but I think they'd chase your family for the debt.

Another way of doing things would be to go through life owning nothing, spending every last penny on rent and having a good time. At retirement age, turn to a life of crime to finance your retirement. If you get caught don't worry, you'll get free board, lodging and health care for a few years. On release, rinse and repeat. And all at the expense of the tax payer (homeowner).

If you get away with it, great, quids in.

If you own nothing they can take nothing from you.

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Sledgehead if you had taken the time to read the thread you will see I described their thinking as "mickey mouse". Your ten minute outburst was wasted on me my friend. And anyone else who read the thread.

The article is relevant because today they are talking up house prices - and it is good to look at the advice they were giving in 2003 that has contributed to the mess we face today.

On this forum too many ridicule any reports from VIs saying the economists know better. Not always.

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Guest Charlie The Tramp

There's some reasoning in there, but I think they'd chase your family for the debt.

Incorrect, they can only chase your estate. If the estate`s assets do not cover the debt, they have the problem.

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You're aiming to die with substantial net assets, at which point they're no use to you. Good financial management would be to die with a 100% mortgage and just enough net assets in your estate to pay for your funeral -- then you'll have had the benefit of the additional money during your lifetime, instead.

Hypothetically maybe this idea would work....

But.

As your wages rise through your lifetime then decline after retirement....how would you service the debt you have accumulated during your financial 'boom years'......or do you simply put a gun to your head at 65!

hey! they made a film about that, but you had to die at 30. I cant remember what it was called! maybe Gordon Brown is a film buff and hates old people!....watch out Charlie.

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Guest Charlie The Tramp

hey! they made a film about that, but you had to die at 30. I cant remember what it was called! maybe Gordon Brown is a film buff and hates old people!....watch out Charlie.

No worries, I died years ago, just refuse to lay down. He needs my taxes to pay your pension.

:P

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The rising value of house prices mean that millions of homeowners could earn a ‘second income’ from remortaging their property. Under this system – called mortgage equity withdrawal – homeowners can borrow a lump sum from their mortgage provider which is added to the amount they must eventually pay back. But this money is covered by the rising value of the property on remortgaging making the sums borrowed practically a ‘second income’. Thousands have taken advantage in recent years – encouraged by low interest rates and leaping property values – often to buy cars, holidays and electrical goods. Analysts already estimate that £15 in every £100 spent now comes from equity withdrawal. This figure looks certain to rise over the coming decades as house prices increase quicker than wages.

Err... if it has to be paid back (potentially over 25 years) with interest to boot then it cannot be considered "income", generally if you're paid to do a job the employee is not expected to return his wage to the employer over two decades, not unless there is some wicked amount of embezzlement of some sort.

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Logans Run.

Hey Charlie!

How are you? not chatted in a long while.

Thats it! Logans Run.

Think I'll see if Blockbusters has a copy of that for tonight......my girly will just love watching an old sci fi film (not)

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Err... if it has to be paid back (potentially over 25 years) with interest to boot then it cannot be considered "income", generally if you're paid to do a job the employee is not expected to return his wage to the employer over two decades, not unless there is some wicked amount of embezzlement of some sort.

Yes, spot on. And when it all goes tits up - house price crash, recession, consumer debt bubble goes bang - I'm sure those who write the obituaries will include the fact that people were fed the line that equity withdrawal is "like a second income" and wonder how they ever got away with such bull.

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Guest muttley

You're aiming to die with substantial net assets, at which point they're no use to you. Good financial management would be to die with a 100% mortgage and just enough net assets in your estate to pay for your funeral -- then you'll have had the benefit of the additional money during your lifetime, instead.

Good financial management would be to build up a passive income that exceeds your outgoings.That way there's no need to die at all.

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MEW is nothing more than glamourised cheap loans. The mortgage repayments go up to cover the withdrawal and you pay interest on it. I don't think lenders are losing sleep on people discovering this technique of borrowing more money...if you can't pay, you lose your house.

As for the trick of dying in debt, the banks have cottoned onto this one(!). You can't take out 25 year mortgages when you reach middle age. If this MEW is second income nonsense came out of The Daily Mail, it explains everything!

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  • 301 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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