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Fancypants

Started Paying My Mortgage Already

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This was how I explained my strategy to our lass this evening... I think I might use it to disarm any waverers I come across in the future.

The rationale being that if I put away, say, £500 a month for the next 5 years that will amount to £30,000 plus compounded interest (hopefully a tidy sum) to put toward a house valued at somewhere near the bottom.

Irrespective of the actual value of the house, this works out far more sensibly than paying £500/month on a loan where a fat chunk of this is just interest and after 5 years maybe only £10,000 has come off the capital owed.

Obviously it is only :rolleyes: the cost of rent and possible lack of saving discipline that prevents this being a far more valuable 25 year strategy but it can also be used to illustrate the folly of buying things on tick in general.

It amazes me that there are folk out there who (thanks to MEW) will be paying the (inflated) cost of things that long since became obsolete until they are pensioners. So many of my generation are already well behind the game in terms of having a tolerable retirement.

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I'm sure that would have been a really great strategy in the last five years :)

Good illustration, and a valuable lesson to anyone investing (for the future, as you do)

Make your investment decisions looking forward, not looking to the past.

Example:

The BTL crowd are currently making decisions on what has already happened.

And somehow to them that will make perfect sense.

Edited by BandWagon

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This was how I explained my strategy to our lass this evening... I think I might use it to disarm any waverers I come across in the future.

Me too, and it's a good way to think.

Thinking about in these terms is very useful, because it helps to quash the natural instinct to buy now instead of renting. Whilst house prices are flat at best, it makes perfect sense.

I think that people's mindset is that they think should buy and get a mortgage as soon as possible because the sooner they get the mortgage, the sooner they'll pay it off and own outright.

But it's just not always true.

Saving prudently now and waiting to buy in 3-4 years for the crash should mean that I may well become an homeowner outright in a faster time-frame than someone taking out a mortgage today.

This is because I will have a much bigger deposit to start with, the house price should be cheaper, and therefore my overall repayment over the loan life will be considerably less.

I should therefore be able to pay off the whole thing a lot faster, and become a homeowner faster than someone buying now.

As Dr. Bubb says it's all about buying at the right point in the cycle.

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This was how I explained my strategy to our lass this evening... I think I might use it to disarm any waverers I come across in the future.

The rationale being that if I put away, say, £500 a month for the next 5 years that will amount to £30,000 plus compounded interest (hopefully a tidy sum) to put toward a house valued at somewhere near the bottom.

Irrespective of the actual value of the house, this works out far more sensibly than paying £500/month on a loan where a fat chunk of this is just interest and after 5 years maybe only £10,000 has come off the capital owed.

Obviously it is only :rolleyes: the cost of rent and possible lack of saving discipline that prevents this being a far more valuable 25 year strategy but it can also be used to illustrate the folly of buying things on tick in general.

It amazes me that there are folk out there who (thanks to MEW) will be paying the (inflated) cost of things that long since became obsolete until they are pensioners. So many of my generation are already well behind the game in terms of having a tolerable retirement.

Yes, this is how we see it. In a static and falling market we are effectively paying off a future mortgage. The difference in cost between renting and buying more than covers the chunk of each month's mortgage payment that actually pays off the capital amount. Put that away each month and you've lost nothing - obviously as prices slide further you suddenly start gaining a heck of a lot!

When friends and colleagues ask if we're still 'saving for a deposit' (sometimes with that tone of pity) I say cheekily, 'Nah, we've saved that already - now we're just saving to buy house.'

Edited by CrashedOutAndBurned

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I won't deny that it makes perfect sense to save for the future. If all you guys that rent on HPC saved £500/month, I probably wouldn't even bother to post my bullish remarks, but there is a flaw in this idea.

Not everyone can spare £500/month.

Many that can will be existing, for example, won't be able to go on exotic holidays and buy whatever takes their fancy.I have no problem with this, but hasn't the argument always been that homeowners are the ones that are just existing?

Existing for the moment yes, but looking forward to no money worries in the near future :lol:

Everyone get saving so that I can stop visiting HPC. I haven't had a decent night sleep since I joined :P

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Saving prudently now and waiting to buy in 3-4 years for the crash should mean that I may well become an homeowner outright in a faster time-frame than someone taking out a mortgage today.

This is because I will have a much bigger deposit to start with, the house price should be cheaper, and therefore my overall repayment over the loan life will be considerably less.

I should therefore be able to pay off the whole thing a lot faster, and become a homeowner faster than someone buying now.

As Dr. Bubb says it's all about buying at the right point in the cycle.

I'm proof that the above system works well.

I waited from 1990 for almost 5 years to FTB in 1995. I got promoted twice in this time and I saved a decent deposit.

Got a nice 3 bed property from a panicky couple who were in serious NE and were seperating.

Got it so cheap I paid it off inside 7 years. Been saving hard ever since for the next 'opportunity'.

If I had bought in 1990 I would have been trapped in a squalid 1 bed flat with NE.

You might have to wait longer than 4 years this time for the true dip in prices...

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Got it so cheap I paid it off inside 7 years. Been saving hard ever since for the next 'opportunity'.

If I had bought in 1990 I would have been trapped in a squalid 1 bed flat with NE.

Well done, Without_a_Paddle.

Back in 1990 I was 16 and without property ownership on my mind... the current bubble has really been incredibly bad timing on my life and aspirations.

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Yes, this is how we see it. In a static and falling market we are effectively paying off a future mortgage. The difference in cost between renting and buying more than covers the chunk of each month's mortgage payment that actually pays off the capital amount. Put that away each month and you've lost nothing - obviously as prices slide further you suddenly start gaining a heck of a lot!

Absolutely! Infact the amount I save each month is greater than my rent.. so I'm (in effect) overpaying my morgage B)

When friends and colleagues ask if we're still 'saving for a deposit' (sometimes with that tone of pity) I say cheekily, 'Nah, we've saved that already - now we're just saving to buy house.'

Nice quote.. must remember that next time someone asks me!

I won't deny that it makes perfect sense to save for the future. If all you guys that rent on HPC saved £500/month, I probably wouldn't even bother to post my bullish remarks, but there is a flaw in this idea.

Not everyone can spare £500/month.

True, but for those that can I think it's a good strategy and it's the one I'm following.

I suspect (having seen various salary polls here) that higher than average salary of HPC members and the occasionally posts on frugality, that quite a few people here are doing this.

Many that can will be existing, for example, won't be able to go on exotic holidays and buy whatever takes their fancy. I have no problem with this, but hasn't the argument always been that homeowners are the ones that are just existing?

Being frugal is what you make of it... for me it's the difference in what I want and what I need... when it comes down to it what you need doesn't cost much. It's not possible to work or save all the time, and you'll find you need a holiday occasionally... but thats only 2 weeks each year... there's still another 50 in which to work / save :D

BTW yes some homeowners (eg recent FTBers mortgaged to the hilt) just exist because that's all they can do (because of mortgage / household expenses). Whereas we have the option to save everything one month, and (if we wanted to) spend everything next month. Knowing I have the flexibility is more important than actually spending to me.

Existing for the moment yes, but looking forward to no money worries in the near future :lol:

Everyone get saving so that I can stop visiting HPC. I haven't had a decent night sleep since I joined :P

I'm trying my best (to save) enworb :P

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This was how I explained my strategy to our lass this evening... I think I might use it to disarm any waverers I come across in the future.

The rationale being that if I put away, say, £500 a month for the next 5 years that will amount to £30,000 plus compounded interest (hopefully a tidy sum) to put toward a house valued at somewhere near the bottom.

Irrespective of the actual value of the house, this works out far more sensibly than paying £500/month on a loan where a fat chunk of this is just interest and after 5 years maybe only £10,000 has come off the capital owed.

Obviously it is only :rolleyes: the cost of rent and possible lack of saving discipline that prevents this being a far more valuable 25 year strategy but it can also be used to illustrate the folly of buying things on tick in general.

It amazes me that there are folk out there who (thanks to MEW) will be paying the (inflated) cost of things that long since became obsolete until they are pensioners. So many of my generation are already well behind the game in terms of having a tolerable retirement.

What a good idea. You have to ask yourself why more people don't do the same ? And it does'nt have to be as much as 500 quid either. Most folks don't realise just how much can be saved by making extra 'principle' payments on a regular basis. If I may expand a little...

I had one of these mortgages on my first home in Australia, http://www.oneaccount.com/onev3/calculator...-detailed.shtml which allowed me and my GF to save a huge sum of money and pay off our 25 year mortgage in just over 4 years. With this type of mortgage your account balance, wages, savings, etc are adjusted daily and then deducted from the principle owed before interest is calculated. Most mortgages don't come even close to doing this and are a complete rip-off.

Based on the calculator in the above link, a couple earning 18,000 a year each and putting in 500/month extra could pay off a 170000 quid mortgage in 8 years. The money that would be going to your Landlord for 5 years would be going towards reducing the mortgage principle instead. Surely if you bought now, and assuming you were earning and saving as above, your mortgage would be paid and you would own your own home by 2013. I know there is an argument for waiting 5 years until 2010 for HPI to fall, but do you think HPI will reduce by that much to warrant waiting that long to buy ? In other words, are you confident that you could buy in 2010 and pay off your mortgage by 2013, therefore making it worth your while to wait that long ?

---

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I won't deny that it makes perfect sense to save for the future. If all you guys that rent on HPC saved £500/month, I probably wouldn't even bother to post my bullish remarks, but there is a flaw in this idea.

Not everyone can spare £500/month.

Very true, but on the other hand there's several people on here saving 1k per month or more. Some may only save 200 pcm on top of their rent - in effect I think the sense comes down to a bit of research:

If (a) Your rent is lower than the mortgage for an equivalent property and (b.) House prices are stagnant or falling then I don't see how anyone can lose?

Edited by FreeFall

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its a fair idea, though it has one fundemental flaw.

by the time you are ready to buy your house, your life will just about over.

spent for the most part in rented accomadation.

lol - I'm not suggesting doing it for 20-30 years! A couple of years toave some cash though....makes sense in my books.

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How much you can save depends on how much you want to save and at what pace. If you really want a big pot of cash, maybe do the following:

1. If you live in a place where you can get around without a car, get rid of the car. If you are renting, can you live where you can walk or cycle to work. We very deliberately created a near zero travel cost life.

2. If you rent but have a spare room get a lodger or sharer. We've just go used to it now. It studenty, it's annoying, it's a littel cramped and third-world, but it's not really too much of a problem if you can find someone hassle free.

3. Stay in more or go and and do free things like walking or free museums.

4. Buy clothes when they wear out, not for fashion or the sake of it.

5. Buy little processed food and ditch the ready meals.

6. Don´t buy any five minute wonders (gadgets, etc) that don´t hit the spot or have any real use.

7. Clear debts

With that scenario it's possible to bank a decent chunk even on modest money.

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by the time you are ready to buy your house, your life will just about over.

spent for the most part in rented accomadation.

No, the idea is to wait for the bottom of the market, that should be in about 4-5 years, when I'll be about 35.

At that stage I should be able to do what Without_A_Paddle did which is to slap down my large deposit on a cheaper house and subsequently have it paid off by my mid-40s.

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My grandad hated his mortgage and prioritised whittling it down as if it was the worst credit card debt. He was mortgage free massively early.

I don't know if he was just savvy or whether it was typical of his generation.

I've asked dozens and dozen of mortgage holders if they've ever made over payments. They've all said no, many reacting as if it's a weird idea or saying they don't have a penny to make extra payments. Actually, thinking about it, it sounds as if many would be instantly screwed if they lost their pay packet for just one month.

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Me thinks your right. Me thinks I won't be getting a good night sleep any time soon :(

Me thinks they will be able to afford a better house.

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Guest Charlie The Tramp

I don't know if he was just savvy or whether it was typical of his generation.

A workmate who had a mortgage in the late 50s and early 60s of 2k took an early morning additional job delivering meat to local schools for a butcher. Each month he would go down to the Town Hall and pay the money earnt off his mortgage fixed at 3% by the council over the term.

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Also bear in mind that it will be psychologically difficult to sink money into houses around 2009/10 – prices will have been falling for years, lending will be tight, repossessions will be high, your family and friends will be telling you not to touch property with a barge pole and will have plenty of anecdotal evidence and tails of woe to back it up, and it will take a leap of faith to step into a homeowner’s shoes (unless, of course, you understand how the property cycle works).

Edited by spline

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The rationale being that if I put away, say, £500 a month for the next 5 years that will amount to £30,000 plus compounded interest (hopefully a tidy sum) to put toward a house valued at somewhere near the bottom.

I know this may seem obvious to some, but make sure that the first few thousand of your savings is put into an ISA so you don't get taxed 20% on that interest. Next April open another ISA and save up in that one until it's full. In 5 years time you should have 5 seperate ISAs going as well as your usual savings account.

Good luck!

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by the time you are ready to buy your house, your life will just about over.

spent for the most part in rented accomadation. (i said)

then warkslad said:

No, the idea is to wait for the bottom of the market, that should be in about 4-5 years, when I'll be about 35

so i said.

exactly.

no binge drinking, thing wearing saturday minger in her right mind will give you a second glance at 35. even if you have a swishy city pad, gram of cocaine and all of craig davids CDs.

they will leave you for their modern apprentices given time.

they have abs. 35yr olds have wrinkles and fat backs.

at 22 your challengers have charging sex pistols of staid, aggresive proportion.

stallions with brutish stamina and looks that would make even your mum horny.

at 35, getting it in the mood is like getting an old mark 3 capri lazer started on a dark winter monday morning.

no hot women would want to ride that.

it would be like trying to put an old dishcloth in a parking meter,.

Edited by right_freds_dead

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so i said.

exactly.

no binge drinking, thing wearing saturday minger in her right mind will give you a second glance at 35. even if you have a swishy city pad, gram of cocaine and all of craig davids CDs.

they will leave you for their modern apprentices given time.

they have abs. 35yr olds have wrinkles and fat backs.

at 22 your challengers have charging sex pistols of staid, aggresive proportion.

stallions with brutish stamina and looks that would make even your mum horny.

at 35, getting it in the mood is like getting an old mark 3 capri lazer started on a dark winter monday morning.

no hot women would want to ride that.

it would be like trying to put an old dishcloth in a parking meter,.

speak for yourself! I'm just entering my athletic prime... there's a lot to be said for cycling 140 miles a week, not drinking and a daily dose of cod liver oil. Keeps the old joints from seizing up!

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It is a good idea, provided you are confident of continuous employment.

If there is a chance of needing to fall back on the state benefits, jobseekers allowance, housing benefit, council tax benefit etc. they will tell you to piss off and don't come back until you used up the most of the money in your savings account.

On the other hand if you had used your savings to buy a real house then the capital tied up in it will not be touched.

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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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