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cashinmattress

Mortgage For Life

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Long-life mortgages are coming to the rescue of hard-up homeowners. Brokers say increasing numbers of borrowers are asking for loans of 30 or 35 years rather than the traditional 25-year repayment mortgage.

In some circumstances, many lenders go even further and let the repayment loans last for up to 40 years.

Extended mortgages are particularly useful to those who have stretched their finances to get super-size loans in property hot spots, especially in the South-East.

Borrow £190,000 at 5.5 per cent over a traditional 25-year term and your monthly payments will be £1,167. But if you extend the mortgage term to 30 years, your monthly bill falls by £89 to £1,078. Pick a 35-year term and the monthly cost will be £1,020 – saving you £147 a month or £1,764 a year on a traditional deal.

The bad news is that while the initial costs look low, the total bill for a long-life mortgage can be eye-wateringly high.

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The 2.9%/35 yr mortgage is the lassie's deal, on the lower part of the article.

Assuming a mortgage of roughly £200k, she's going to end up paying out nearly £350k in interest...versus £200k interest for a more standard 25 year term.

Folk are just so financially and mathematically illiterate that these bankers are shooting fish in a barrel.

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As house prices go up this is the only way people can still buy...

Although taking out a longer term mortgage in some respects isn't all bad if you overpay, although I'm guessing most won't.

This is music to the bankers ears.

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DeathPledge for Life......kinda makes sense in a war is peace kind of way

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The country would be a far better place if:

1) 35 year fixed mortages at 5% were available

2) A similar scheme existed to pay in to a low-risk pension with some guaranteed annuity

So average Joe could live without ever having to visit a roulette table.

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Folk are just so financially and mathematically illiterate that these bankers are shooting fish in a barrel.

Mr. Burns: Are you acquainted with our state's stringent usury laws?

Homer: (Unsure) U...sury?

Mr. Burns: Silly me! I must have just made up a word that doesn't exist.

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The country would be a far better place if:

1) 35 year fixed mortages at 5% were available

2) A similar scheme existed to pay in to a low-risk pension with some guaranteed annuity

So average Joe could live without ever having to visit a roulette table.

£200k house on 5%x35yr is a whopping £1.1 million in total and £2.6k mortgage payment per month. You'd need to have a household income of £100k plus if you wanted to live within the 30% mortgage payment 'safety' zone.

Bonkers. It would work if they proposed a model such as in Sweden, with 50% tax relief on mortgage interest paid. But still bonkers.

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£200k house on 5%x35yr is a whopping £1.1 million in total and £2.6k mortgage payment per month. You'd need to have a household income of £100k plus if you wanted to live within the 30% mortgage payment 'safety' zone.

Bonkers. It would work if they proposed a model such as in Sweden, with 50% tax relief on mortgage interest paid. But still bonkers.

? I make it £1009/month for total repayment of £424,000 (224 of which is interest). Bonkers for sure, but still.

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? I make it £1009/month for total repayment of £424,000 (224 of which is interest). Bonkers for sure, but still.

Tip of the hat.

Yes, I c0cked up the numbers with wrong formula...and wrong rate, but yes, bonkers indeed.

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? I make it £1009/month for total repayment of £424,000 (224 of which is interest). Bonkers for sure, but still.

That's because it was calculated as follows:

200,000 * ((1 + 0.05)^35) = £1,103,203.

£1,103,203 / (35 * 12) = £2,627 per month.

In other words it assumes the borrower doesn't make any monthly payments.

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In what I now call my 'previous life', I worked in the motor trade selling cars up until around 11 years ago. Back then these PCP/Personal Lease-type deals (Ford Options etc) were starting to be pushed quite hard. Being a cynical type I could see right through them; a decent deposit to get a monthly payment which looked good then an amount still owed at the end which made it almost certain you would have no equity and would need to find another hefty deposit to get another car. I was certain thet these schemes would never take off - how wrong I was, people were far more stupid than me and it's now the norm to simply buy based on monthly payment.

So, to the housing market. I am now absolutely convinced that with low rates bringing in all the buyers it could and having seen the government's Help to Buy scam take off and help to keep the bubble inflated, the next move will be to make longer mortgage terms the norm. They'll push it and push it and as with every other scam so far it will suck people in and they will succeed in a 40 year or more mortgage term becoming normal. It's the obvious way of keeping the monthly payment 'affordable' in the eyes of buyers and having been 'Helped to Buy' to get over the deposit hurdle, the monthly payment is the only thing that will be of interest, the term will become irrelevant.

For my part I could be worse, could be better. Those who wish to seek my previous posts will see that we took what we felt was a worthwhile punt and bought in late 2005, based on good solid income and buying a house we felt we could ride out the storm in. We've made sacrifices in order to make plenty of overpayments, especially when the rate came down to under 3% but the truth is I now feel I've been a bit of a plonker and should just had taken the gamble to buy the 4-bed detached/big garden/double garage type house we really wanted as there's no way it will happen now. I remember a chap called Sibley on here who we all felt was a bit of a muppet with his 'they won't let prices fall' mantra; the truth is that other than a fairly minor blip, they've managed to keep the whole thing going despite unprecedented happenings. Even although there have been some falls in some areas, actual affordability is as much of a stretch as ever for anyone starting out as everything else has gone up so much and wages have stagnated.

But all the fiddling has kept things ticking over and the next fiddle is 40 year plus mortgages and the remaining debt being passed onto your offspring; I fear for kids such as my 20yo at Uni but I'm so happy she is such a bright kid and has listened to her Pappa as there's no way she's intending to stick around this country for much longer!!!

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Meanwhile, who is paying for all this cheap money?...its savers, pensioners and capitalists. with money they arent getting to spend in the economy.

So we have a nice mix of borrowers with nothing spare to spend in the economy, and we have savers the other side of the coin, with nothing spare to spend in the economy. Central banks low rates are doing nothing for the economy...everybody loses.

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One of my relatives is on a 30 year 100% mortgage - now in negative equity by at least 10% of the purchase price. Since it isn't the best of areas, and their family is growing, the current plan is to rent it out and rent somewhere else (a disaster waiting to happen in my view).

If they manage to keep a hold of it, they'll have paid it off just as they retire.

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The property bubble is simply the biggest scam imposed on ordinary people, getting people to pay more for a roof over their heads by extending more and more credit on ever longer terms. It's banks, tax collectors and rent collectors that benefit, for ordinary people it is an extraordinary theft of purchasing power - and freedom.

Never understood how paying fortunes to the banks, way in excess of the property value could be deemed s wise or acceptable thing to do.

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if the market had been allowed to correct I would seen it as a sign of capitalism working.

but the system looks more and more like a one way bet for everyone that jumps on.

all sorts of stops to keep it level or inflating but no intervention for when it begins to runaway.

property values falling = very bad

property values rising faster than wage inflation = not a problem

HPI is like a disease.

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image002.gif

The 2.9%/35 yr mortgage is the lassie's deal, on the lower part of the article.

Assuming a mortgage of roughly £200k, she's going to end up paying out nearly £350k in interest...versus £200k interest for a more standard 25 year term.

Folk are just so financially and mathematically illiterate that these bankers are shooting fish in a barrel.

I think most people would bite your arm off to get a 35 year fixed mortgage of only 2.9%, me included. the interest on this over 35 years would be approx £119k, don't know where you get £350k from.

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I think most people would bite your arm off to get a 35 year fixed mortgage of only 2.9%, me included. the interest on this over 35 years would be approx £119k, don't know where you get £350k from.

The problem being, where as before it was the high cost of the interest that was the concern/problem, now it is the high cost of the capital repayment that is the problem on top of stagnating incomes and pensions to finish all very nicely. ;)

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