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lostinessex

Tick Tock - Is That An Interest Only Timebomb I Hear ?

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Equity release to pay down IO mortgage? You need mega HPI to make that viable. Assuming you regard a lifetime in debt as viable in the first place.

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Surely this is people who bought Endowments in the early 90s.

The real fun for IO 2002-2010 starts in 2020ish.

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Surely this is people who bought Endowments in the early 90s.

The real fun for IO 2002-2010 starts in 2020ish.

Maybe - but I think a lot of people cashed in their endowments early when the mortgage companies took their eye off the ball. IIRC endowments were being seen as bad investments 10-15 years ago.

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So you owe say 50% of your home's current "value" to the bank through an IO loan and after equity release to pay it off you end up owing 100%. At least you don't have to pay any more until death - but no trickle down just trickle to the bank.

Edited by billybong

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So you owe say 50% of your home's current "value" to the bank through an IO loan and after equity release to pay it off you end up owing 100%. At least you don't have to pay any more until death - but no trickle down just trickle to the bank.

No.

Equity release aggressively down value homes.

Then they'll only give you 50%.

And you have to be pretty old too.

I doubt they'd offer equity release to someone intheir early 60s.

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No.

Equity release aggressively down value homes.

Then they'll only give you 50%.

And you have to be pretty old too.

I doubt they'd offer equity release to someone intheir early 60s.

No - that's only part of the picture.

They down value homes then allow you say 50% of the value and because you don't pay any more until death you effectively lose the whole house on death.

You're wrong about the age limit.

https://www.equity-release-centre.co.uk/faq/qa-35--is-there-a-minimum-age.htm

Is there a minimum age?

I am interested in getting some money from my home, is there a minimum age for equity release?

For specialist equity release lifetime mortgages, the minimum age is 55 and this applies to the youngest applicant in joint cases.

For home reversion plans the minimum age is usually 65.

So providing you or all applicants are over 55 and want to consider releasing some equity from your home complete our online enquiry form and we will call you back to discuss how we could help as soon as possible.

Edited by billybong

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No.

Equity release aggressively down value homes.

Then they'll only give you 50%.

And you have to be pretty old too.

I doubt they'd offer equity release to someone intheir early 60s.

Often not even that much, I've seen 35% LTV as a typical maximum, although this is on the arrangement where no repayments are made until the house is sold, however long that is. At 6% interest rates it only takes 13 years for a 35% LTV loan to turn into a 100% LTV debt, if prices remain stable. The ER outfit eats the losses on sales where the debt exceeds the eventual sale price, as I understand it anyway.

Would seem pretty risky for an equity release outfit to lend on a 'no repayment' basis to people who aren't on their way to a home.

Doubtless lots of variations on the arrangements exist, but the basic issue is that the people don't have a pot to piss in so any sort of repayment arrangement is problematic.

It ain;t gonna solve the problem of someone in their 60s who is banking on infinite refinancing imo.

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Guest BillyNI

Showing my ignorance here and being utterly confused. So a simple example for someone to help me with. (I've never looked at IO)

Person gets and IO mortgage for 200k

20 years later person still owes 200k

Current market (which we know is crazy) 400k

How is the person losing all of the 400k?

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Did a quick online equity release calculator, if I was 55 and owned my own home outright worth £125k they would give me the grand sum of £27k for it!

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Showing my ignorance here and being utterly confused. So a simple example for someone to help me with. (I've never looked at IO)

Person gets and IO mortgage for 200k

20 years later person still owes 200k

Current market (which we know is crazy) 400k

How is the person losing all of the 400k?

You take another loan to pay off the 200k IO mortgage. You make no further payments but on death (or sale) the bank takes equity in lieu of interest rate payments. You won't necessarily lose all of the 400k (you only ever had the 200k equity to lose at any rate) but that's the general principle . Of course the proportions aren't exact and each individual case and contract will tend to be different and some agreements will be better than others.

From my own investigations (admittedly some time ago) as a rule of thumb over average time spans it seemed that for any equity release sum borrowed you effectively lost roughly the same again once the agreement was concluded (by death or sale etc). Such that you would probably be financially better off downsizing/selling although sometimes a home is too small to downsize from, they might not want to rent and people become attached to their homes.

Edited by billybong

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Showing my ignorance here and being utterly confused. So a simple example for someone to help me with. (I've never looked at IO)

Person gets and IO mortgage for 200k

20 years later person still owes 200k

Current market (which we know is crazy) 400k

How is the person losing all of the 400k?

They can of course sell the house, trouser the 200k and do whatever they like with the 200k net they have to provide their future needs. As many people will tell 'em, there are cheap houses up norf etc, so they can easily go and buy one of those and spend the rest as they like. Alas, multi-decade IO borrowing with no intention of repayment is exactly that, and hence why the sad faces of people meeting the inevitable consequences of their previous decisions will increasingly be adorning the papers in future. They want to keep the house and the dough.

The amount of repayments that would have been required by some of these types to have either repaid in full or reduce it to pretty trivial amounts can be staggeringly low for someone wrestling with the full on ponziness of current housing costs.

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Showing my ignorance here and being utterly confused. So a simple example for someone to help me with. (I've never looked at IO)

Person gets and IO mortgage for 200k

20 years later person still owes 200k

Current market (which we know is crazy) 400k

How is the person losing all of the 400k?

What a ridiculous post!

A 200k house at a very modest 10% a year will be work 1.2 million in 20 years. :rolleyes:

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Did a quick online equity release calculator, if I was 55 and owned my own home outright worth £125k they would give me the grand sum of £27k for it!

Looked into it....the info I got was a Lifetime or equity release mortgage would double every 13 years....say you were 60 years old, home worth £250k they would lend £60k....interest rate today 4.88% to 5.9% so variable.....in 26 years or less you would no longer own your home, so they have calculated would die by the age of 86 years old.....would reduce the prospect of ever downsizing or moving and how long would £60k last?........5 years possible how long is a piece of string?, planning to live till 86....what will be left to live on.

This debt is very expensive and would only suit someone who has no dependents or people they would want to leave it to....for £60k today they are in effect giving it away. ;)

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Showing my ignorance here and being utterly confused. So a simple example for someone to help me with. (I've never looked at IO)

Person gets and IO mortgage for 200k

20 years later person still owes 200k

Current market (which we know is crazy) 400k

How is the person losing all of the 400k?

Suppose lots of people do that, the market crashes because they all become forced sellers and then the banks lose money.

I used to work with someone who had an interest only from 2007 she had no idea nor concern on how to pay it.

The other problem is that your monthly outgoings are more vulnerable to interest rate changes.

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they never checked for repayment vehicles...they didnt care, and just conveniently forgot when the SHTF in 2007.

Course, uncovered mortgages are not worth as much, so why worry about CDO clients who bought the assets years before.

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they never checked for repayment vehicles...they didnt care, and just conveniently forgot when the SHTF in 2007.

Course, uncovered mortgages are not worth as much, so why worry about CDO clients who bought the assets years before.

They make more money the longer the loan goes on unpaid for IO and equity loans sees that it does......if every secondhand home in the UK was fully paid for, how would they make any money?....

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I'm staggered by that headline.

It seems likely that the intention here is to replace an interest-only mortgage with an equity release product.

I suppose you can label that as 'repaying' the mortgage, but it's a tendentious use of language. You go from a position of servicing an non-amortising interest-only mortgage with income to having a negatively-amortising (i.e. growing) equity release mortgage debt that no longer needs servicing.

You've 'repaid' in a technical sense, in the same way that you repay an existing mortgage when you re-mortgage to a new provider, but in reality you took out a mortgage which you never had any intention to repay (the original interest-only mortgage) and now you've swapped it for a mortgage that gets bigger over time (the equity release product).

Exactly what the word 'repay' is doing in this article title is beyond me. The 'article' is little more than an advertorial for the lenders and uncriticially regurgitates the way that the lenders would prefer the matter presented. This is housing financialisation in action. :rolleyes:

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Did a quick online equity release calculator, if I was 55 and owned my own home outright worth £125k they would give me the grand sum of £27k for it!

In not giving it away! Unless I get to go on a few cruises. Yep, okay then.

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What's the problem here? So long as they don't go with some sort of cowboy equity-release outfit then their home is secure until they die or no longer need it. It seems to me like an extremely efficient and elegant way to provide a lifetime of housing. There is approximately zero risk to creditor or debtor. (The losers are self-entitled kids losing their inheritance, and/or the state which in recent times has set it sights on housing equity to fund care in old age.)

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What's the problem here? So long as they don't go with some sort of cowboy equity-release outfit then their home is secure until they die or no longer need it. It seems to me like an extremely efficient and elegant way to provide a lifetime of housing. There is approximately zero risk to creditor or debtor. (The losers are self-entitled kids losing their inheritance, and/or the state which in recent times has set it sights on housing equity to fund care in old age.)

That's an excellent argument, persuasively made. Agree 100%.

That's the dream of the property-owning democracy.

The dream was that you never actually own your home, and that when you die you leave nothing to your children. Not even any of right of tenure to the council house that you grew up in. We need to make sure that we work for the banks.

This is the dream that we must cleave to. We need to find a way to make sure that we can always pay as much as possible for a house, servicing as much debt as possible for as long as possible, and when in the end the accounts are drawn up, we want to find that we own nothing.

That's efficiency.

Thank goodness we've finally ended the ridiculous situation where people could buy adequate houses outright over 25 years paying about 30% of household income.

This new model of renting till you are forty, signing up for massive f**k off mortgage with a 35-year term which you pay till you are seventy-five, then at seventy-five finding that having serviced that mortgage you were unable to make adequate pension provision, but a generous lender will now trade your equity for a stipend, meaning that at your death the house is theirs.

Of course, the first twenty years you were servicing a buy-to-let mortgage.

Hence your whole life you were servicing debts which only existed because of easy lending against property and you go to your pauper's grave as naked as you came, financially speaking.

That's the definition of efficient, from a certain perspective.

Where-students-want-to-be-007.jpg

Edited by Ghost Bird

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