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DoubleBubbleTrouble

Is Remortgaging Really Withdrawing/releasing Your Mortgage Equity

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Here's an interesting conundrum I have in my head...

Is remortgaging really withdrawing/releasing your mortgage equity?

As far as I can see the arguments for it being true are:

1. Yes as when you remortgage you reduce the amount of equity in your home. Therefore you have withdrawn it.

Against:

1. You could borrow that money in any number of ways.

2. You can never really know how much equity you have until you sell the place.

I know this is really a question of interpretation but it's an important issue for an argument I'm putting together...

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It's a question of spinning debt as a withdrawal / release of 'wealth' as opposed to the obvious take a loan.

Your right it's all about oppinion whether you cup is half full or empty.

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Of course the word withdrawn gives it a twist, since it infers you have taken it out and that's that.

But you haven't have you since you have to pay it back and with interest. The net effect is to make you poorer.

Man this is a difficult one...

Cambridge dictionary:

equity Show phonetics

noun

1 [C or U] SPECIALIZED the value of a company, which is divided into many equal parts owned by the shareholders, or one of the equal parts into which the value of a company is divided:

He sold his equity in the company last year.

The rights give holders the opportunity to purchase additional equity interests in the company at a big discount.

2 the value of a property after you have paid any mortgage or other charges relating to it

Ah so you can't have withdrawn equity since the equity itself is the money left over after the mortgage by definition.

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Here's an interesting conundrum I have in my head...

Is remortgaging really withdrawing/releasing your mortgage equity?

As far as I can see the arguments for it being true are:

1. Yes as when you remortgage you reduce the amount of equity in your home. Therefore you have withdrawn it.

Against:

1. You could borrow that money in any number of ways.

2. You can never really know how much equity you have until you sell the place.

I know this is really a question of interpretation but it's an important issue for an argument I'm putting together...

Not really, it's securing a loan against an asset. So you are in effect selling more of your asset to the bank. Another way to look at it. The bank is buying your home from you, you repurchase it in full, plus the banks repurchase rate.

It's no different to how financial institutions raise capital.

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Equity withdrawl simple means a loan secured on house.

There is absolutly no difference between re-mortgaging and getting a loan secured on a house, except you may get a slightly better interest rate on a re-mortgage.

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Equity withdrawl simple means a loan secured on house.

There is absolutly no difference between re-mortgaging and getting a loan secured on a house, except you may get a slightly better interest rate on a re-mortgage.

Yeah.. buit with a re-mortgage you are paying off the debt with MEW you are getting a loan. Not paying anything back, letting it accrue LOTS OF INTEREST and then have to sell the house and pay them back the loan plus interest.SO if its like a mortgage where you pay back £1.70 per £1.00 then the chances are that you owe them 1.7x what you borrowed. If the MEW was 25 years.

EG: House valued at £250K

I MEW 80K. I have 10 years left on my mortgage. I am 55. So when I finally pay my mortgage at what point would he MEW get called in? Or does it just stay there gathering interest until I either DIE or SELL?

Lets say I SELL at 70. I have had 80k for 15 years I calculate that you would owe them about £120K. In them 15 years lets assume that houses stayed the same. This means you have £130k to buy your downsizer. That wont buy anything! So maybe rent. So the chances are you would not leave much inheritance.

If houses dropped by 30% then your house is worth £175 and you owe the lender £120K!!!

Sounds like you are selling your inheritence/pension fund to the banks imho.

TB

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Hi,

I think I have a rather old fashioned view of wealth. MeW is a loan. It is not at all the same as interest on savings, dividends on shares or bond yields, at least on the amateur investor scale. If you take that money out, someone is charging you interest to do it. If you can't make payment commitments to that loaner, they will repocess your home. That gain is also a subjective assessment of the market at a particular point in time that is capable of rising or falling. Other forms of investment wealth require by contract of law that the investment recepient has to pay you a profit (dividend, interest, etc.,). "Real wealth" means that you do not have to worry about creditors on your back, you are free, that you can come and go as you wish in life. MeW is the NuLabour definition of voter bribe, sorry, I mean wealth.

Boomer

Edited by boom_and_bust

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Thinking you are richer because you can MEW (as that guy on PricedOut seems to) is about as valid as thinking you are richer because you just got offered a good credit card deal.

It is just slightly preferential access to credit, available only to home "owners".

frugalista

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Thinking you are richer because you can MEW (as that guy on PricedOut seems to) is about as valid as thinking you are richer because you just got offered a good credit card deal.

Aye he's one stick short of a bundle that one, for your amusement if you hadn't seen it already;

Blah blah blah blah - it's all white noise to me mateys

What a whinging moaning bunch of Miss The Boater's you lot are. Just cos you didn't have the nads to get on the ladder when the rest of us did. You're all moaning cos you ain't minted like me.

Worth a fortune cos of my house, gonna spend it all on a nice X5 just to annoy you lot.

Let's face it if you had more b***s or weren't so lazy you'd be snapping up some of the bargain properties that are around at the moment. Don't whinge about not having the money, get some credit cards to get a deposit, or blag it off your old folks, and get on with it. What's the worst that could happen, you make a fortune on your new place and buy a bigger place next time.

...

To quote Chnandler Bong... could he be any more wrong!

Edited by DoubleBubbleTrouble

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It's a question of spinning debt as a withdrawal / release of 'wealth' as opposed to the obvious take a loan.

We have it on good authority that it is releasing the money that's tied up in your home !

My blood pressure rockets at the merest hint of that damn phrase. They're basically suggesting there's great wads of cash stuffed in the wall cavities and under the floor-boards just begging to be freed. A loan ? Oh no! We're just liberating some captivated cash that's been inadvertently trapped in the structure of your house.

Is cash being held hostage in your home? Doesn't your currency have a right to liberty and freedom? Call the SAS MEW Company and we'll get all those readies out alive! Terms and friendly fire may apply. etc. etc.

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Call the SAS MEW Company and we'll get all those readies out alive! Terms and friendly fire may apply.[/i] etc. etc.

The good old Suckers And Stupid MEW Company would that be?

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Thinking you are richer because you can MEW (as that guy on PricedOut seems to) is about as valid as thinking you are richer because you just got offered a good credit card deal.

It is just slightly preferential access to credit, available only to home "owners".

frugalista

Whenever I overhear someone bragging about releasing the equity in their home as though they've made a shewd financial move, I think to myself "Ha Ha, you've just pawned some of your home for a car/kitchen/holiday!" It makes their posturing seem rather squalid when looked at from that perspective...

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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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