Mancghirl Posted May 17, 2006 Share Posted May 17, 2006 Eating lunch at work yesterday, the topic turned, as it often does, to HPI. One of my collagues tried the old 'rent is dead money' tack.She couldnt understand why, on a decent salary, I wasnt sprinting to the estate agents. I pointed out that the flat next door to me had gone up for sale for £150k, whereas I only pay £570/pm in rent, which includes a decent management service and instantaneous repairs. She said it would be much cheaper to 'buy' on an IO mortgage. One of her friends and hubby have 'bought' a 400k house on IO with no repayment vehicle and are busy p*ssing their disposable income away on hols and St Tropez tanning sessions. I pointed out that they had not bought their house, would never own their house and were in fact renting money from the bank. I further asserted that if one of them got ill or lost their jobs they would be royally screwed. Oh no, she said, it would be fine, they would just pay off the mortgage by selling and therefore 'releasing the equity' in the house. She didn't seem to understand that £400k mortgage and £400k selling price = no equity. £400k mortgage and selling price>£400k = you are screwed. Are people really this thick? Quote Link to comment Share on other sites More sharing options...
FreeFall Posted May 17, 2006 Share Posted May 17, 2006 Most of them, yes. They've all been brainwashed by previous HPI and rampant inflation to inflate away debts that they haven't stopped to think.... Quote Link to comment Share on other sites More sharing options...
JBFTB Posted May 17, 2006 Share Posted May 17, 2006 Alas, yes. A friend of mine bought a place, did it up, and successfully sold it (apparently for more money, although no figures were mentioned) a year or so ago. After that he moved to another, bigger, house, where he intends to do the same thing. Except it turns out that this place (and, I'm guessing, the last place) is on an IO mortgage. "It's a way of building up equity," he says - except if house prices don't keep rising above the costs of his renovations (and I might add, he appears to be steadily spending more and more money on fancier and fancier tatt) I don't think he'll be building up any further. An awful lot of people don't seem to understand the concept that a mortgage has to be repaid at some point - they just think the house prices will go up through the roof forever and that wage inflation will do much the same, thus conveniently removing the problem. Quote Link to comment Share on other sites More sharing options...
Time to raise the rents. Posted May 17, 2006 Share Posted May 17, 2006 Yes but who has been right so far, you or them? Quote Link to comment Share on other sites More sharing options...
OzzMosiz Posted May 17, 2006 Share Posted May 17, 2006 Don't bother trying to explain. Let them ruin themselves. They will in the long run help the cause of HPC! Quote Link to comment Share on other sites More sharing options...
JBFTB Posted May 17, 2006 Share Posted May 17, 2006 Well, since he hasn't given any figures it's hard to tell. He did mention monthly repayments and he pays slightly less than me in rent, but having said that the place I rent is slightly bigger. As for the rest of "them" - well, I guess it's a case of ask me in a few years. Quote Link to comment Share on other sites More sharing options...
Bemused Posted May 17, 2006 Share Posted May 17, 2006 Yes but who has been right so far, you or them? That Mr TTRTR is the pivotal question upon which the whole of this site hangs. I have frequently pointed out that this site cried wolf too early - some posters point to a sea of troubles and that they will eventually lead to a serious crash. Others are like those strange old nutters with a billboard proclaiming the end of the world is happening tommorow. However even you must acknowledge that this all has to end with a bang at some point. I have friends on frankly rubbish wages with few career prospects being offered and taking morgages of 200K! Over the next 5 -10 years if rates rise by even 0.75% they are utterly screwed. Quote Link to comment Share on other sites More sharing options...
Te Mata Posted May 17, 2006 Share Posted May 17, 2006 Yes but who has been right so far, you or them? Them for the lat 5 years,clearly! But cycles cycle. Thats what cycles do. This something neuveax(?) rich(?????) investors fail, or refuse to understand. This epitomizes the difference between bull and bear psychology. Bears are all former bulls and are bears so they can be bulls again. Bulls universally need there guts slashed out to understand this. Quote Link to comment Share on other sites More sharing options...
Ethel Posted May 17, 2006 Share Posted May 17, 2006 Eating lunch at work yesterday, the topic turned, as it often does, to HPI. One of my collagues tried the old 'rent is dead money' tack.She couldnt understand why, on a decent salary, I wasnt sprinting to the estate agents. I pointed out that the flat next door to me had gone up for sale for £150k, whereas I only pay £570/pm in rent, which includes a decent management service and instantaneous repairs. She said it would be much cheaper to 'buy' on an IO mortgage. One of her friends and hubby have 'bought' a 400k house on IO with no repayment vehicle and are busy p*ssing their disposable income away on hols and St Tropez tanning sessions. I pointed out that they had not bought their house, would never own their house and were in fact renting money from the bank. I further asserted that if one of them got ill or lost their jobs they would be royally screwed. Oh no, she said, it would be fine, they would just pay off the mortgage by selling and therefore 'releasing the equity' in the house. She didn't seem to understand that £400k mortgage and £400k selling price = no equity. £400k mortgage and selling price>£400k = you are screwed. Are people really this thick? PMSL! "Rent is dead money"... whereas paying thousands in interest to the bank on a never-diminishing capital sum is a much more sensible way to spend your cash! She's just renting the house from the bank. Only THEY don't pay for the repairs and upkeep like a landlord would. What genious. No wonder we have such a crappy government if this is the level of intelligence of the average voter. Quote Link to comment Share on other sites More sharing options...
Mushroom Posted May 17, 2006 Share Posted May 17, 2006 Depending upon your age and any entitlement to live elsewhere, the ability to up sticks quickly may prove to be useful in the not to distant future. There are some intense pressures building in the UK. Our most recent history would seem to indicate that pressures have been, if not subdued, at least put on the back burner. For how much longer? I'm trying to work out whether there really could be social breakdown leading to perhaps a form of civil war. Sound far fetched? It is perhaps too easy to assume such things couldn't happen in the UK. Anyway, imo, IO, a nonsense without a repayment vehicle with a reasonable chance of providing the capital repayment. Well, unless you want to be a chancer (or BTLer, leveraging away) and happy to go bankrupt if neccessary. Quote Link to comment Share on other sites More sharing options...
BoredTrainBuilder Posted May 17, 2006 Share Posted May 17, 2006 That Mr TTRTR is the pivotal question upon which the whole of this site hangs. I have frequently pointed out that this site cried wolf too early - some posters point to a sea of troubles and that they will eventually lead to a serious crash. Others are like those strange old nutters with a billboard proclaiming the end of the world is happening tommorow. However even you must acknowledge that this all has to end with a bang at some point. I have friends on frankly rubbish wages with few career prospects being offered and taking morgages of 200K! Over the next 5 -10 years if rates rise by even 0.75% they are utterly screwed. Quite so. Quote Link to comment Share on other sites More sharing options...
AteMoose Posted May 17, 2006 Share Posted May 17, 2006 I guess thats why HPC is addictive, everyone is attempting to predict/deny the end of the uk economy, its fked up but its really interesting to watch... Quote Link to comment Share on other sites More sharing options...
since the beginning Posted May 17, 2006 Share Posted May 17, 2006 PMSL! "Rent is dead money"... whereas paying thousands in interest to the bank on a never-diminishing capital sum is a much more sensible way to spend your cash! She's just renting the house from the bank. Only THEY don't pay for the repairs and upkeep like a landlord would. What genious. No wonder we have such a crappy government if this is the level of intelligence of the average voter. Getting a I/O is worthwhile in a rising market as youv'e locked in your price. Renting is good in a falling market as you can buy for cheaper further down the line. Quote Link to comment Share on other sites More sharing options...
BuyingBear Posted May 17, 2006 Share Posted May 17, 2006 (edited) It makes evil endowment mortgages look cuddly doesn't it? IO will turn into a blood bath, and I'm certainly not going to help fund 'compensation' for peoples' own stupidity Yes but who has been right so far, you or them? As the worker who fell off the top of the Empire State shouted to his colleagues half way down - "so far, so good!". Edited May 17, 2006 by BuyingBear Quote Link to comment Share on other sites More sharing options...
cupidstunt Posted May 17, 2006 Share Posted May 17, 2006 I might be a boring old *****? but when I bought my first House in 1982 you could only get two types of mortgage - Repayment or IO with an Endowment. For goodness sake what on Earth is happening? IO mortgages that people will never pay back and repayment mortgages at 8X earnings! Of course it's all going to go pop - it's just a question of when. Quote Link to comment Share on other sites More sharing options...
Guest Posted May 17, 2006 Share Posted May 17, 2006 PMSL! Just for the uninitiated... PMSL = Privately Managed Subsidised Living Quote Link to comment Share on other sites More sharing options...
Once in a lifetime Posted May 17, 2006 Share Posted May 17, 2006 Getting a I/O is worthwhile in a rising market as youv'e locked in your price. Renting is good in a falling market as you can buy for cheaper further down the line. Agree: I know someone that ‘won’ on an IO mortgage. A chap I worked with moved up the property ladder when interest rates dropped to 3.75%, not just one step... he stretched to his limit!!! working all the hours god sends to pay when the rates moved up slightly. He sold a year ago making a huge profit. (now a STR) He told me that if IR went to 5% he would have been repossessed. Some win some lose. Quote Link to comment Share on other sites More sharing options...
fairygirl Posted May 17, 2006 Share Posted May 17, 2006 I have friends on frankly rubbish wages with few career prospects being offered and taking morgages of 200K! Over the next 5 -10 years if rates rise by even 0.75% they are utterly screwed. What do you mean by "rubbish wages"? Quote Link to comment Share on other sites More sharing options...
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