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Proof That People Don't Understand I O Mortgages

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"If I switch to another provider who offers me a decent deal what happens to the 36 months of interest only payments i have made already to my original provider?"

http://boards.fool.co.uk/Message.asp?mid=1...=whole#10071743

I think it's proof that this person doesn't understand them, but I think it's a bit supercilious to think it proves that most people don't (I know you didn't say that, but many on here assume that everyone else is thick). Most people understand that they are not paying off the capital on an IO mortgage, I would suggest.

I'm sure some people don't understand the ratio of capital/interest they pay on a standard repayment mortgage, come to that!

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I think it's proof that this person doesn't understand them, but I think it's a bit supercilious to think it proves that most people don't (I know you didn't say that, but many on here assume that everyone else is thick). Most people understand that they are not paying off the capital on an IO mortgage, I would suggest.

I'm sure some people don't understand the ratio of capital/interest they pay on a standard repayment mortgage, come to that!

have you conducted a poll ?

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have you conducted a poll ?

No, have you? Or are we basing our opinion on 1 poster on a forum?

Or on the assumption that everyone who doesn't post on here is a "muppet", "chav", "sheeple" or any other HPC term of endearment used to describe 99.99% of the population?

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Guest donall

Correction:

Most people are think - especially when it come to money.

I might never have understood partial differential equations in Maths - but 99% of people don't need to know this as they won't be using it.

It is amazing what people don't understand about money - something that would be pretty hard to do without.

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I think it's proof that this person doesn't understand them, but I think it's a bit supercilious to think it proves that most people don't (I know you didn't say that, but many on here assume that everyone else is thick). Most people understand that they are not paying off the capital on an IO mortgage, I would suggest.

Pedantry alert!

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No, have you? Or are we basing our opinion on 1 poster on a forum?

Or on the assumption that everyone who doesn't post on here is a "muppet", "chav", "sheeple" or any other HPC term of endearment used to describe 99.99% of the population?

Make that 2 posters pointed out in the last week!

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Pedantry alert!

Oh, Levy Process, really. I think you need to look up the meaning of the word pedantry!

I was pointing out that 1 poster displaying his ignorance about IO mortgages does does warrant the thread title "Proof that People Don't Understand IO Mortgages". That is not pedantic!

If I reproduced a post which displayed a full understandinf of IO mortgages and titled it "Proof that people understand IO mortgages" would you be a pedant for pointing out my stupidity?

Your accusation of pedantry really takes the biscuit. Please have a go at defending yourself, it will be fascinating!

My 23 year old son just expained very accurately how an IO mortgage works. This is proof that people understand them. Tell me I'm wrong, that it merely proves that he understands them, and I can call you a pedant

Edited by Casual Observer

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In 20 - 25 years time there will be loads of people that haven’t dealt with the debt. All they can hope for is decent bit of wage inflation (unlikely in my view). At lot of people forget that while some people used to actively move up the housing ladder there used to be loads of people that stayed in the same house for 40-50 years both sets of grand parents in my family did this. These people used to chip away at their original mortgage over 25 years and then live rent free for the rest of their days. Unfortunately plenty of people with an IO mortgage will wake up in 25 years time to the fact they have paid none of their mortgage off - nightmare.

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In 20 - 25 years time there will be loads of people that haven’t dealt with the debt. All they can hope for is decent bit of wage inflation (unlikely in my view). At lot of people forget that while some people used to actively move up the housing ladder there used to be loads of people that stayed in the same house for 40-50 years both sets of grand parents in my family did this. These people used to chip away at their original mortgage over 25 years and then live rent free for the rest of their days. Unfortunately plenty of people with an IO mortgage will wake up in 25 years time to the fact they have paid none of their mortgage off - nightmare.

I've no doubt there will be problems. However many will have inherited large amounts (higher HPs and smaller families).

Also, despite low inflation, have you calculated the compounded erosion of debt over 25 years on 3 to 4% annual wage inflation?

Edited by Casual Observer

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Yes, but they'll need to MEW at regular intervals in order to keep up with the neighbours. I suspect their debt will be just as big in real terms in 25 years as it is today.

Couple this with woefully inadequate pension provision and you have a recipe for plenty of old people living out of shopping trolleys on the streets.

Ah, but they will only be able to MEW if the value of their properties go up.

And RB tells me they're already crashing...... :unsure:

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However many will have inherited large amounts (higher HPs and smaller families).

So houses will simultaneously be a source of easy money through MEW, old farts' pension funds, and a source of massive inheritances for their kids? The only way it can work is if house prices massively increase over the next few decades, which is unlikely when wages, at least in real terms, are only going to go down.

Plus, of course, if kids are inheriting large amounts, the government are going to want to get their sticky fingers into the pie.

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So houses will simultaneously be a source of easy money through MEW, old farts' pension funds, and a source of massive inheritances for their kids? The only way it can work is if house prices massively increase over the next few decades, which is unlikely when wages, at least in real terms, are only going to go down.

Plus, of course, if kids are inheriting large amounts, the government are going to want to get their sticky fingers into the pie.

No, I was just pointing out how inheritances will be a source of funds to pay off IO loans

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No, I was just pointing out how inheritances will be a source of funds to pay off IO loans

Indeed. This is why many people aren't bothering to set up investment vehicles for their IO mortgages.

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I was just pointing out how inheritances will be a source of funds to pay off IO loans

While neglecting to mention where those 'large inheritances' will come from in an era where many old farts will be spending every penny they have and more...

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While neglecting to mention where those 'large inheritances' will come from in an era where many old farts will be spending every penny they have and more...

Sorry I forgot that "old farts" were all part of the conspiracy!

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No, have you? Or are we basing our opinion on 1 poster on a forum?

Or on the assumption that everyone who doesn't post on here is a "muppet", "chav", "sheeple" or any other HPC term of endearment used to describe 99.99% of the population?

we only have a couple of hundred posters and there are over 60,000,000 people.. a lot over..

I don't think that everyone who doesent post here is a prat...

This guy I feel bad for..

No, I was just pointing out how inheritances will be a source of funds to pay off IO loans

Why? property prices are going to stay high..

Hell that would mean that they would have to stop dropping..

and then get more expensive again

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While neglecting to mention where those 'large inheritances' will come from in an era where many old farts will be spending every penny they have and more...

Or more likely GB will be getting his grubby little paws on any inheritance that there might be.

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Hell that would mean that they would have to stop dropping..

and then get more expensive again

Well APOM, "stop dropping" implies they've started dropping, so the size of the average IO mortgage will have dropped then, won't it?

You can't have it both ways! Lower debt (due to your "dropping prices") = less of a problem paying it off.

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There is at least one more person out there who doesn't understand IO mortgages.

A while back I was having a chat with a colleague:

Me: "Did you know there are people out there who have IO mortgages without and repayment plan in place".

Him: "I have an IO mortgage" (he bought autumn last year).

Me: "Yes, but you'll have a repayment plan won't you".

Him: "What do you mean".

Me: "Well how will you pay back the capital, your only paying the interest right now".

Him: "Well, erm, we have a fixed rate mortgage of X%, I can borrow against the house and put it in a cash ISA at (X + a gnats c*ck%).

Me: Stunned into silence... Thinks, "What equity" & "might pay it off in 1000 years".

There's more:

Recently he announced his separation from his wife. "What about the house" say I, "I'll keep paying the mortgage for as long as she lives there" says he (they also have 3 kids).

Fine think I, but now there is no real incentive for him to set up any sort of repayment plan, pipe-dream or otherwise. Also I would lay odds that she doesn't know their mortgage is IO, and if she does, doesn't understand the implications.

OK, still a small sample, but they are out there...

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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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