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Bingley Bloke

Here's A Mortgage They Haven't Thought Of!

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When my parents bought their house it cost them £4,400. When they paid their mortgage off it was worth £60,000. (It's now supposedly worth over £120,000). Just prior to having paid the mortgage off the repayments were so small they were negligible. I was wondering if the banks would realise that this can occur and let you take out a loan that you couldn't ordinarily afford with artificially supressed repayments to start with that increase over time so that the repayments are always the same percentage of your income, rather than the current system where repayments are a massive percentage of your income to begin with and a tiny percentage at the end. Imagine me on £17K paying out just 10% of my take home pay on a £170K mortgage, but of course, at the end still paying out 10% of whatever my take home pay has risen to to make up the shortfall. Okay that' a hugely simplified example, but I suspect this is the only way to keep the bibble growing. How long before it happens?

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Okay that' a hugely simplified example, but I suspect this is the only way to keep the bibble growing.

Great name for it BB - I too have been feeling that the whole system is getting increasingly infantile.

I think that the scheme you propose would end up being indistinguishable from IO in most cases - or even more so, if that's possible. Also, the start is the most important time to be paying back, to get the capital down to get the interest on it down as well - otherwise you might find that your small initial repayments weren't even covering the interest and you'd never pay off even all the interest on the capital, let alone the capital itself!

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Great name for it BB - I too have been feeling that the whole system is getting increasingly infantile.

Damn! Who swapped the I and the U on my keyboard? :lol:

I think that the scheme you propose would end up being indistinguishable from IO in most cases - or even more so, if that's possible. Also, the start is the most important time to be paying back, to get the capital down to get the interest on it down as well - otherwise you might find that your small initial repayments weren't even covering the interest and you'd never pay off even all the interest on the capital, let alone the capital itself!

I think the difference between this and IO is that the initial repayments wouldn't even be as much as an IO mortgage would cost. Of course, that would leave people paying interest on the interest as that would undoubtedly be added to the loan amount. I wonder if there's a mathematical model that explains how feasibile it is? I take your point about it never beinbg paid off, but that doesn't seem to be worrying lenders who are dishing out IO mortgages left, right and centre right now!

Edited by Bingley Bloke

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Damn! Who swapped the I and the U on my keyboard? :lol:

I think the difference between this and IO is that the initial repayments wouldn't even be as much as an IO mortgage would cost. Of course, that would leave people paying interest on the interest as that would undoubtedly be added to the loan amount. I wonder if there's a mathematical model that explains how feasibile it is? I take your point about it never beinbg paid off, but that doesn't seem to be worrying lenders who are dishing out IO mortgages left, right and centre right now!

And they are completely insane. Let's not be like them.

Under this proposal it is certain that one would end up paying a good deal more in total; therefore the savings at the start would be outweighed by the extra burden at the end (just when retirement looms?). Surely it's better to get debt behind you as fast as possible?

This is the whole problem with debt, full stop. Now how about abolishing mortgages? How's that for radicalism.

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Guest wrongmove

When my parents bought their house it cost them £4,400. When they paid their mortgage off it was worth £60,000. (It's now supposedly worth over £120,000). Just prior to having paid the mortgage off the repayments were so small they were negligible. I was wondering if the banks would realise that this can occur and let you take out a loan that you couldn't ordinarily afford with artificially supressed repayments to start with that increase over time so that the repayments are always the same percentage of your income, rather than the current system where repayments are a massive percentage of your income to begin with and a tiny percentage at the end. Imagine me on £17K paying out just 10% of my take home pay on a £170K mortgage, but of course, at the end still paying out 10% of whatever my take home pay has risen to to make up the shortfall. Okay that' a hugely simplified example, but I suspect this is the only way to keep the bibble growing. How long before it happens?

They do exist, believe it or not: deferred interest mortgage

:o

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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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