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Borrowers Offered 10 Times Salary

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Guest wrongmove

Borrowers offered 10 times salary

"Rich customers are being allowed huge home loans, but there are big risks in mortgaging yourself to the hilt, writes Clare Francis

WEALTHY borrowers are being offered “super size” mortgages of nearly 10 times income as even well-heeled homebuyers find that property prices have soared out of their reach.

The Sunday Times can reveal that some of the country’s biggest banks and building societies have offered loans totalling nearly nine times borrowers’ gross salary, or nearly 10 times their net disposable income — in other words, their take-home pay after all their outgoings.

Mortgage brokers say that big names such as Abbey, Chelten-ham & Gloucester (C&G), Alliance & Leicester (A&L), Intelligent Finance (IF) and The Mortgage Works (TMW), a subsidiary of Portman building society, are among the most generous with their lending criteria.

One broker, who asked not to be identified, has a client who borrowed 8.9 times his gross salary from Abbey, while C&G lent another 8.8 times his income.

TMW has been known to offer 9.6 times net disposable income — which could potentially equal eight times gross salary.

These mega deals will raise fears that borrowers are being encouraged to overstretch themselves, but lenders and brokers claim they are rare. ........."

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Borrowers offered 10 times salary

"Rich customers are being allowed huge home loans, but there are big risks in mortgaging yourself to the hilt, writes Clare Francis

WEALTHY borrowers are being offered “super size” mortgages of nearly 10 times income as even well-heeled homebuyers find that property prices have soared out of their reach.

The Sunday Times can reveal that some of the country’s biggest banks and building societies have offered loans totalling nearly nine times borrowers’ gross salary, or nearly 10 times their net disposable income — in other words, their take-home pay after all their outgoings.

Mortgage brokers say that big names such as Abbey, Chelten-ham & Gloucester (C&G), Alliance & Leicester (A&L), Intelligent Finance (IF) and The Mortgage Works (TMW), a subsidiary of Portman building society, are among the most generous with their lending criteria.

One broker, who asked not to be identified, has a client who borrowed 8.9 times his gross salary from Abbey, while C&G lent another 8.8 times his income.

TMW has been known to offer 9.6 times net disposable income — which could potentially equal eight times gross salary.

These mega deals will raise fears that borrowers are being encouraged to overstretch themselves, but lenders and brokers claim they are rare. ........."

This article is about the top earners of society. Money does not concern them. These are people who will happily spend many thousands on caviar and champagne. They may be borrowing 10 x their salary but they probably have many large nest eggs elsewhere. Bastards.

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But 10 times salary is still 10 times salary whether you are rich or poor.

In fact, 10 times salary is much worse if you are rich because you will be paying 40% tax on your wage.

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But 10 times salary is still 10 times salary whether you are rich or poor.

In fact, 10 times salary is much worse if you are rich because you will be paying 40% tax on your wage.

Having a huge mortgage is a good idea if you are rich because you will get tax free interest on all your savings you pay into your huge mortgage. The point is these people are not living on the bread line because of their huge mortgages. They have plenty of money sloshing around in shares, gold, property, BTL, anything else you can think of.

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This article is about the top earners of society. Money does not concern them. These are people who will happily spend many thousands on caviar and champagne. They may be borrowing 10 x their salary but they probably have many large nest eggs elsewhere. Bastards.

That conveniently ignores the consequences if something goes wrong! A couple of big loans like this and a couple of bad decisions could easily be the difference between them being rich and them being not rich.

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Having a huge mortgage is a good idea if you are rich because you will get tax free interest on all your savings you pay into your huge mortgage. The point is these people are not living on the bread line because of their huge mortgages. They have plenty of money sloshing around in shares, gold, property, BTL, anything else you can think of.

eh. so if you have an offset mortgage, paying IO and saving alongside to pay the capital, these savings are tax free. what! :o

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There is no mention of who the banks deem to be "richer people" Maybe it is someone with no debt? remember the bank decides.....

I think that some banks may define a "wealthy customer" as somebody who has a net worth of £50,000. However some worths are more net than others. This would be not a bad definition if that person had absolutely no debt of any kind and had £50,000 in cash sitting in a savings account. However, the loose credit policies of the BoE in the past decade have created a class of "wealthy" wannabes, whose wealth is no more than a veneer on a terrible financial circumstance which will come home to roost sooner rather then later. Personal debt always finances future misery, personal savings always finances future prosperity

Best,

L

Edited by Luminist

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These are people who will happily spend many thousands on caviar and champagne.

Until they lose their jobs.

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eh. so if you have an offset mortgage, paying IO and saving alongside to pay the capital, these savings are tax free. what! :o

Savings in your offset are tax free yes. Which bit don't you understand so that I can clarify it for you.

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Savings in your offset are tax free yes. Which bit don't you understand so that I can clarify it for you.

ok no need for the attack. I just didn't realise this was the case.

So would you recommend an offset mortgage over a standard 25yr term repayment? (sorry if going off topic for a mo)

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ok no need for the attack. I just didn't realise this was the case.

So would you recommend an offset mortgage over a standard 25yr term repayment? (sorry if going off topic for a mo)

I would recommend an IO mortgage which is fully flexible. The reason for this is that offset mortgages tend to have slightly higher interest rates. A lot of IO mortgages only let you overpay by 10% per annum which is okay if you think you won't be able to pay more than this but I prefer fully flexible. The other advantage of this is it means your fixed monthly payment is the minimum possible and if you overpay significantly you can always get the money back or take payment holidays.

Edited by nohpc

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But 10 times salary is still 10 times salary whether you are rich or poor.

In fact, 10 times salary is much worse if you are rich because you will be paying 40% tax on your wage.

But then:

10 x [salary] may only be equal to 3 or 4 x [salary + on-target bonus], if this is offered to "wealthy people" who work in e.g. finance...

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This article is about the top earners of society. Money does not concern them. These are people who will happily spend many thousands on caviar and champagne. They may be borrowing 10 x their salary but they probably have many large nest eggs elsewhere. Bastards.

I take it you don't know many people like this then - a) money concerns them greatly - they mostly work bloody hard for it - what you see on the telly and read in the tabloids is mostly bullsh1t B) if you care about the money, unless it's being claimed back on expenses, it mostly won't be going on champagne and caviar (their wives may take a different view, but the earner tends not to) C) they probably won't have nest eggs in the sense of their cash tucked away, it will be invested to maximise returns (and it's not that hard to pick winners in certain fields at the moment) and d) as someone else has said, the 10X is a headline grabber - these people usually also take big bonuses and make large lump sum payments.

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This article is about the top earners of society. Money does not concern them.

Hmmm, my experience of rich people is that money does concern them. A lot. In fact, most of them obsess about it.

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I earn £1 a year. I borrowed £100 from my brother to secure the purchase of a 100.5k house, of which i had 100.4k as a deposit.

I am now borrowing at 100x my salary. Is this a new record?

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Guest wrongmove
I earn £1 a year. I borrowed £100 from my brother to secure the purchase of a 100.5k house, of which i had 100.4k as a deposit.

I am now borrowing at 100x my salary. Is this a new record?

I'm sure it is! I assume the loan is IO with a very preferable rate? Even if you limit yourself to absolute necessities - say one mp3 download a year from iTunes - you are still left with only 21p a year to service your debt.

:P

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I earn £1 a year. I borrowed £100 from my brother to secure the purchase of a 100.5k house, of which i had 100.4k as a deposit.

I am now borrowing at 100x my salary. Is this a new record?

How did you manage that. (Goes into Jamaican patois)

`Me wanna mek fe borrow that amount of shekels so me cyan go fe mek me yard`

(English)

`I want to borrow that amount of money to invest in new properties`

:P

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Having a huge mortgage is a good idea if you are rich because you will get tax free interest on all your savings you pay into your huge mortgage.

This is absolute b*ll*cks. If you get income from savings, you pay tax, if you have debt, you dont - debt is not a 'tax-free' way of saving - if instead of investing your money in an interesting bearing investment you put it in something that pays nothing at all (eg a current account or a home), then you pay no tax - big deal! If your home goes up in value, then sure that's tax free, but if not, it's worse than a current account. Rich people borrowing huge multiples of their income are (like so many others) just gambling on property inflation - maybe they think that they are better placed to weather a crash - another great tax saving idea...

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Guest wrongmove
This is absolute b*ll*cks. If you get income from savings, you pay tax, if you have debt, you dont - debt is not a 'tax-free' way of saving - if instead of investing your money in an interesting bearing investment you put it in something that pays nothing at all (eg a current account or a home), then you pay no tax - big deal! If your home goes up in value, then sure that's tax free, but if not, it's worse than a current account. Rich people borrowing huge multiples of their income are (like so many others) just gambling on property inflation - maybe they think that they are better placed to weather a crash - another great tax saving idea...

I think what the OP means is that you can pay down your mortgage, i.e. put equity into your property, while saving yourself X% on your mortgage payments. If you stay in cash, your interest will be taxed at 40%, while the equity and savings on your mortgage are not.

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I think what the OP means is that you can pay down your mortgage, i.e. put equity into your property, while saving yourself X% on your mortgage payments. If you stay in cash, your interest will be taxed at 40%, while the equity and savings on your mortgage are not.

I still don't get it (scratches head). Can you or the OP give a real world example (with figures for illustration) of what you're on about because on the face of it, it sounds as though if you have an offset mortgage you can avoid paying 40% tax on your savings?

Oh, hang on, I think I might have it. Rather than saving the money, you pay off more of the mortgage/loan? If so, thats not the same as saving is it becasue you couldn't go out and spend the 'saved' money could you?

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Guest wrongmove
I still don't get it (scratches head). Can you or the OP give a real world example (with figures for illustration) of what you're on about because on the face of it, it sounds as though if you have an offset mortgage you can avoid paying 40% tax on your savings?

This is correct

Oh, hang on, I think I might have it. Rather than saving the money, you pay off more of the mortgage/loan? If so, thats not the same as saving is it becasue you couldn't go out and spend the 'saved' money could you?

No, but you have to repay the capital sometime. It is much more tax effective to pay down thr mortgage, than to keep the cash on deposit, ready for when you will repay the capital.

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I think what the OP means is that you can pay down your mortgage, i.e. put equity into your property, while saving yourself X% on your mortgage payments. If you stay in cash, your interest will be taxed at 40%, while the equity and savings on your mortgage are not.

That is exactly what I meant.

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I still don't get it (scratches head). Can you or the OP give a real world example (with figures for illustration) of what you're on about because on the face of it, it sounds as though if you have an offset mortgage you can avoid paying 40% tax on your savings?

Oh, hang on, I think I might have it. Rather than saving the money, you pay off more of the mortgage/loan? If so, thats not the same as saving is it becasue you couldn't go out and spend the 'saved' money could you?

Okay say you owe 100000 on your mortgage and it is fully flexible 5% interest only

You overpay 10000 pound lump sum. This reduces your mortgage interest by 500 pounds a year. This means you have 42 pounds extra in your bank account at the end of every month. You can spend it if you want or you can put it in your mortgage.

The overpayment is flexible so you can spend it at any time you want.

Now if you invest 10000 pounds in a 5% savings account you will make 500 pounds a year before tax. For a higher rate tax payer you will then pay 40% tax on this.

This gives you 300 pounds a year interest after tax on your initial lump = 25 pounds a month.

So for 10000 pounds you are earning 200 pounds more a year if you use it to pay your mortgage as opposed to putting it in savings.

Note: ISA will give the same return but you can only invest finite amount each year. I like to use my mini ISA limit before overpaying the mortgage just incase I find myself out of the property ladder one day with a large lump sum and struggling to find another tax free investment.

So if you have an offset mortgage you completely avoid paying any interest on your savings.

This is definitely a big advantage to owning a home if you do have significant savings making taxable interest. Yes it the market tanks and you have to sell you will lose money but this is a separate issue to keeping your home long term.

Edited by nohpc

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I think that some banks may define a "wealthy customer" as somebody who has a net worth of £50,000. However some worths are more net than others. This would be not a bad definition if that person had absolutely no debt of any kind and had £50,000 in cash sitting in a savings account. However, the loose credit policies of the BoE in the past decade have created a class of "wealthy" wannabes, whose wealth is no more than a veneer on a terrible financial circumstance which will come home to roost sooner rather then later. Personal debt always finances future misery, personal savings always finances future prosperity

Best,

L

Personally i wouldn't class anyone a " Wealthy customer " who had £50,000 in cash free savings , i would just term them as someone who's got a few quid tucked away , 50k is not a life changing amount of money imho .

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  • 333 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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