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Young Homebuyers Are Ready To Take On Very Large Mortgages To Get Onto The Property Ladder

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http://www.moneyhighstreet.com/news/182267...fford+house%27/

Young 'ready to take risks to afford house'

Young homebuyers are increasingly prepared to take on very large mortgages to be able to afford to get onto the property ladder, new research suggests.

Data gathered by LV= shows that 15 per cent of young adults are prepared to borrow more than four times their annual salary for a mortgage.

A third (30 per cent) would also be prepared to forgo any financial protection, instead opting for the largest mortgage they could possibly afford.

Worryingly, seven per cent of young people in London and the south-east would borrow six times their salary in a bid to get on the property ladder.

"Home-owning has long been a national passion, and one which continues to cascade down the generations," explained Nigel Snell, communications director at LV=.

"But what concerns us is just how many younger buyers are prepared to stretch themselves well beyond traditional lending limits without arranging adequate financial protection.

"We fear that, under genuine pressure to realise their home-buying dreams, many more buyers will choose to walk the mortgage highwire without a financial safety net."

Recent findings from Scottish Widows showed that 56 per cent of graduates are yet to get a mortgage and buy their first property.

Why do they think that they must get onto the property ladder at any cost? 35+ may or may not take risks in today's market as they might have some savings or large deposit to protect theirself but young buyers' decision to borrow six times of their salary is purely stupid & unsustainable.

They don't appreciate the benefit of being young in today's market. I wish I was 20 years old to be able to wait 8 or 10 years for the bottom of the market!

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http://www.moneyhighstreet.com/news/182267...fford+house%27/

Why do they think that they must get onto the property ladder at any cost? 35+ may or may not take risks in today's market as they might have some savings or large deposit to protect theirself but young buyers' decision to borrow six times of their salary is purely stupid & unsustainable.

They don't appreciate the benefit of being young in today's market. I wish I was 20 years old to be able to wait 8 or 10 years for the bottom of the market!

I think this is good and would encourage as many people as possible to do the same, that way fewer people will be able to take advantage of lower prices in the next 4-5 years.

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http://www.moneyhighstreet.com/news/182267...fford+house%27/

Why do they think that they must get onto the property ladder at any cost? 35+ may or may not take risks in today's market as they might have some savings or large deposit to protect theirself but young buyers' decision to borrow six times of their salary is purely stupid & unsustainable.

They don't appreciate the benefit of being young in today's market. I wish I was 20 years old to be able to wait 8 or 10 years for the bottom of the market!

You have no idea the pressure to buy put on us youngsters. I have been told I am a fool by a number of smug 30 somethings for not taking out a four times, joint salary, IR only mortgage. My wife's colleagues literally want to arrange an intervention to force me to buy!

Sadly, these youngesters are the ones who will lose out the most. Stuck in poverty through what should be the most financially independent phase of their lives.

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2005 - the BOE (again) stuck the financial borrowing gun at the back of the heads of youngsters, borrow and support our economic shell game or risk being priced out forever.

One advantage for the young is that (supposing they actually put none of their own money down) they can tell the lender to do one if the gamble fails and just walk away and not lose out.

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FTBs currently number less than 10% of mortgage business (IMHO/experience), those that 'can' are taking on average 4 times salary, either joint or together. Not that risky given the average loan is 125K with a 10% deposit. The exotic loans - 125% from NR A&L etc., account for perhaps 5% of the FTB market. Granted this is a huge amount of money, but not a huge amount of loans or clients. The major risk FTBs are currently taking is the potential to see their deposit wiped out, particularly if on new build where arguably the 'dipper' evaporates the minute you sign the paperwork. Which is why IMHO they should consider 100% mortgages and keep the hard earned dipper safe. All in my experience but I've got to say FTBs that can manage to buy are bizarrely the most sensible mortgage clients you can imagine, let's not forget with an average age of 32+ they're hardly kids are they? Very financial products 'savvy', make the broker work hard for the best rates and are not as "desperate" as the press would like to portray.

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They don't appreciate the benefit of being young in today's market. I wish I was 20 years old to be able to wait 8 or 10 years for the bottom of the market!

I am ten years older than that, and quite prepared to wait 8-10 years for the bottom, if necessary. By that stage, I would hope that prices would have fallen to such an extent, and my savings grown sufficiently for any mortgage to be on a significantly shorter term than the (once) conventional 25 years.

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I am ten years older than that, and quite prepared to wait 8-10 years for the bottom, if necessary. By that stage, I would hope that prices would have fallen to such an extent, and my savings grown sufficiently for any mortgage to be on a significantly shorter term than the (once) conventional 25 years.

same age. I can wait 10 years and buy in cash

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I am ten years older than that, and quite prepared to wait 8-10 years for the bottom, if necessary. By that stage, I would hope that prices would have fallen to such an extent, and my savings grown sufficiently for any mortgage to be on a significantly shorter term than the (once) conventional 25 years.

same age. I can wait 10 years and buy in cash

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I will echo the sentiments about pressure on young people. I am recently married and we are being told by almost every older person we know that we must get on the ladder immediately, even if it is expensive and we end up in a crap place. I refuse to listen because I question their logic, however many like me will not be strong enough to do this.

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I will echo the sentiments about pressure on young people. I am recently married and we are being told by almost every older person we know that we must get on the ladder immediately, even if it is expensive and we end up in a crap place. I refuse to listen because I question their logic, however many like me will not be strong enough to do this.

Good lad. Stick to your guns.

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2005 - the BOE (again) stuck the financial borrowing gun at the back of the heads of youngsters, borrow and support our economic shell game or risk being priced out forever.

One advantage for the young is that (supposing they actually put none of their own money down) they can tell the lender to do one if the gamble fails and just walk away and not lose out.

I'm genuinely confused now. Although I haven't bought a property for 7 years, my understanding of the position was that - in contrast with the US situation - whatever you borrowed you OWED. Full stop.

So if you put down 10K deposit and the property drops 20K, what you 'walk away' with is a 10K debt owed to the bank or BS.

In the early days of GC1, many people 'got away with' handing in their keys because historically neg equity drops had been small. Very quickly as the crash progressed this option was removed and when I sold a property for 8K less than the mortgage in 1992 I'd have loved to tell Alliance and Leicester to 'do one' but I instead I had to borrow the money to pay back the mortgage company.

Are you telling me this situation has now changed ??

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I will echo the sentiments about pressure on young people. I am recently married and we are being told by almost every older person we know that we must get on the ladder immediately, even if it is expensive and we end up in a crap place. I refuse to listen because I question their logic, however many like me will not be strong enough to do this.

with respect that is an age old pressure, irrespective of market conditions. You're a lot more enlightened than most. If my parents had said to me 20 years ago "rent was 'dead money' get on the ladder" I'd have thought it an incredibly profound statement and believed them, I did, they were right (at the time).

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Part of the learning process I suppose - or payback time for being so smug...

In my experience, young 20 something buyers are not smug. They don't live in lovely houses and brag about it to their friends. They live in new builds and they worry how they are going to pay the mortgage if one of them gets laid off. Most young FTBs are just scared and naive. We should not delight in their downfall.

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I'm genuinely confused now. Although I haven't bought a property for 7 years, my understanding of the position was that - in contrast with the US situation - whatever you borrowed you OWED. Full stop.

So if you put down 10K deposit and the property drops 20K, what you 'walk away' with is a 10K debt owed to the bank or BS.

In the early days of GC1, many people 'got away with' handing in their keys because historically neg equity drops had been small. Very quickly as the crash progressed this option was removed and when I sold a property for 8K less than the mortgage in 1992 I'd have loved to tell Alliance and Leicester to 'do one' but I instead I had to borrow the money to pay back the mortgage company.

Are you telling me this situation has now changed ??

Many did tell their bank to "do one" even then. Yes the banks chased and in a lot of cases people paid up at a later date. The bankruptcy laws have changed somewhat since then.

If I'm right any negative equity is reclassified as an "unsecured loan", after all it cannot be secured, as there is no equity. Therefore immediately following bankruptcy the lender has no further claim to the money - after all isn't that the point of bankruptcy. Nowadays for a first bankruptcy you can be discharged in anything between 6 and 12 months!

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How does mortgage indemnity protection come into this? Essentially this is an insurance premium paid, usually by the lender but sometimes by the mortgagee (if their LTV ratio is high), to protect against equity loss.

Was this concept around in the last crash? I would expect this to mean lenders would be more willing to accept a loss when they repossess?

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In my experience, young 20 something buyers are not smug. They don't live in lovely houses and brag about it to their friends. They live in new builds and they worry how they are going to pay the mortgage if one of them gets laid off. Most young FTBs are just scared and naive. We should not delight in their downfall.

There are some who fall into that category; agreed. However, the cynical BTLers who did what they did in the full knowledge that they were denying hard working citizens in their 20s and 30s the right to the financial security their generation took for granted deserve all that's coming to them.

Besides, this whole debate is rapidly becoming academic. As the credit crunch tightens, young professionals won't be able to get 6x mortgages whether they're willing to take them out or not. It'll be case of 3x maximum, SVR only (unless you're prepared to pay 2-3% over the odds for the security of a fix), a substantial arrangement fee and serious exit penalties before long.

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In my experience, young 20 something buyers are not smug. They don't live in lovely houses and brag about it to their friends. They live in new builds and they worry how they are going to pay the mortgage if one of them gets laid off. Most young FTBs are just scared and naive. We should not delight in their downfall.

There are some who fall into that category; agreed. However, the cynical BTLers who did what they did in the full knowledge that they were denying hard working citizens in their 20s and 30s the right to the financial security their generation took for granted deserve all that's coming to them.

Besides, this whole debate is rapidly becoming academic. As the credit crunch tightens, young professionals won't be able to get 6x mortgages whether they're willing to take them out or not. It'll be case of 3x maximum, SVR only (unless you're prepared to pay 2-3% over the odds for the security of a fix), a substantial arrangement fee and serious exit penalties before long.

Edit: sorry about double post. Got 'IPS Driver Error' on the first attempt, and when I pressed F5 the post had appeared twice.

Edited by The Ayatollah Bugheri

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How does mortgage indemnity protection come into this? Essentially this is an insurance premium paid, usually by the lender but sometimes by the mortgagee (if their LTV ratio is high), to protect against equity loss.

Was this concept around in the last crash? I would expect this to mean lenders would be more willing to accept a loss when they repossess?

Can't remember where I heard this (on the radio last week I think), but they were saying that mortgage indemnity insurance is a massive con and very rarely pays out. Most lenders don't bother trying to flog it anymore.

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How does mortgage indemnity protection come into this? Essentially this is an insurance premium paid, usually by the lender but sometimes by the mortgagee (if their LTV ratio is high), to protect against equity loss.

Was this concept around in the last crash? I would expect this to mean lenders would be more willing to accept a loss when they repossess?

Yes they were around and a lot of the time it was the MIG policy issuers that did the chasing for the shortfalls that they ended up with.

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How does mortgage indemnity protection come into this? Essentially this is an insurance premium paid, usually by the lender but sometimes by the mortgagee (if their LTV ratio is high), to protect against equity loss.

Was this concept around in the last crash? I would expect this to mean lenders would be more willing to accept a loss when they repossess?

MIG was an insurance policy that the buyer paid to protect the lender in case for any reason the house was not worth what was borrowed against it.

In the event of the buyer being repossessed, the lender would get paid out the difference. Then the MIG company would chase the buyer for the money still. Nobody walked away. Some were caught out by this. They thought they had an insurance that would just cough up so they handed in their keys thinking that was the end of it ... only to be disappointed years later when the MIG company got in touch along the lines of "OK, you had a bad time, bound to be in a better position now ... so cough up, we want this money back now"

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MIG was an insurance policy that the buyer paid to protect the lender in case for any reason the house was not worth what was borrowed against it.

In the event of the buyer being repossessed, the lender would get paid out the difference. Then the MIG company would chase the buyer for the money still. Nobody walked away. Some were caught out by this. They thought they had an insurance that would just cough up so they handed in their keys thinking that was the end of it ... only to be disappointed years later when the MIG company got in touch along the lines of "OK, you had a bad time, bound to be in a better position now ... so cough up, we want this money back now"

Exactly.

As far as I'm aware this is what you need to do when faced with a massifve loss on property and no assets that the lender can claim back on (details ned to be checked very carefully).

Deafult on mortgage and get the house repo'd then claim bankcuptcy (need to ensure all other finances are in a state - not difficult to do nowadays!) - not allow the house "owning" phase to span the bankruptcy period otherwise mortgage debts can be re-assigned post BK, you want all outstanding debts and liabilites wiped out at the point of bankruptcy - finito, done and then wait for discharge.

In the 90's many didn't go bankrupt, that was a mistake, for many (then again the rules and bankrupt status hung over for a much longer period) they allowed all and sundry to then come after them at a later date. Now, as long as you haven't done anything particulalry bad (singing your name on a 6x mortgage / 125% mortgage / whatever no longer counts as bad - that's what the lenders are bloody well pushing) then usually withion a year that's it you are discharged with no further liability whatsoever.

That's the way I read it anyway.

http://www.purnells.co.uk/phouse-transfer.htm

NEGATIVE EQUITY

If there is "negative equity" in the property you may wish to do one of two things.

You may wish to hand the keys back. If so, the full amount of any loss the mortgage company makes will be written off in the bankruptcy or

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Can't remember where I heard this (on the radio last week I think), but they were saying that mortgage indemnity insurance is a massive con and very rarely pays out. Most lenders don't bother trying to flog it anymore.

Yes, has been sold to people that the lenders know hve no chance of claiming - self-employed for example, just the group of people who feel fianncially insecure and are most likely to fall for the last minute hard sell when their mind is distracted by all the other things going on with the house buying process. Fill a desk with paperwork in a tight lunchour meeting and its amazing what people will sign.

Just another wheeze to offset artificially low interest rates and skim off more commission in the short term.

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Only 1,000 not discharged in double-quick time. If the lender offered 6x salary and you didn't overstate your salary in the first first, then the lender can go swing if they think they'll ever get their money back by having an extended bankruptcy term slapped on the debtor - it isn't going to happen.

http://www.debtlifeboat.co.uk/bankruptcy-questions.html

5. How long does this period of being a bankrupt last?

The bankruptcy period usually lasts just 12 months. However, if you incurred your debts irresponsibly (through gambling, for example), or if you incurred your debts when there was no realistic prospect of repaying them, then the Official Receiver could obtain a bankruptcy restrictions order against you. This means the bankruptcy conditions could apply for a further two to 15 years. About 1,000 people a year currently have these additional restrictions placed upon them.

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