Anyone Know Of Accquaintances That Have Been....

[Guest Daddy Bear]

Cashstration

"The act of buying a house which renders the subject financially impotent for an indefinite period of time"

[Mikhail Liebenstein]

Cashstration

"The act of buying a house which renders the subject financially impotent for an indefinite period of time"

Yep, I know someone who has probably blown most of a £700k inheritance buying a £1.2m house.

a) They overpaid, even at the peak of the market by about £300k. Rule 1 - don't get involved in bidding wars

b.) Their timing was really bad. Rule - 2 don't buy at the top of the market.

c) They hadn't even sold their old house and are having to pay 2 mortgages. Rule 3 - LTB doesn't work in a falling market.

Of the £700k, I reckon £50k has gone in stamp duty, £300k has gone by confusing a £900k house for a £1.2m house, and another £150k has gone with the market. To me that leaves £200k out of the original sum, and actually £100k of that has probably come off the old house.

Oh dear, some people never learn. This is a true story by the way!!!

Edited August 6, 2008 by mikelivingstone

[The 4 Horsemen]

Yep, I know someone who has probably blown most of a £700k inheritance buying a £1.2m house.

a) They overpaid, even at the peak of the market by about £300k. Rule 1 - don't get involved in bidding wars

b.) Their timing was really bad. Rule - 2 don't buy at the top of the market.

c) They hadn't even sold their old house and are having to pay 2 mortgages. Rule 3 - LTB doesn't work in a falling market.

Of the £700k, I reckon £50k has gone in stamp duty, £300k has gone by confusing a £900k house for a £1.2m house, and another £150k has gone with the market. To me that leaves £200k out of the original sum, and actually £100k of that has probably come off the old house.

Oh dear, some people never learn. This is a true story by the way!!!

At least it wasn't their own money they were wasting.

[Yoss]

ANEC - Fiends of the misses bought in Aug 2007, £400K 2 bed semi on 100% interest only in Pangborne (Nice exclusive area near Reading) maxed out the motgage because they felt they had been missing out on the property wave.

25K replacing the roof, 45K (Basically the gains from thier preious home) on a new kitchen....both incomes bar a few day to day pounds sunk into the mortgage.

Way I see it, they are comitted to beans on toast until the market rises or one gets a massive pay rise.

But after seeing the greed in thier eye's and that was their motivation (they made no qualms about that) I would find it hard to feel sorry for them if it does take a turn for the worse.

God help then should one lose thier job as the interest payments alone would give me personally many a sleepless night.

[miko]

Yep, I know someone who has probably blown most of a £700k inheritance buying a £1.2m house.

a) They overpaid, even at the peak of the market by about £300k. Rule 1 - don't get involved in bidding wars

b.) Their timing was really bad. Rule - 2 don't buy at the top of the market.

c) They hadn't even sold their old house and are having to pay 2 mortgages. Rule 3 - LTB doesn't work in a falling market.

Of the £700k, I reckon £50k has gone in stamp duty, £300k has gone by confusing a £900k house for a £1.2m house, and another £150k has gone with the market. To me that leaves £200k out of the original sum, and actually £100k of that has probably come off the old house.

Oh dear, some people never learn. This is a true story by the way!!!

Heavens that is a real mess up. Got left all that money,I bet by someone who has spent a life time building it up and basically they could have blown it all very soon . could even send them backwards from where they were prior to getting it. Just a few mistakes can have such bad long term results. Can they carry on with both mortgages indefinatly or could they end up f----d?

[DementedTuna]

£700k on a house.. and not just a £700k house either, a house requiring a £500k mortgage... dear god, WHY?

If I had that kind of money, I'd f**king retire and live off the interest. Some people are real pillocks.

[Mikhail Liebenstein]

Heavens that is a real mess up. Got left all that money,I bet by someone who has spent a life time building it up and basically they could have blown it all very soon . could even send them backwards from where they were prior to getting it. Just a few mistakes can have such bad long term results. Can they carry on with both mortgages indefinatly or could they end up f----d?

The guy works and is very well paid. but that said he is in what is a rather risky industry at the moment and things could be looking shaky at work.

I reckon they will struggle, though not starve immediately with 2 mortgage. But these things do damage over time, it like having a minor haemorrhage.

[ParticleMan]

confusing a £900k house for a £1.2m house

If these idiots could only capitalise a £900k asset with the additional benefit of a £700k gifted capital injection (picture Thurman's resuscitation in Pulp Fiction) then they're going to learn the meaning of the expression "ruinously expensive" as the debt is carried to term (or far more likely, drags them beneath the mire) and the maintenance overheads mount up.

Edited August 8, 2008 by ParticleMan

[Backseat Economist]

That's insane - you're investing virtually ALL of your inheritance into property....

Oh, hang on, I forgot....over half of most peoples' "wealth" is tied up in bricks and mortar....

Maybe not so insane after all if you think about it - their guessing that even in the worst case scenario,

i.e. - you never LOSE money on property that one amount in will get you 2x out when you cash the house in.

What's scarier to think is that I would have thought like this five years ago...

GT.

[Mikhail Liebenstein]

£700k on a house.. and not just a £700k house either, a house requiring a £500k mortgage... dear god, WHY?

If I had that kind of money, I'd f**king retire and live off the interest. Some people are real pillocks.

Actually this guy probably has 2 x £500k mortgages. One on the first house which had quite a lot of work done on it and which some MEWing to put into a business (not a bad thing per se though things looking shaky now).

By my estimates, every time the Halifax drops 1.7% they are losing £30,000.

[fluffy666]

Cashstration

"The act of buying a house which renders the subject financially impotent for an indefinite period of time"

That would be me..

I thought that when we moved in 2006, increasing the mortgage to £150k was a lot. There again it's on a 20 year repayment term... I don't see how any bank could responsably lend more than that, yet I'm sure I could have got a mortgage for twice the amount.

[Tonkers]

Yep, I know someone who has probably blown most of a £700k inheritance buying a £1.2m house.

a) They overpaid, even at the peak of the market by about £300k. Rule 1 - don't get involved in bidding wars

b.) Their timing was really bad. Rule - 2 don't buy at the top of the market.

c) They hadn't even sold their old house and are having to pay 2 mortgages. Rule 3 - LTB doesn't work in a falling market.

Of the £700k, I reckon £50k has gone in stamp duty, £300k has gone by confusing a £900k house for a £1.2m house, and another £150k has gone with the market. To me that leaves £200k out of the original sum, and actually £100k of that has probably come off the old house.

Oh dear, some people never learn. This is a true story by the way!!!

Deary me, this is one of the most depressing and anger causing posts I have ever read on here. Can you ask them if the land they bought will ever generate enough income to justify the price tag?

[Mikhail Liebenstein]

That's insane - you're investing virtually ALL of your inheritance into property....

Oh, hang on, I forgot....over half of most peoples' "wealth" is tied up in bricks and mortar....

Maybe not so insane after all if you think about it - their guessing that even in the worst case scenario,

i.e. - you never LOSE money on property that one amount in will get you 2x out when you cash the house in.

What's scarier to think is that I would have thought like this five years ago...

GT.

Backseat Economist, I think you have hit the nail on the head here.

People believe and some still believe that wealth is tied up in houses and in fact that houses are wealth generators.

This is of course madness. As far as I am concerned, both the banks and land owners are effectively being given special license to extract economic rent which ultimately crushes all other industry.

The reason the UK is so expensive for many goods and services is because land and property is so expensive. Our £15 CD rather than $15 are due to the fact that shop rents cost a fortune. Similarly your plumber costs more because he has to make a living to pay his ludicrous mortgage.

The guy who has this right is Fred Harrison and the Government really ought to look at a land tax.

Questions:

1) Why should the banks be allowed to bid for Government money at or near the base rate? Why am I not allowed to borrow at 5% from the Government and then perhaps put it into an account earning 6.5%?

2) As the economy grows firms tend to pay more in tax, including on profits, VAT and employment taxes. Meanwhile landlords get to increase rents etc having done little for this. When the Government spends a £1bn on a new tube line, property in the area shoots up and the landlord gets the gain for free until he sell and then only pays 18% on the profit. Effectively land owners are allowed to capture the economic value that is created by others, with little tax on their unearned income and capital.