Mortgage for everyone

[Zero Gravitas]

Beanie Babies are both great investment and also great friends!

How could friends be a cognitive hazard? Apart from my Langford's Parrot Beanie Baby that is.

[jamiefairlie]

cognitively hazardous

What do you mean by that?

[Alberon]

[TrenterPercenter]

I think it's basically fine not to spend your time telling people about the financial benefits of unethical and cognitively hazardous investments.

Looking for a fight I see.  Not going to get it I'm afraid.

[Zero Gravitas]

What do you mean by that?

By becoming aware of the concept of retaining a asset potentially being a profitable venture, you forget the entire contents of State and Revolution, upon trying to read it subsequently all the pages appear blank, listening to an audiobook produces the subjective experience of listening to white noise.

I believe there's an SCP entry on it actually: https://scp-wiki.wikidot.com/1231-warning

[TrenterPercenter]

By becoming aware of the concept of retaining a asset potentially being a profitable venture, you forget the entire contents of State and Revolution, upon trying to read it subsequently all the pages appear blank, listing to an audiobook produces the subjective experience of listening to white noise.

I believe there's an SCP entry on it actually: https://scp-wiki.wikidot.com/1231-warning

Yes and the result is that your otherwise "good brain" will have flipped to a "bad brain" which will suddenly get big hair, start dressing itself in a leather jacket and smoking.

[flotemysost]

These are largely specific flaws with the way the UK rental market is set up. They can be fixed but people have been conditioned to believe the only practical solution to it is to try and own a place yourself while putting up with it, rather than placing more rights in the hands of renters.

Yep, that's exactly what I meant!

My friend has just up-sticks from Cambridge where she was living in a tiny 2 bedroom house to move to a much nicer and cheaper house in Sheffield she has made herself some cash in the process.  This what is happening a lot in Birmingham now too London folk realising they can have much better quality of life buying a property in Birmingham

Not disagreeing here at all, but I would add that "quality of life" can be subjective - to use myself as an example, I know it's an unpopular opinion but I like living in London, and tbh right now I'm not sure my mental health is stable enough to just take off and start living somewhere where I don't know anyone. The idea of "putting down roots" (in the traditional sense of seeking more spacious accommodation, owning rather than renting, and potentially living somewhere less urban) isn't really on the cards for me any time soon, I dunno what the fuck I'll be doing in 5 years' time, so that stuff's not necessarily a pull. Obviously Sheffield and Birmingham are both great places to live, and if things were different I'd consider relocating - but it doesn't necessarily make sense from a mental/emotional stance for everyone to just leave where their job/friends/family/whatever are based, though obviously many are forced to for financial reasons anyway.

Sorry, it probably seems like I'm making rather a lot of that short quote from your post, but I think this is sort of key to the failure to recognise that some people are actually fine with renting, we just want it to be a bit less shit, basically.

Obviously everyone's priorities are different, and it's genuinely great if people can improve their overall happiness AND spend a lot less on their accommodation, but it's not always a one-size-fits-all - and it's definitely not a reason to excuse the sorry state of the rental market. "Why don't you just move somewhere else?" isn't a substitute for improving a system which would work just fine for many people, if its numerous flaws were fixed. (I know you're not saying this, BTW Trenter - I'm thinking more of all the smug harping on from people who'd moved out of London during lockdown, which really got to me after a while. Of course I'm not going to begrudge their choices, but at the time I didn't appreciate being made to feel like a mug for living in a poky flatshare still.)

[Jasha]

It's quite simple pay 100s of thousands of pounds to lease someones home and never recoup any of that money or pay yourself 100s of thousands of pounds and then recoup all of it or someone of it and live rent free.

It's really quite simple, the only people making money out of ever increasing house prices are Lloyds Barclays and NatWest (and maybe the donkey sanctuary if you're of a benevolent disposition)


N.b overpaying when rates are so ridiculously low is a mugs game.

[TrenterPercenter]

I appreciate where you are coming from @flotemysost and just to be clear I'm on the side of renters, in fact I would say that renters deserve more benefits and protections because of how much things are stacked towards homeowners. 

The London flight to Birmingham is a specific thing to do with HS2 and changes in work from home; it suits some and not others that is the spice of life I guess.  It happens here as well, lots of people I know have left for the "idyllic semi-rural" life, not for me at this stage.

[Sebastian Cobb]

At least the Londoners buying homes in your area are actually living in them I suppose.

[TrenterPercenter]

N.b overpaying when rates are so ridiculously low is a mugs game.

Thanks for the advice but I think I've got this one.  Cheers.

[Jasha]

Thanks for the advice but I think I've got this one.  Cheers.

You really haven't, but it's okay a lot of people make the same mistake and I can see the perceived piece of mind thinking you're guaranteeing financial security sooner even if it's costing you more money. Have a think about it, I'm sure someone as astute as yourself can see the flaw.

[TrenterPercenter]

You really haven't, but it's okay a lot of people make the same mistake and I can see the perceived piece of mind thinking you're guaranteeing financial security sooner even if it's costing you more money. Have a think about it, I'm sure someone as astute as yourself can see the flaw.

It means I'm paying less interest on a debt over less time, also if rates rise then I'll have less debt and more ability to overpay then.  Not sure what I'm missing but you could just explain it rather than being coy about it I'm not averse to good advice.

[TrenterPercenter]

I think what you are saying is putting the money in a high savings account which out paces my current interest rate means I got more money that I can then use to pay my mortgage off.  Only paying off my mortgage monthly also saves my accrued interest so I need an account that can outpace this drop also.  I'm sure there are probably such accounts out there though not by much (needs to be about 3%).

This is not bad advice not sure why you went about telling me it in the way you did but cheers anyway I will look into it.

[Jasha]

It means I'm paying less interest on a debt

The rate is constant until the bank changes it or you change lender

over less time,

The term is constant unless you move lender

also if rates rise then I'll have less debt and more ability to overpay then.

If you can swallow a rate rise and still make overpayments then why aren't you making those additional overpayments already?

Not sure what I'm missing but you could just explain it rather than being coy about it I'm not averse to good advice.

Any benefit from overpayment is limited to your existing outstanding term and your lenders overpayment ceiling (usually 10% of the outstanding capital), that is to say once you have repaid the capital in full there is no longer any return on your overpayment, most mortgage deals issued anytime in the last 6 or 7 years are going to be around 2-3%, on such a small rate assuming all overpayments are against the capital and keeping the monthly repayment constant the compound interest savings just aren't enough to justify it.



And no it's not a high interest savings account as you won't find a monthly saver or even a building society bond that pays 3%

[shoulders]

Jasha, I'm on a 3 year fixed at a very good rate in the current circumstances, and speculation is that by the end of my term new fixed rate deals available will be at least double the cost of what is being applied on our mortgage.

Outside of the above conversation I was wondering about the merits of reducing the loan with a capital repayment (can't afford 10% but maybe 5%). My thinking was that such a payment would be interest-free, reduce the balance owing and in turn help keep the next set of monthly repayments on the next deal more manageable. Alternatively it might allow us to reduce the mortgage term next time so I'm not nearly dead by the time it's paid off.

[TrenterPercenter]

@shoulders careful shoulders I thought I knew what Jasha was saying here as the only way I can think of overpayments not being beneficial would be accruing an interest in another accounts and then overpaying from these accounts (this is true it is just there isn't any good vehicle at the moment).

I really don't understand what Jasha is saying now - the rate and term are constant but the amount owed reduces?! You can remortgage the term anyway if you wanted and I am paying well over future rate rises.  The ceiling overpayment rate (on my mortgage) is 10% per annum which means I would need to be dropping in 18k a year at this stage to top that out and this ain't going to happen anytime soon.

Anyway check this out
Martin Lewis who knows a thing or two about this

You can also use the overpayment calculator here Overpayment Calculator

This is a calculation based on a mortgage of 200k, 25yrs at 3% interest and overpaying £500 a month (this might be quite high for some people) the first line is with overpaying.  That is a saving in interest alone of £38,784 over 14 years at which point you will be mortgage free (though in reality by year 10-11 your mortgage is about £200 a month)



If you can find a better saving or way of paying off that debt sooner/for less money then I would be very interested to know what it is.

Just to note a renters graph would just be a straight line.

[shoulders]

There are other things to consider such as the benefit of having more savings for home improvements and emergencies, buffer for day to day expenses and so on.

Do I need the mortgage term to come down from 25 to (eg.) 18 years that badly?

[colacentral]

I think there's some misunderstanding about equity here so for anyone that might benefit from this overly simplistic explanation: your house value goes up over time, becoming larger than the size of the outstanding mortgage. At the same time, your monthly mortgage payments reduce the debt. That difference between outstanding debt and the house value is essentially your deposit on your next house. Everyone else's house value increasing at a hypothetical equal rate doesn't matter because you still would have a much smaller debt the next time you move. As trenter said, rent payments disappear into the ether / someone else's pocket, but mortgage payments are essentially payments into life savings. It's almost impossible to pay rent and save for a deposit, but if you can do it, then once you're in a house, the mortgage payments save the deposit for you.

Ie, trenter's equity isn't 60k, it's 60k plus however much he's paid off his mortgage.

[Buelligan]

However, house prices can go down as well as up.  Sometimes people can find that, even though they've paid their mortgage payments diligently, the value of their house is now less than the outstanding debt.  Which is something to think about.

[MojoJojo]

Ohh, keep it up guys. I've got a dinner party coming up, this conversational gold.

[shiftwork2]

Ohh, keep it up guys. I've got a dinner party coming up, this conversational gold.

I'm thinking White Ladder by David Gray on CD.  Maybe Moby.  Depends whether variable or fixed.

[Buelligan]

Ohh, keep it up guys. I've got a dinner party coming up, this conversational gold.

How's your kitchen extension coming along btw?

[shoulders]

Even though I work in remortgaging I avoid discussing anything to do with such matters in real life as it is a very dry, dusty sub-Ryvita subject synonymous with the most boring people on the planet, petty social climbers.

I'm just bringing it up here as that's what the topic says and this way I don't have to defile myself on one of Martin Lewis' Day of Judgement-tier message boards.

[Mr_Simnock]

The rate is constant until the bank changes it or you change lender

The term is constant unless you move lender

If you can swallow a rate rise and still make overpayments then why aren't you making those additional overpayments already?

Any benefit from overpayment is limited to your existing outstanding term and your lenders overpayment ceiling (usually 10% of the outstanding capital), that is to say once you have repaid the capital in full there is no longer any return on your overpayment, most mortgage deals issued anytime in the last 6 or 7 years are going to be around 2-3%, on such a small rate assuming all overpayments are against the capital and keeping the monthly repayment constant the compound interest savings just aren't enough to justify it.



And no it's not a high interest savings account as you won't find a monthly saver or even a building society bond that pays 3%

The rate may well be constant but 3% of £100,000 is more than 3% of £90,000 if your paying it off quicker. The term may well be fixed but I can pay off my mortgage early by paying a tiny fee (in rtelation to the size of the mortgage, even a lot smaller than a monthly repayment at this time). Paying off more each month during low interest is a good thing, no idea how anyone thinks otherwise.

[shoulders]

The rate may well be constant but 3% of £100,000 is more than 3% of £90,000 if your paying it off quicker. The term may well be fixed but I can pay off my mortgage early by paying a tiny fee (in rtelation to the size of the mortgage, even a lot smaller than a monthly repayment at this time). Paying off more each month during low interest is a good thing, no idea how anyone thinks otherwise.

I would have thought even more so if you're on a very good fixed deal and interest rates are going to be pulled up to double that or more in the years to come.

If next remortgage have a fixed rate at 3+% and my mortgage payments have doubled then I might not afford to make overpayments, so best to do it now while I can. At least, I think so.

[Endicott]

The rate may well be constant but 3% of £100,000 is more than 3% of £90,000 if your paying it off quicker. The term may well be fixed but I can pay off my mortgage early by paying a tiny fee (in rtelation to the size of the mortgage, even a lot smaller than a monthly repayment at this time). Paying off more each month during low interest is a good thing, no idea how anyone thinks otherwise.

I think I'll just chime in here as another person who doesn't understand what @Jasha is saying.

The rate might be fixed (only if you're on a fixed rate, I was on a variable rate) but the amount is decreasing faster.

The term may be fixed but you might be surprised as I was to find that the charge for paying it all off 5 years early was, in my case, zero.

I did it for peace of mind, because I was on a variable rate and rates are going to go mental. BUT, if I'd needed a loan at the time, I wouldn't have paid off the mortgage, as it was still the cheapest loan I could have possibly got. But I didn't need a loan and the costs were about to rocket.

[Ferris]

Thanks to covid we got a 5 year fixed rate at 1.86%

Amortized that bad boy over 30 years, no problemo.

Tasty.

[TrenterPercenter]

Thanks to those that have chimed in here @colacentral, @Mr_Simnock and @Endicott this is all I've been trying to point out (and thought it was quite clear).  I've no idea what Jasha is on about really.

[TrenterPercenter]

There are other things to consider such as the benefit of having more savings for home improvements and emergencies, buffer for day to day expenses and so on.

Do I need the mortgage term to come down from 25 to (eg.) 18 years that badly?

Well it depends on what you want to do with any excess cash now but ultimately you just pay more money on it.  Think about a credit card debt, they set a minimum payment to service the debt you pay mostly interest and small amount of the debt, that is how credit cards make banks money by people not paying off their debt quickly.  It's the same with mortgages (though the interest is less but the amount borrowed is much higher).

As the link I posted point out if you a) do not have any unsecured high interest debt (or any at all really) b) have a buffer of savings for emergencies and c) cannot save via interest at higher rate than your mortgage then overpaying is incredibly beneficial.  Like all banking it's a con, thinking I won't pay now I'll pay later just means paying more for longer.  Like all debt that might be preferable depending on circumstances.