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Mortgage for everyone

Started by bgmnts, August 01, 2022, 05:04:10 PM

Previous topic - Next topic

TrenterPercenter

Quote from: katzenjammer on August 04, 2022, 02:19:57 PMOn the other hand there is an emotional appeal to entirely owning your own home that most people can relate to so I understand the appeal of paying off the mortgage ASAP too.

I have no emotional appeal to owning my home other than not having to pay a mortgage.

TrenterPercenter

Quote from: MojoJojo on August 04, 2022, 02:48:18 PMYou get the money from the AVCs when you retire. Since the NHS is a defined benefit scheme, this translates into getting a lump sum of cash when you retire.

Would it be tagged to my NHS pension then i.e. I would only be able to claim it at 68?  Also those figures quoted by Jasha surely that cash taxed when you withdraw it?

MojoJojo

I think so - I'm out of depth here though with it being an NHS pension. You can take 25% of the lump sum as cash tax free, then use the rest to buy an annuity, which you would pay income tax on the payments from. That's basically how a defined contribution scheme works.

I'm looking here https://www.nhsbsa.nhs.uk/member-hub/increasing-your-pension . You can pay extra to retire earlier, which might be a better thing to look at.

TrenterPercenter

Quote from: MojoJojo on August 04, 2022, 04:13:56 PMI think so - I'm out of depth here though with it being an NHS pension. You can take 25% of the lump sum as cash tax free, then use the rest to buy an annuity, which you would pay income tax on the payments from. That's basically how a defined contribution scheme works.

I'm looking here https://www.nhsbsa.nhs.uk/member-hub/increasing-your-pension . You can pay extra to retire earlier, which might be a better thing to look at.

I'm not in the one with the lump sum are pensions got raided by the Tories back in 2015. I worked it out at currently around £200 a week after 13 years service (for life from 68).

katzenjammer

Quote from: TrenterPercenter on August 04, 2022, 02:50:15 PMI have no emotional appeal to owning my home other than not having to pay a mortgage.

For me it would be knowing that the bank cannot repossess my home

Psybro

Quote from: TrenterPercenter on August 04, 2022, 02:51:43 PMWould it be tagged to my NHS pension then i.e. I would only be able to claim it at 68?  Also those figures quoted by Jasha surely that cash taxed when you withdraw it?

You could take it out sooner as it operates separately.  Really the only advantage to using the NHS one rather than a private pension is they could take the money directly out of your pay.

As stated by MojoJojo, 75% of it is taxable on withdrawal but you also get tax relief on what you pay in (either by the amount in the account being increased or by the tax in your take-home pay being reduced).  This could mean you're better off than overpaying your mortgage from your pay which has already been taxed and that money is gone forever.

You can't get to it until you're 55 (rising to 57 in April 2028) though.

TrenterPercenter

Quote from: katzenjammer on August 04, 2022, 05:05:42 PMFor me it would be knowing that the bank cannot repossess my home

These things are related somewhat

katzenjammer

Quote from: Dr Trouser on August 04, 2022, 01:37:01 PMdouble digit inflation
can't take the train to my job, there's a strike at the station

Zetetic

Quote from: Ferris on August 02, 2022, 06:20:00 PMI'm amazed there's any back and forth at all considering everyone here basically agrees this system is bad and wants fixing.
Hmm.

TrenterPercenter

Quote from: katzenjammer on August 04, 2022, 06:57:17 PMcan't take the train to my job, there's a strike at the station
neon king kong standing on my back, can't stop to turn around broke my sacroiliac

Uncle TechTip

Quote from: MojoJojo on August 03, 2022, 09:45:22 AMOhh, keep it up guys. I've got a dinner party coming up, this conversational gold.

I guess it's this kind of attitude that keeps the less well-off from thinking they can do something about their situation, when looking far into the future. All jokes, I know.

Thanks to @shoulders @trenter et al for resisting that.

Proactive

@trenter, yes stocks and shares are basically gambling, but the trick is that rather than put money into one or a small number of companies, you instead spread your money around literally thousands of the world's biggest companies via a pre-packaged portfolio/fund,because some of those companies will ultimately go bust but some of them will become Apples, Amazons etc and it'll all equal out. I've mentioned it either in this thread or elsewhere but there's a book called The Simple Path To Wealth which helped me to get my head around it all, which I'd really recommend.

Edit: and when I say equal out, I mean grow over the long term.

Proactive

Here's my own little head scratcher: we have 23k remaining on our mortgage. We have about 70-80k cash between us (to go towards the next house) and we each make adequate pension contributions (her via work scheme, me via a SIPP). Now, what I'm wondering is with the rate of inflation the way it currently is, would it be worth just paying off the mortgage now, as the 23k we could use to do so will have a fair bit less purchasing power in 2-3 years time.

What I don't want to do is put that kind of money in my SIPP as it's then locked away for at least another 12 years, even though I appreciate that would otherwise be the best means of accruing more ultimately. Given that the pot of money we have is for moving house, but I don't know when we'll make that move, surely it would be better off in bricks and mortar than just sitting in a low interest account decreasing in real-terms value?

Sorry I appreciate this is bordering on "diamond shoes too tight" territory.

TrenterPercenter

Quote from: Proactive on August 06, 2022, 06:55:01 PM@trenter, yes stocks and shares are basically gambling, but the trick is that rather than put money into one or a small number of companies, you instead spread your money around literally thousands of the world's biggest companies via a pre-packaged portfolio/fund,because some of those companies will ultimately go bust but some of them will become Apples, Amazons etc and it'll all equal out. I've mentioned it either in this thread or elsewhere but there's a book called The Simple Path To Wealth which helped me to get my head around it all, which I'd really recommend.

Thanks for this : )

Quote from: Proactive on August 06, 2022, 07:05:20 PMWhat I don't want to do is put that kind of money in my SIPP as it's then locked away for at least another 12 years, even though I appreciate that would otherwise be the best means of accruing more ultimately. Given that the pot of money we have is for moving house, but I don't know when we'll make that move, surely it would be better off in bricks and mortar than just sitting in a low interest account decreasing in real-terms value?

My advice would be pay off the mortgage, you much more sophisticated than me with the stocks and shares stuff but it makes sense to move it from a low interest account - I'm in the same situation really but I need access to the money incase something goes wrong with my folks.

shoulders

Quote from: Proactive on August 06, 2022, 06:55:01 PM@trenter, yes stocks and shares are basically gambling, but the trick is that rather than put money into one or a small number of companies, you instead spread your money around literally thousands of the world's biggest companies via a pre-packaged portfolio/fund,because some of those companies will ultimately go bust but some of them will become Apples, Amazons etc and it'll all equal out. I've mentioned it either in this thread or elsewhere but there's a book called The Simple Path To Wealth which helped me to get my head around it all, which I'd really recommend.

Edit: and when I say equal out, I mean grow over the long term.

There's the thing about Trump, great businessman, that if he chose to invest his father's fortune in pretty much any low risk tracker he'd have more money now than anything he's made from his own business endeavours.

This was a great time of optimism, plenty of boom along with the occasional bust, up to 2000 it felt like everything would gradually, if unevenly, continue getting better, however now, I wouldn't be so sure entering into a 40 year strategy right now will pay off when all indicators point to 2062 being a terrible time to be alive. Live for now.

Proactive

Quote from: shoulders on August 07, 2022, 07:51:43 AMLive for now.

Or, bit of living for now, bit of planning for later?

If the global equities market is so far in the toilet by old age that there's nothing left in the pot, the very idea of having or needing money at all will be moot.

On the other hand, it might be basically as it is now and being poor in retirement/not being able to retire will also be as shit as it is now.

TrenterPercenter

Quote from: Proactive on August 07, 2022, 11:01:35 AMOr, bit of living for now, bit of planning for later?

Pretty much this.  Personally growing up in very poor household one of my main anxieties is around being poor again and unless they win the lottery, it's very likely I'll be paying out when my parents pass away not the other way round.

Lots of people (and I mean lots) don't have to think as much about later life because they will inherit wealth from their parents who with even moderate assets will be a healthy amount retirement. We seem to be forgetting that wealth is generational and consolidated this way - this is the often unspoken wealth that people are ashamed to speak about because it is unearned and would be counter to their leftwing beliefs, very few people forgo their inheritance donate it to good causes.  Homeowners after declining in 2010s are back up to the same as the 80s now with loads more people that own their property outright, this is of course all badly skewed towards older people......who in the main will leave these matured assets to their kids.

TrenterPercenter

Again another thing for the negative equity issue.

Michael works his arse off to buy a house taking a mortgage at 300k because that is the average house price and he has no choice, house prices tumble to 150k leaving Michael with -150k negative equity and a 300k mortgage.

John's mum and dad have who paid the equivalent price for a house in 1980 of 100k (adjusted for inflation) die and leave the house him, he now has an asset of 150K, no negative equity, no mortgage, no rent.

The idea that keeps getting espoused here is that Michael can just wait for house prices to rise which in order to work (and ignoring all the problems mentioned before) is just literally willing the same boom and bust cycle to continue.  John through doing nothing has a cheap house (it was original bought for a 100k) that has increased 100% in value and is going to increase another 200% before Michael is actually paying for what thought he was buying.

Ferris

I had the other thread muted but you're still banging on about this? Ok sure:

What is the base interest rate in this hypothetical? What economic driver caused the housing market to lose 50% of all value overnight - a recession? A nuclear war? Free houses on the moon? Does it impact all houses equally or is it mean vs median? What's the NPV for cash, and the inflation rate in this scenario? How about the future predicted values of all those figures? How about the generational expectation of house prices in the population - are those being priced in or what? What's the rate of population increase versus new housing starts in the country? Is the market stable or bearish, and what are employment levels in the broader economy?

I don't know why you keep arguing with strawmen over and over when me and a few other people have dropped it. Nobody thinks negative equity is a good thing in and of itself, and that's not a point anyone was making. Here's the headline though: ceteris paribus, your nominal house price fluctuating means nothing unless you are trying to sell.

If you start making other assumptions, then yeah it can be bad news but you're making predictions that tbh can go the other way. What about if house prices drop 16% (which would be the largest drop in recorded data) so your 250k house is now only "worth" 210k, but BoE base interest rate drops to .25%? And inflation shoots up to 20%? And wages go through the ceiling, housing starts drop, and immigration increases 50%? If anything, that makes everyone's mortgage repayments cheaper and people are better off month over until they try to sell - they might even save in cash more than the decrease in the nominal value of their home over the life of the mortgage so they finish ahead.

It's not as simple as saying "house down 50% so you have lost money!!" because that relies on a ton of other assumptions that aren't necessarily the case, and doesn't apply at all unless you realize the loss by selling the asset (and if you are forced to do that by circumstance then yes that is bad).

Ok, now I'll drop it.

TrenterPercenter

#169
Is it possible that you are getting way too heated over this? I really don't get this idea that I'm now in another thread trying to antagonise you or something. You are making a mistake here and I'm sorry if this is me being shit at communicating what I am saying, Despite this I've even apologised and pointed out that I wasn't calling your advantages into question.

QuoteWhat is the base interest rate in this hypothetical? What economic driver caused the housing market to lose 50% of all value overnight - a recession? A nuclear war? Free houses on the moon? Does it impact all houses equally or is it mean vs median? What's the NPV for cash, and the inflation rate in this scenario? How about the future predicted values of all those figures? How about the generational expectation of house prices in the population - are those being priced in or what? What's the rate of population increase versus new housing starts in the country? Is the market stable or bearish, and what are employment levels in the broader economy?

These are all exactly the same questions I think are important, I was the person looking for more consideration of these things (I've really not sure if you read where this particular discussion came from but it was from another posters glib dismissal of negative equity as unimportant/made up).

QuoteI don't know why you keep arguing with strawmen over and over when me and a few other people have dropped it. Nobody thinks negative equity is a good thing in and of itself, and that's not a point anyone was making. Here's the headline though: ceteris paribus, your nominal house price fluctuating means nothing unless you are trying to sell.

See this is where we end up back at and I respectfully disagree, I've pointed out, and so have a series of other posters that this isn't true.  You keep ignoring these things (you've acknowledged this right at the end tbf) and that you can't sell.  I'm really not trying to argue or strawman or anything here Ferris (genuinely) I think it's just one of those simple things, I see you saying this as "there is no problem with NE unless you are trying to sell", I'm saying "the problem with NE is you can't sell and this is the problem with NE", we are agreeing it's just you are removing the context of this originally being a conversation the impact of house prices on the public, not people that can just sit in the house so someone (not you originally) saying NE doesn't matter isn't true in reality as for lots of reasons people will need to sell, their fixed terms will run out they will not be able to remortgage and they might not be able to pay their mortgage (as suggested the lenders might cut a deal but this will be almost certainly be extending the term and costing lots more money overall), likewise losing your job you have some protections in equity, these are now gone.

It's absolutely isn't as simple as "House down 50% so you have lost money!" that is my point, the counter point to saying it doesn't matter your house is down 50% (as you recognise in your brackets) and why I pointed out the scenarios beyond this that it does.

I think the problem here is that you are looking at this in investment mode whilst I was talking about the impact on society of a sizeable amount of people going into NE hence why I was saying "I'm thinking about it a bit more" i.e. in different way.

I'm not sure what else I can do to explain this but it really isn't anything to get too worked up about.



jamiefairlie

But a house as an asset is not special to any other kind of investment, it's value is subject to rise and falls and if you need to sell during a fall you may well lose money, but in the longer term it will gain in value more than money in a regular bank account.

TrenterPercenter

#171
Hear me out here (or atleast humour me)

Quote from: jamiefairlie on August 07, 2022, 05:40:00 PMBut a house as an asset is not special to any other kind of investment, it's value is subject to rise and falls and if you need to sell during a fall you may well lose money, but in the longer term it will gain in value more than money in a regular bank account.

It is though, for several reasons I've covered these in the other thread before. 

Having somewhere to live is an essential, negative equity increases someones vulnerability to becoming homeless - if you invest in luxury cars and this market halves this is not an essential commodity unless you've secured your investments to the equity in your home which just links this back through to the first point (and this is another point here lots of people have used their equity this way).  They become more vulnerable to not being able to pay their mortgage as they can no longer use equity, they have no secured borrowing power, cannot remortgage, will end up on the banks standard rate.  The house price halves not the debt.

The context of this was if house prices halved it would help reduce misery because young people would be able to get on the market, but in the condition where people just sit in their houses and wait for them to rise again then everything stays the same.  Someone has to lose in order for the new person to buy the cheap house because someone is still having to carry the debt.

I'm not defending any of this btw, I'm just talking about it, specifically about how to deflate the market with the least pain - which seems to me to be reduce debts alongside prices (now a FTB is left carrying a 300k debt for a house they sold to YP for 150k - which just switched the debt around otherwise).  Where neg equity might help is with my example up page in that via inheritance or buying when the market was low the drop might still even out the price so perhaps weighting around this would make things fairer.

Does this makes sense? am I missing something here? I'm really puzzled as to why this being seen as such a bizarre line of thinking.

jamiefairlie

Quote from: TrenterPercenter on August 07, 2022, 06:01:30 PMHear me out here (or atleast humour me)

It is though, for several reasons I've covered these in the other thread before. 

Having somewhere to live is an essential, negative equity increases someones vulnerability to becoming homeless - if you invest in luxury cars and this market halves this is not an essential commodity unless you've secured your investments to the equity in your home which just links this back through to the first point (and this is another point here lots of people have used their equity this way).  They become more vulnerable to not being able to pay their mortgage as they can no longer use equity, they have no secured borrowing power, cannot remortgage, will end up on the banks standard rate.  The house price halves not the debt.

The context of this was if house prices halved it would help reduce misery because young people would be able to get on the market, but in the condition where people just sit in their houses and wait for them to rise again then everything stays the same.  Someone has to lose in order for the new person to buy the cheap house because someone is still having to carry the debt.

I'm not defending any of this btw, I'm just talking about it, specifically about how to deflate the market with the least pain - which seems to me to be reduce debts alongside prices (now a FTB is left carrying a 300k debt for a house they sold to YP for 150k - which just switched the debt around otherwise).  Where neg equity might help is with my example up page in that via inheritance or buying when the market was low the drop might still even out the price so perhaps weighting around this would make things fairer.

Does this makes sense? am I missing something here? I'm really puzzled as to why this being seen as such a bizarre line of thinking.

No I broadly agree with you but it is classic supply/demand economics, more people want to buy houses than are available to buy, so prices go up. As long as that dynamic continues (and it's hard to see how it shifts) then it will continue to be that way.

TrenterPercenter

Quote from: jamiefairlie on August 07, 2022, 07:13:44 PMNo I broadly agree with you but it is classic supply/demand economics, more people want to buy houses than are available to buy, so prices go up. As long as that dynamic continues (and it's hard to see how it shifts) then it will continue to be that way.

Thanks for replying.  Yep the real solution is more housing stock and better T&Cs for renters.