Lbm Posted April 27, 2010 Share Posted April 27, 2010 Nice little article here on interest only verses repayment mortgage. It really is worth a quick peek http://uk.biz.yahoo.com/26042010/389/true-cost-interest-only-mortgage.html Quote Link to comment Share on other sites More sharing options...
supra_aero Posted April 27, 2010 Share Posted April 27, 2010 Nice little article here on interest only verses repayment mortgage. It really is worth a quick peek http://uk.biz.yahoo.com/26042010/389/true-cost-interest-only-mortgage.html That article fails to mention a lot in favour of interest only mortgages (again media scare tactics! ). It ignores the fact, if you are renting your property, the increased amount you make by rent far outweighs the savings from repayment mortgage, assuming you invest it wisely in a high interest business or investments or simply prefer the increased income. People (generally media) always use ISA s as a benchmark for investments. ISAs are not a good way of earning an income!!! They are a relatively risk free holding for money but not an investment for making money. Afterall if they were all businesses would be singing their praises. And even if you are not renting your property the same principle applies. The article also fails to make the point that the £150k down payment you must make in 25 years will not be the same as £150k in real terms now. We all know our parents used to say a £10k home back then was a lot of money. Likewise £150k a year in 25 years will not be all that much. Taking into account growth of income and inflation it in actual fact is far less in 25 years time in real terms. £150k may even be the average annual salary for most of us on here by then. It also fails to mention that assuming you don't keep your house for the full 25 years, taking the above stance into consideration its *highly* unlikely you'll be selling it at less than that, so you have effectively lived your home at a far cheaper monthly mortgage than had you been on a repayment mortgage. Granted you'll get less back when you sell 15-20 years down the line as you have paid none of the capital off, but at least you lived with far more disposable income throughout your mortgage period. I'd rather get paid an extra £4k per year for 20 years than have a big bonus 20 years later when I am an old man And it also fails to mention you generally have the option of putting some money into the capital as and when you please with a lot of the interest only mortgages. so in summary, I disagree with the article. Quote Link to comment Share on other sites More sharing options...
tbourner Posted April 27, 2010 Share Posted April 27, 2010 I have always aimed for doubling my investment every 8 years which is pretty much the average rate of growth in the property market over 50 years. Erm.... no, massively no. It's more like 3% in real terms! (you can't ignore inflation, as some in this thread have done) edit - seems I was too generous - here are the last 50 years for you: The average UK house price has increased by 273% since 1959 in real terms (i.e. after allowing for retail price inflation), at an average annual rate of 2.7%. That 2.7% is annually though, so it's more like 24% growth over 8 years? Quote Link to comment Share on other sites More sharing options...
Tom Posted April 27, 2010 Share Posted April 27, 2010 Snip that was interesting to read, changed my view on a couple of things This thread is good reading Quote Link to comment Share on other sites More sharing options...
SteveR Posted April 27, 2010 Share Posted April 27, 2010 That 2.7% is annually though, so it's more like 24% growth over 8 years? 23.7% yes - nothing like 100%! (the doubling that was mentioned as an "average" increase over the last 50 years) Take away the average wage inflation over the same period and that number reduces to single figures. Quote Link to comment Share on other sites More sharing options...
jagman Posted April 27, 2010 Share Posted April 27, 2010 "But the sources you are using to justify them are based on the same media who forecasts nonsensical opinions to make a good story. The sources are not empirically based." If I wanted to, I am sure I too could dig around media websites which state house prices will increase. Actually far from it but I cant be bothered with finding all the charts graphs and historical data - you do have to be selective using media ,opinions are one thing , but you also need anecdotal evidence and reasons to explain the opinion given ONS data is useful but sometimes flawed , mortgage data and pricing data also needs some extra factors - such as auction prices are not added to the sales data and prices , month on month prices have to be balanced with quantity of sales etc and averages can sometimes distort figures , building company shares can predict forward pricing to some extent ,job loses have to be qualified into the types of job -some job types will cause 4-1 ratio of knock on job losses ,some job losses will simply never return as future jobs - is is a huge task but I have been doing it some time !!! The initial post requested a simple answer ,which is NO - and I could post up a couple of hundred pages of reasoning and evidence,this is not really the place for it and I dont really have the time available Quote Link to comment Share on other sites More sharing options...
SteveR Posted April 27, 2010 Share Posted April 27, 2010 jagman - hit the "quote" button rather than copy & paste someone's post. It's much easier to read and track what is going on - ta! Quote Link to comment Share on other sites More sharing options...
supra_aero Posted April 28, 2010 Share Posted April 28, 2010 "- is is a huge task but I have been doing it some time !!! The initial post requested a simple answer ,which is NO - and I could post up a couple of hundred pages of reasoning and evidence,this is not really the place for it and I dont really have the time available Likewise. My job is research and analysis, 3 of that was dedicated to the housing market actually Anyway we'll see what happens.. I'll bump this thread 1 year later Quote Link to comment Share on other sites More sharing options...
Charlotte Posted April 28, 2010 Share Posted April 28, 2010 The initial post requested a simple answer ,which is NO - and I could post up a couple of hundred pages of reasoning and evidence,this is not really the place for it and I dont really have the time available Could you at least give a brief explanation to your points? I for one would be really interested to hear your views based on your background knowledge. Quote Link to comment Share on other sites More sharing options...
jagman Posted April 28, 2010 Share Posted April 28, 2010 Could you at least give a brief explanation to your points? I for one would be really interested to hear your views based on your background knowledge. http://www.chrismartenson.com/ " the crash course " this is a reasonable place to start some investigation ,take a look( its about 1 hr for all chapters ) and then post your comments Quote Link to comment Share on other sites More sharing options...
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