Mortgage repayments

[Les.]

It is over 50 years since I bought my first house. Mortgage or endowment? I took mortgage, BUT, I think back then an endowment could work quite well. It seems where Dave went wrong was using an agent. The insurance companies DIRECT were much better value.

My pal explained to me a few years ago that properly done, endowments could be winners, as the insurance companies would often “up” the benefits towards the end. They had a “with profits” element. However, they expected people to change or finish paying well before the final date. The company’s directors, family and friends would stick it out, then be quids in as they upped the benefits accrued because the others had dropped out early.

But I get the impression NOTHING is worthwhile today. Back when I started, interest rates tended to be fairly static for long periods, unlike recent times. I would hate to have to be in the market today. 25 years ago I suckered myself into taking a bridging loan. Disaster! I have deliberately NEVER attempted to work out what it cost me. I was in it at the time of the ERM debacle, when interest rates hit over 30%, and I was paying bank rate plus 3%. It should have only lasted a few months, but the market shut down the moment I took it, and it took a further seven years to sell the cottage. During that time, I moved back in and took a mortgage, having paid off the original 12 years previously.

The idea of a “fixed term for 2 years” was fortunately never even though of 50 years ago, just another grab money scam following the de-mutualising of all the mortgage companies. They were fantastic “businesses” before greed and Mrs T allowed that process.

Les.

[tadka]

We are just pawns in a big money game. I wonder how long before our current interest rate starts going up again.

[Spedley]

I took a new 10 year mortage out at 3.79% with 60% LTV because of uncertainty in the future after Brexit.  I actually have two mortgages, one for half the loan is a 0.5% tracker for the life of the mortgage and the fixed rate is on the rest.

The bit I couldn’t understand was when I inquired about borrowing more.  I want to build an extension next year but thought I’d have to borrow the money now because I’d be tied into a mortgage deal but, that is not how it works.  I currently have a 60% LTV mortgage and I can borrow the remaining money at the 85% rate.  That just doesn’t make sense to me but it is quite standard.

i7 4790s / 8GB / 480GB SSD / GTX 980 / 34" UltraWide : i3 4170 / 8GB / 480GB SSD / GTX 770 / 24" Samsung : i3 4130 / 8GB / 500GB Spinner / GTX 1050 / 23" Acer : Q9550 / 8GB / 1TB Spinner / GTX 580 / 22" Acer : i7 720QM / 8GB / 1TB+2TB+500GB Spinners (server) : i5 4570 / 8GB / 60GB SSD / 1TB / GeForce 210 / 22" Dell It's getting warm in here!

[Dave Rice]

It wasn’t just me Les, remember the big mis-selling compensation? More than 5 million were mis-sold. Mine were bought before the cut off date.

Yours did well because the interest rates at that time were high and stayed that way for long enough, nothing to do with an agent. If you went direct the insurance company just trousered what would have been paid in commission. They weren’t better policies.

I know a few people who had them well before us did OK too. The problem was the illustrations were based on just that scenario, continued high interest rates. Various economic crashes did for that and pushed us into negative equity at one time too.

Bridging loans – I’m glad I never needed one, they never seemed to go well for those I know that did. The worst was a neighbour who got caught up in negative equity and had to move for work.

[JayCeeDee]

We had an endowment back in ’82. We bought out first maisonette in Barnet for £27k, taking out a 35 year endowment to re-pay it. I cashed it in ( 9 years early ) 9 years ago when we moved here. I got around £15k for it. When we moved from there to Potters Bar in ’87 we took out a bridging loan. Everything was in place, but the dates overlapped by about a week. They were desperate to move, but we’d got a very good price on the house so it figured in alright. The mortgage came in a week later and everything went back to normal.

To this day we reckon there was a scam by the estate agents going on. We hadn’t sold our place when we went to look, but knew where and what we wanted. The vendors had already lowered the price twice and the husband, a teacher, had moved north to a new job. The wife and kids had stayed down here till the house sold. They were bridging and were giving the ( sole ) estate agents grief about no viewings. We went into the EA telling them we had approval on a mortgage but hadn’t sold yet. We think we were sent to mollify the vendors without putting anything at risk. The house was perfect for what we needed. The wife had just taken over the business and we needed a third bedroom for an au pair to look after our son while we were at work. We offered at the asking price – about £10k  under true value – on the viewing, on condition they took it off the market, were accepted  and we shook on the deal. The next day when the wife phoned the estate agent to ask for the vendor’s phone number they balked at giving it to her and said the house had to stay on the market. She got the number off them and phoned her up about to tear her off a strip – not a nice experience, I can tell you:) – when the vendor re-iterated her willingness to keep to the deal and went on to rip the EA a new one. From that point on almost all our dealings were with the vendor direct.

Our thoughts are that the EA had someone in the wings with an even lower offer, waiting till they were truly desperate, then they would joint purchase it and re-sell it at a big profit.

The value of that house went up by £35k within a few years, just before the crash in the early 90’s. That one thing, buying it at a good price, kept us out of negative equity.

[Spedley]

House prices are crazy near me and most properties sell in less than a week.  One house went up for sale and the first viewing was a friend of the estate agent, they only had 1 other viewing in the first 3 weeks but were tied to a 6 week contract with the estate agent.  Eventually they sold shortly after the contract period ended when they displayed an interest in changing estate agent.

Some people are too soft, I’d have taken them to court straight away.

i7 4790s / 8GB / 480GB SSD / GTX 980 / 34" UltraWide : i3 4170 / 8GB / 480GB SSD / GTX 770 / 24" Samsung : i3 4130 / 8GB / 500GB Spinner / GTX 1050 / 23" Acer : Q9550 / 8GB / 1TB Spinner / GTX 580 / 22" Acer : i7 720QM / 8GB / 1TB+2TB+500GB Spinners (server) : i5 4570 / 8GB / 60GB SSD / 1TB / GeForce 210 / 22" Dell It's getting warm in here!

[Richard]

Reply to JCD:

That sounds familiar. I think that one agent or may be more was caught doing some sort of scam. They overvalued a house, left it sitting there for a while and when the owner was at their wits end stepped in an bought themselves or through a puppet. Once a house was known to be a ‘sticker’ no one took much interest and it was easy for the agent to put possible buyers off, you would not want this we cannot sell it, there must be a problem etc.. I only vaguely remember the issue, but I thought that it was not a long way from where you lived.

I thought about my endowment, it ran for the full term and returned about 3 times what I paid in. But sterling pounds 35 years earlier were worth a lot more than at the end of the term.

Edited to add the reference to the original post.

[Ed P]

In all matters financial there are elements of both luck and timing, backed by sound judgement.

When buying a house, remember location is everything, but of course finances, work and commuting set limits on what can be done. This article has some tips that look to be reasonable advice on spotting good locations near the start of their price growth curve. You can almost use the opposite to spot the future dogs. You can get a lot of area data from places like the Office for National Statistics or Police Crime figures. (You might have to wait a while to get a good return in London’s Stratford, but trend the crime stats and when they start to fall as this could be a good time to speculate! The ones who did this in London’s Islington made a fortune.)

[Richard]

Ed P wrote:

In all matters financial there are elements of both luck and timing, backed by sound judgement. When buying a house, remember location is everything, but of course finances, work and commuting set limits on what can be done. This article has some tips that look to be reasonable advice on spotting good locations near the start of their price growth curve. You can almost use the opposite to spot the future dogs. You can get a lot of area data from places like the Office for National Statistics or Police Crime figures. (You might have to wait a while to get a good return in London’s Stratford, but trend the crime stats and when they start to fall as this could be a good time to speculate! The ones who did this in London’s Islington made a fortune.)

You are right, had I sold the first house at the best price it would have been close to worth sold for eight times what we paid. As it happened we sold for about five times what we paid, before interest paid out in the early mortgages days, all sorts of taxes, (rates and others), lost interest on the cash, legal expenses, insurance, repairs, etc. Overall the net gain was very likely about the same as on the endowment.

If you are looking  for a degree of protection the worst house on the best street was the maxim. A blighted house suffering from work in progress that will end perhaps within the next couple of years can be a good bet*, Though as ED said, buying at the bottom in an about to improve district usually wins.

I missed out on a flat in north London, I did not act but they fell to £3,000 and would not sell because of a mjor road scheme 12~18 months later they went over £12,000 and then they never stopped rising.

[Dave Rice]

Be careful of those crime statistics. There was a case in the local evening paper this week where a street in South Bristol was one of the worst in the country. Top crime by far was shop lifting. There are no shops in the street whatsoever.

Upon being challenged the online provider (forget who) says that some data may come from surrounding streets and there is a major shopping street close by. In fact the street is one of the up and coming areas where you may want to get in and crime is very low (apart from the shoplifters down the road).

@ Richard, Clifton has slipped down the hill and over the docks. Southville and Bedminster are now very much the area to be. Even St Annes is now desirable as it’s just on the limit of being able to walk to work in town. Bristol is now much cyclist friendly too.

[Richard]

Yes Dave the ebb and flow of locations is amazing. My father lived in a now bulldozed area which was OKish at the time he was growing up but the houses were getting time expired in the 1950s. We live in Fishponds just after the war, I do not think I would want to be there now.Sometimes I take a virtual drive round the old areas, some are long gone and some are almost unchanged.

I had heard suggestions that Clifton was losing is gloss, but my connections with Bristol are all dead now so I do not have much in the way of contact. I will give the cycling a miss thank you, however friendly the town. I am too old to start that lark.

Deptford in London was a terrible place a few years ago but I understand that is now improving, however, I have no plans to go there ever. You can get knifed even walking through Blackheath which used to be the bees knees of places.

[Ed P]

The crime stats should be those supplied by the Police. The problem is poor staff work where the person entering the details is lax in pin-pointing the exact location and it automatically gets dumped on the central location in the reporting district. Overall district crime is OK but street level may well go astray as a result.

[edit]You can get a better handle by searching on crime-types e.g. violent or ASBOs link

[PlaneMan]

Dave, when I spent time in Bedminster (mostly the skatepark in Dame Em park) it was pretty rough.

My then boss had a large house not to far away from the skate park, he made a killing on it when he sold to a developer, moved across the road and about 10 years later (so I’m told) did the same again.

Not a book smart person but he could wheel and deal with the best of them.

[Richard]

PM, would that be somewhere near to Bedminster Down? As I recall that was always referred to as somewhere they would eat their young given half a chance in years gone by. But after 50~60 years the old memories do not sharpen up.

[PlaneMan]

According to Google, not that far away.

[Richard]

Ed P wrote:

The crime stats should be those supplied by the Police. The problem is poor staff work where the person entering the details is lax in pin-pointing the exact location and it automatically gets dumped on the central location in the reporting district. Overall district crime is OK but street level may well go astray as a result. [edit]You can get a better handle by searching on crime-types e.g. violent or ASBOs link

I was told a while back that many shop lifters are caught ’round the corner from the places where they did their deeds’. This caused the arrest to be shown in an area with no shops, could this still be the case?

[Ed P]

Richard, I honestly do not know.  I had understood that the statistics went with the crime location, not where the arrest was made. However, I would guess that they outsource the collation of the entry stats to a data entry type as many of the Police PCs look like they still run on Windows 2000, and I doubt that the software interfaces have been written to eliminate double data capture. In that situation transposition of locations is quite possible.

[Malcolm]

The crime stats are interestingly vague unless you already know the area. They’re a bit like a local council ward in the basis of their geographic extent.

So a crime ridden area (or just a bad public house) nearly a mile from the house you’re looking at gets included in the crime stats for the ward your house is in.

In one ward I know locally some of the houses in one end of the ward are all in band H (houses valued at £320,000 plus in 1992) and at the other end of the ward the houses/flats are all in band A (valued at less than £40,001 in 1992). That ward is a political wheeze to hide perhaps the poorest area in the city, and the two distinct areas in the ward don’t receive much in the way of interaction of any kind.

Crime stats are the same, one bad pub in a ward and the amount of violent crime for the whole ward goes up even if the violence always takes place on the same pub car park between the same drunk locals.

With all this talk about Mortgages and how best to pay for them, I’m an advocate of paying off as much over the set monthly payment as you can afford each month. After all every £1 you pay over reduces the capital owed, and next years interest charge. I know people who’ve paid off 25 year mortgages in 15 years. Then they pay cash for their cars/holidays etc and no interest to anyone.

Becoming mortgage free whilst owning a property is a must to achieve early in life. The other must is sell the property and move into rented accommodation whilst you’re still young enough and fit enough to spend it on cruises, fast cars and other diversions once the burden of bringing up a family has passed. That way when you’re finally old enough to need a care home, they won’t be able to take the house off you to pay for it. B-)

[Malcolm]

Atypical Actuarial calculus rules for the average being:

Rule 1 – if we’re likely to pay out make it costly

Applications in principle:

You’re young (under 30) and want life insurance from us for a mortgage and to provide for your young family? Refer to Rule 1. Then answer ‘You face many dangers and risks and are young and inexperienced so could die tomorrow, so the life cover won’t be cheap but it will be there for £xxxx’s per year. We know that over the life of the policy the payments you’ll make will exceed the amount insured but my, my the risk of your early death is large, and you did say one of your hobbies was reading..

You’re old (over 65) and want to give us all your capital in return for us paying you it back each month for the rest of your life? Refer to Rule 1. Then answer ‘ My, my haven’t you done well, you’ve successfully negotiated life’s dangers, you’re almost immortal, a born survivor, who’d have guessed? Of course we’ll do it, you give us £100,000 and we’ll give you an income of £3,000 per year increasing by up to 2% per annum to inflation proof you. Yes we’re aware you’ll have to live for a further 33 years to get your capital back, but just look at how good a survivor you are..

:yahoo:

[Richard]

Malcolm,

You are right with both posts, I could not agree more with your suggestions, especially ‘pay it off early’. As for the over 65 package, – ‘roll your own’ you know it makes more sense.

[Author]

Posts