New mortgage

[foxnet22]

We are looking into buying a bungalow that as come up for sale .we currently have 3 years left on our mortgage then this house is paid for. My question is would there be anything I should know about before I look into a new mortgage. 

[Neverforget]

Have you thought about it 3 years left and you want to start again 

 

[foxnet22]

We wI'll be putting current house up for sale then .and pay some of the new one hopefully leaving a smaller payment .

[Neverforget]

Wish you all the luck 

I paid mine off four years back wouldn't want to start again , daughter has just got her first one last December chuffed to bits but worrys me sick 

[Whatmuff]

I'd be looking very soon to make the most of low interest rates and have it fixed for as long as possible. You may find it difficult to get a low rate fixed due to the announcement of possible interest rate rises coming up to counter inflation. I'd check to make sure you can still afford the monthly payments with interest rate rises to ensure you are not shooting yourself in the foot. I am prediction a huge market crash in the next year or two due to the rate rises as people are just so in debt and with cheap rates it's artificially low. If they move just a few percent then people's monthly payments are going to sky rocket, along with the council tax increase and inflation it's not looking pretty. The last week has shown the stock market decline and pension funds are looking shady, it's not long if you ask me. So id be looking to pay as much debt off as possible before the rates rise.

[washerboy]

I’m in a similar situation, 4 years left on mine . To make matters worse my first house was bought in 1992 and would have been paid off by now.

The wife wants a bungalow but wouldn’t find one for the same money if I sold my house I’m in now 

[team tractor]

I’ve just added 3 years to my mortgage and don’t regret it. I love my house , it’s perfect for me . 

I see loads of people trying to pay them off early . Why ? 

Yeah you can save money but then they buy nice cars instead that loose money. 

 

At at the end of the day you have to live somewhere so make it something you want .

[Whatmuff]

Paying off your mortgage early will save you alot in the long run! Nowadays people are happy to take on 6 x their annual salary on a 35 year term. If you get a 200 grand mortgage you'll end up paying nearly 400 gra d for your house so overpaying and clearing your mortgage early will save thousands. 

200 grand mortgage 4% interest on a 30yr term. overpayment of 200 per month will take 8 years off it and save nearly 80000.

[Lloyd90]

15 minutes ago, Whatmuff said:

Paying off your mortgage early will save you alot in the long run! Nowadays people are happy to take on 6 x their annual salary on a 35 year term. If you get a 200 grand mortgage you'll end up paying nearly 400 gra d for your house so overpaying and clearing your mortgage early will save thousands. 

200 grand mortgage 4% interest on a 30yr term. overpayment of 200 per month will take 8 years off it and save nearly 80000.

I’ve just taken out a mortgage for 30 years, interest rate was 1.2% not 4% so maths will be a bit off. 

 

I dont expect them to stay that low for 30 years but I don’t imagine they’ll be sky high, if they do go a lot of people will be going homeless as with current House prices most people are mortgaged up to their eye balls! 

[team tractor]

2 minutes ago, Lloyd90 said:

I’ve just taken out a mortgage for 30 years, interest rate was 1.2% not 4% so maths will be a bit off. 

 

I dont expect them to stay that low for 30 years but I don’t imagine they’ll be sky high, if they do go a lot of people will be going homeless as with current House prices most people are mortgaged up to their eye balls! 

My parents were paying 15% ouch

20 minutes ago, Whatmuff said:

Paying off your mortgage early will save you alot in the long run! Nowadays people are happy to take on 6 x their annual salary on a 35 year term. If you get a 200 grand mortgage you'll end up paying nearly 400 gra d for your house so overpaying and clearing your mortgage early will save thousands. 

200 grand mortgage 4% interest on a 30yr term. overpayment of 200 per month will take 8 years off it and save nearly 80000.

I understand that but most of the people I know that are trying to pay it off early end up driving heaps of junk , no holidays etc.

i might not live to see the end of mine even tho I’ll be 54 so I just leave as is and enjoy my money . 

[Lloyd90]

14 minutes ago, team tractor said:

My parents were paying 15% ouch

I understand that but most of the people I know that are trying to pay it off early end up driving heaps of junk , no holidays etc.

i might not live to see the end of mine even tho I’ll be 54 so I just leave as is and enjoy my money . 

That’s what I mean mate - if they go back up to the likes of 10% + etc they’ll be a homeless epidemic - there is already apparently record levels of homelessness - but I’m talking entire families with little kids sleeping in doorways. 

I imagine it would lead to large scale civil unrest etc, so can see the government avoiding that at all costs! 

[Whatmuff]

31 minutes ago, Lloyd90 said:

I’ve just taken out a mortgage for 30 years, interest rate was 1.2% not 4% so maths will be a bit off. 

 

I dont expect them to stay that low for 30 years but I don’t imagine they’ll be sky high, if they do go a lot of people will be going homeless as with current House prices most people are mortgaged up to their eye balls! 

If you look over history to the last 40 years interest rates were in fact nearly 20% hence the average home cost around 5 grand, however rates have fallen ever since due to various Financial crashes. Reducing interest rates makes borrowing cheaper and therefore people can borrow more. A normalised interest rate for our economy is around the 7% mark so 1.8% is extremely low and no where near the normal rate, I definitely wouldn't be predicting my future outgoings on that rate. 4% is an average interest rate that people are paying especially those on a long term say 10yr fixed. Inflation is starting to pick up now so to counter that the BOE will start to increase the base rate to bring inflation under control. I'd expect this figure to be at least 2-4% and thats just the base rate, remember you'll pay the banks rate on top of that.

 

28 minutes ago, team tractor said:

My parents were paying 15% ouch

I understand that but most of the people I know that are trying to pay it off early end up driving heaps of junk , no holidays etc.

i might not live to see the end of mine even tho I’ll be 54 so I just leave as is and enjoy my money . 

I get that, people just have different priorities that's all and different attitudes towards money. For a lot of the older generation, they will have benefited from high rates back in the day when they first bought a home, say 1970's to 1980's and where interest rates were between 10% and 20% and then over the years the rates have significantly fallen to 0.25% (Historic Lows) and all this has done is enabled people to borrow huge sums and inflated the market. The trouble now lies with an over inflated housing market full of borrowed money and silly schemes like the Governments Help To Buy.

Here is an example, A new couple go to the House Build Co and looks round a new build in the SE, They spot a 3 bed semi for 450 grand and like it. They only need a 5% deposit to buy as the Government will give them a 30% loan at £135000 and with their deposit at £22500 so they now need a mortgage of £292500 and they are the proud new owners of a 3 bed semi detached new build. Only they have a mortgage on a 35 year term, and a loan that needs paying back at £135000 and only 5% equity in a property. The monthly payments on these will increase when the Base Rate goes up. And having bought in the last ten years when interest rates are at historic lows it's never going to get cheaper. These families already have their family cars on Hire Purchase and most of the items in their houses like Sofas, Furniture, TVs ect. When the economy needs interest rates at 0.25% and Governments to lend people up to 30% to get on the housing ladder then somethings not right. 

Edited February 10, 2018 by Whatmuff

[Whatmuff]

10 minutes ago, Lloyd90 said:

That’s what I mean mate - if they go back up to the likes of 10% + etc they’ll be a homeless epidemic - there is already apparently record levels of homelessness - but I’m talking entire families with little kids sleeping in doorways. 

I imagine it would lead to large scale civil unrest etc, so can see the government avoiding that at all costs! 

You are absolutely right mate there will be, only they won't need to rise 10% for that to happen, they will only need to rise a few percent and the effect will be huge! Especially with average mortgages up in the 100's of thousands. Look at the news over the past 3 months... Economy slowing down,  House prices starting to slow,  Carrilion Bankrupt,  Capita shares fall,  The last week we saw huge falls in the US Dow Jones, the FTSE, the DAX, the CAC and the three major Asian Markets. If we see a crash there will be no more reducing interest rates to recover the economy it will be the big one. They can try Quantitative Easing no 4 but that will do nothing and destroy currency values. I have family and friends all in this housing boat and its sinking fast and they have no idea. It doesn't matter if they are on 25 grand a year or 300 grand a year they are all living in the red, a sea of debt and flash life styles they cannot afford.  Oh and it's not Brexit's fault either, this was always on the cards.

Edited February 10, 2018 by Whatmuff

[100milesaway]

50 minutes ago, Whatmuff said:

Paying off your mortgage early will save you alot in the long run! Nowadays people are happy to take on 6 x their annual salary on a 35 year term. If you get a 200 grand mortgage you'll end up paying nearly 400 gra d for your house so overpaying and clearing your mortgage early will save thousands. 

200 grand mortgage 4% interest on a 30yr term. overpayment of 200 per month will take 8 years off it and save nearly 80000.

+1

 

[team tractor]

5 minutes ago, Whatmuff said:

I you look over history to the last 40 years interest rates were in fact nearly 20% hence the average home cost around 5 grand, however rates have fallen ever since due to various Financial crashes. Reducing interest rates makes borrowing cheaper and therefore people can borrow more. A normalised interest rate for our economy is around the 7% mark so 1.8% is extremely low and no where near the normal rate, I definitely wouldn't be predicting my future outgoings on that rate. 4% is an average interest rate that people are paying especially those on a long term say 10yr fixed. Inflation is starting to pick up now so to counter that the BOE will start to increase the base rate to bring inflation under control. I'd expect this figure to be at least 2-4% and thats just the base rate, remember you'll pay the banks rate on top of that.

 

I get that, people just have different priorities that's all and different attitudes towards money. For a lot of the older generation, they will have benefited from high rates back in the day when they first bought a home, say 1970's to 1980's and where interest rates were between 10% and 20% and then over the years the rates have significantly fallen to 0.25% (Historic Lows) and all this has done is enabled people to borrow huge sums and inflated the market. The trouble now lies with an over inflated housing market full of borrowed money and silly schemes like the Governments Help To Buy.

Here is an example, A new couple go to the House Build Co and looks round a new build in the SE, They spot a 3 bed semi for 450 grand and like it. They only need a 5% deposit to buy as the Government will give them a 30% loan at £135000 and with their deposit at £22500 so they now need a mortgage of £292500 and they are the proud new owners of a 3 bed semi detached new build. Only they have a mortgage on a 35 year term, and a loan that needs paying back at £135000 and only 5% equity in a property. The monthly payments on these will increase when the Base Rate goes up. And having bought in the last ten years when interest rates are at historic lows it's never going to get cheaper. These families already have their family cars on Hire Purchase and most of the items in their houses like Sofas, Furniture, TVs ect. When the economy needs interest rates at 0.25% and Governments to lend people up to 30% to get on the housing ladder then somethings not right. 

That’s what’s happening around here. Places like jaguar Land Rover paying £25per hour doesn’t help and my mates are spending big. It’s going to crash and hurt.

 

[oldypigeonpopper]

hello, i can remember when the rate was 15%, purchased the family house for £9,000, it reached a massive £200,000 plus worth then the market crashed, leaving many a morgage higher the their propery value,   

Edited February 10, 2018 by oldypigeonpopper

[Whatmuff]

Just now, team tractor said:

That’s what’s happening around here. Places like jaguar Land Rover paying £25per hour doesn’t help and my mates are spending big. It’s going to crash and hurt.

 

It's all over unfortunately. My best mate got a better job in the city and within two weeks of the job off he had sold his house and got another mortgage on a £600 000 house and requested the new company send him three example pay checks with his bonus of £180 000 included to make sure he could borrow the max he could. His bonus isn't even guaranteed, however he managed to get the second mortgage and currently living there with 70 grands worth of credit card debt and a nice car. His pay check runs out on the 7th of every month. I regularly search online forums and various other economic websites for research and this issue is global unfortunately. I recently saw an advert on the TV the other day advertising 2300% APR pay day loans for boiler repairs!! If someone needs a loan for 2300% to get them through the month to carry out a repair on the boiler then they are living beyond their means.  

1 minute ago, oldypigeonpopper said:

hello, i can remember when the rate was 15%

They were huge and you may remember when the rates went from 10% and then shot up to 18% to counter Inflation, this caused a huge housing crash in the 1970's and people were handing their keys back.

[100milesaway]

Unfortunatly today we live in an " I want it all now society" and young couples can afford a place to buy easily, they just don't want to have to wait for anything.There are plenty of really cheap tiny houses for next to nothing, that may not be in the best areas but they are still around. I had to buy and move about 6 times before i got the place i wanted and it took years, but i didn't go into critical dept to do it. Painted bear crates with cushions on were my best seats in my first property., . You can still get a private mortgage over 5 years and keep upgrading.It's all about vision and kids today don't have any... from Auntie.

 

[Whatmuff]

This image paints a 1000 words. The dark shaded vertical lines are previous crashes, 70s crash, Black weds, 2001 Dot com Bubble, and the last 2008 Financial Crisis. There is a crash every 10 years or so, the last being 2008. And all they do is lower interest rates to create cheap credit to stimulate the economy. 

Example 25 year term, Interest rate 20% monthly payment £1000. Total amount borrowed = £59 579

25 year term, Interest rate 15% monthly payment £1000. Total amount borrowed = £78 074

25 year term, Interest rate 10% monthly payment £1000. Total amount borrowed = £110 047

25 year term, Interest rate 5% monthly payment £1000. Total amount borrowed = £171 060

25 year term, Interest rate 2% monthly payment £1000. Total amount borrowed = £235 930

 

If you have a mortgage of £200 000 over 35 yrs at 4% and interest rates rise 1% your payments go from £886 to £1009 and end up paying £52,007 more in the long run. Thats only a 1% increase.

Hence why we have see a huge housing market boom over the last 40 years. You can plot the house price index over the last 40 yrs with the Bank Of England Base Rate and they are directly linked. Base rate goes down, lending goes up and prices go up. Not to mention the over inflate buy to let market and overseas investment thats causing issues. Just look at the interest rates from 2008 and how low they are to try and keep the economy afloat. There is no movement on them after the next one.

8 minutes ago, 100milesaway said:

Unfortunatly today we live in an " I want it all now society" and young couples can afford a place to buy easily, they just don't want to have to wait for anything.There are plenty of really cheap tiny houses for next to nothing, that may not be in the best areas but they are still around. I had to buy and move about 6 times before i got the place i wanted and it took years, but i didn't go into critical dept to do it. Painted bear crates with cushions on were my best seats in my first property., . You can still get a private mortgage over 5 years and keep upgrading.It's all about vision and kids today don't have any... from Auntie.

 

Auntie, I 100% agree with you. We live in a different society now. Growing up I remember getting all our furniture from my nans house and their old TVs and we made do, We only decorated the lounge after living in the house for 8 years. Now all I see is people wanting the entire house renovated before they step foot in it, they want brand new sofas and furniture in every room and a new car on the drive. Little does everyone know that it's all borrowed and they will eventually have to pay it back. 

Edited February 10, 2018 by Whatmuff

[team tractor]

29 minutes ago, Whatmuff said:

This image paints a 1000 words. The dark shaded vertical lines are previous crashes, 70s crash, Black weds, 2001 Dot com Bubble, and the last 2008 Financial Crisis. There is a crash every 10 years or so, the last being 2008. And all they do is lower interest rates to create cheap credit to stimulate the economy. 

Example 25 year term, Interest rate 20% monthly payment £1000. Total amount borrowed = £59 579

25 year term, Interest rate 15% monthly payment £1000. Total amount borrowed = £78 074

25 year term, Interest rate 10% monthly payment £1000. Total amount borrowed = £110 047

25 year term, Interest rate 5% monthly payment £1000. Total amount borrowed = £171 060

25 year term, Interest rate 2% monthly payment £1000. Total amount borrowed = £235 930

 

If you have a mortgage of £200 000 over 35 yrs at 4% and interest rates rise 1% your payments go from £886 to £1009 and end up paying £52,007 more in the long run. Thats only a 1% increase.

Hence why we have see a huge housing market boom over the last 40 years. You can plot the house price index over the last 40 yrs with the Bank Of England Base Rate and they are directly linked. Base rate goes down, lending goes up and prices go up. Not to mention the over inflate buy to let market and overseas investment thats causing issues. Just look at the interest rates from 2008 and how low they are to try and keep the economy afloat. There is no movement on them after the next one.

Auntie, I 100% agree with you. We live in a different society now. Growing up I remember getting all our furniture from my nans house and their old TVs and we made do, We only decorated the lounge after living in the house for 8 years. Now all I see is people wanting the entire house renovated before they step foot in it, they want brand new sofas and furniture in every room and a new car on the drive. Little does everyone know that it's all borrowed and they will eventually have to pay it back. 

True and not true tho. 

Kitchens for example used to be hand made but now a cheap top i retail at £45 , kitchen doors from £6. Cheap emulsion is £10 a gallon etc. Things are cheaper than ever . I rebuilt my house for £18k and I mean rebuilt inc the front and back walls. 

My sofa is on interest free so I left the money in the bank.

my van is brand new but it’s my money earner so I can’t afford it to break down. 

 

on the other hand I see couples buying massive 4 bed houses at £300k / £1800 per month and I know what they earn . 

It can go wrong quickly but my parents made the gamble and it worked . 

I’m playing the safe card with a £500 mortgage I can afford it on the sick if I became ill for example.

lifes a gamble tho remember  

[blackbird]

5 hours ago, Lloyd90 said:

I’ve just taken out a mortgage for 30 years, interest rate was 1.2% not 4% so maths will be a bit off. 

 

I dont expect them to stay that low for 30 years but I don’t imagine they’ll be sky high, if they do go a lot of people will be going homeless as with current House prices most people are mortgaged up to their eye balls! 

They don’t have to go up sky high as you say, your rate 1.2% it’s only got to go up to 2.4% & your payments have doubled what if in time they hit say 5% or 6%. 

[Davyo]

Paid mine off in 92,wouldnt ever want another one.I can forsee another 1988/89 on the horizon and plenty of reposessions.Its a geat feeling when you get the deeds in your hand and you finally own it, and your no longer renting it off your lender.

Edited February 11, 2018 by Davyo

[markm]

8 hours ago, Whatmuff said:

Paying off your mortgage early will save you alot in the long run! Nowadays people are happy to take on 6 x their annual salary on a 35 year term. If you get a 200 grand mortgage you'll end up paying nearly 400 gra d for your house so overpaying and clearing your mortgage early will save thousands. 

200 grand mortgage 4% interest on a 30yr term. overpayment of 200 per month will take 8 years off it and save nearly 80000.

Totally agree with this, don’t save a penny, put it in as overpayments, you can always take it out if needed. 

 

Every spare £ we had, we done this. Off on holiday, £100 in money left, the Mrs paid it off the mortgage instead of blowing it on booze and take away, went to a wedding, £50 left after a night out, the mrs paid it off, get the picture!!!  It used to annoy me but now i’m sat here at 44 having paid of my mortgage at 40.....

We also took out our first mortgage as an endowment, when we changed to repayment we kept that going as it was predicted to do well. We get that cash lump sum (significantly more than in a bank account) in 5 years. 

We both still work full time and can lead the lifestyle we enjoy, you only live once and no pockets in a shroud......

 

[silver pigeon69]

8 hours ago, 100milesaway said:

Unfortunatly today we live in an " I want it all now society" and young couples can afford a place to buy easily, they just don't want to have to wait for anything.There are plenty of really cheap tiny houses for next to nothing, that may not be in the best areas but they are still around. I had to buy and move about 6 times before i got the place i wanted and it took years, but i didn't go into critical dept to do it. Painted bear crates with cushions on were my best seats in my first property., . You can still get a private mortgage over 5 years and keep upgrading.It's all about vision and kids today don't have any... from Auntie.

 

Very true. But how can you blame the youngsters for borrowing up to their eyeballs, when their supposed leaders etc (likes of Corbyn etc) think they can solve the UKs problems by borrowing vast amounts and not even think about how these are going to be repaid.

Also people seem to be missing the fact that if inflation rates go up, not only do mortgage rates etc, but also earnings and wages. My parents struggled when they bought their first house, i remember my mum putting stamps on envelopes and stuffing teddy bears in the evening to raise funds to pay the mortgage. But i also remember when they finally paid it off a few years ago! The very high repayments that they were struggling to meet were.............£3 per week!

Edit: Although wages etc normally take a lot longer to fall in line, than the banks interest rate.

Edited February 11, 2018 by silver pigeon69

[JohnfromUK]

Interest rates will rise - of that there is no doubt - if only because they are historically low (talking official Bank of England rates here, not the mortgage rate which is higher to cover profit, admin, risks etc.).  The 'real' interest rate is that amount by which interest rate is above inflation.  Currently this is probably negative since inflation is above the interest rate.  That will need to correct in time and typically interest rates will be a percent or two above inflation.

IF a future Government wants to borrow lots more money, interest rates will rise .... sharply.  This is because lenders need attractive rates to lend, and if they thing too much is being borrowed, they see risk, and charge more to cover risky loans.  The UK government has only limited control over interest rates, because if they are kept artificially low, no one will lend them any money - the rest of the world is a better bet, and so money flows out and the pound falls.

The way to a low interest, low inflation long term stable future is to limit borrowing to what is affordable to repay.  Arguably we are already borrowed to the extent that we are struggling to repay what we owe.  As interest rates rise, we will have to pay more.  It is a sobering fact that Great Britain plc's interest payment is about the same size as their defence spending.

In the long term we must work to reduce our countries debts.  Increasing them is shear folly and leads to disaster for us all.