Advice Fact List

Advice: Housing & Mortgage

Comments (4)
  1. jo archer says:

    Does ‘interest only’ work that way in the US? In the UK you have to pay back the principle at the end of the agreement not start making additional payments part way through… Also (and again this might be more relevant in the UK where house prices rise at a much faster rate than the US) do you really gain no equity in your home while only paying back the interest?

    “The obvious disadvantage of an interest-only mortgage is the borrower builds no equity in their property for the period they are only paying interest.”

    House prices are pretty much always on the increase here and so if (or rather when) your house price doubles you have gained equity as your loan to value ratio has dropped with the every increasing house prices. Personally I paid £295k for a house 12 years ago after borrowing £180k. I still owe the £180k but the property value is now about £800k. My loan to value has changed with the increase but also because inflation works in favour of people who hold property not cash that £180k at the time is equivalent to £269k now. By the time I need to repay it, the principle will be worth £80k to £120k in todays money. I have no intention of repaying it out of my own pocket at the end of the agreement. I intend to remortgage it with a tiny loan to value ratio which will keep getting smaller until it is insignificant and can be paid off with a small personal loan or remortgaged with a higher loan to value ratio allowing me to buy more properties.

    I have almost zero insight into the US housing market, but if it is anything like the housing markets in the rest of the world then this content of this article feels like an oversimplification.

    1. Jerry says:

      In Canada we simply don’t have the range of options in the US and UK which is largely why we avoided any housing market decline (some vacation properties were depressed but not really losing value).

      The fact is that houses don’t ALWAYS go up. Was proven in our lifetime.

      1. jo archer says:

        For about five minutes… The house prices are now higher than they were pre-2008.

    2. Ben says:

      “I have almost zero insight into the US housing market, but if it is anything like the housing markets in the rest of the world then this content of this article feels like an oversimplification.”

      Well, to a degree it is over simplified, or at least that’s what a yank reader of it draws out. Not sure why it is skewed in such a way. The skewing may be helping keep the tone down to about I suppose what you lot would call grammar school level. Americans generally read at a level no higher than that as sad as that is to say.

      Me and the wife have looked into attaining help from the department of agriculture for housing. They offer a fixed rate mortgage at very low interest rate for the less financially able, it’s part of rural development stimulus to get people back toward homesteading. We faced and completed a requirement of a home ownership course, an eight hour crammed packed full informative “here’s what you sign on to do and get”. Turned out we knew most of it and fared better than we expected.

      A lot of that course was even skewed similar to this article. Seems even our government here has rather low expectations of us. I might be able to see that as sad if but for not knowing of our whole political system and the “fine” shape it is in. We’ve got what we deserve, as is said. No, it’s not sad when I see it like that. Instead it is infuriating that we as the people of our nation have been cowed into accepting it.

      Well mate, I apologize. Will digress as I think I might be missing the mark of what you were enlightening, even if not I cannot bear thinking on it too long. Big Brother tells me it’s all fine, so there’s that. 🙂 😉

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