By: Creaking Door
- 7th January 2015 at 14:55Permalink- Edited 1st January 1970 at 01:00
Mrs. Thatcher intended to create a property owning democracy but failed entirely to anticipate the effect of the law of unintended consequences. Alongside the demand her government created was the creation of property wealth. Property, apart from the odd hiatus, increased in value year on year...
I agree with much of your post, with one small caveat; just because your house goes up in value it does not mean you are more wealthy. Since, as it has been pointed out, people need a house to live in, you can only 'get' the money if you sell your house and find a house that is as suitable but much cheaper...
...but you can't.....because every other house has gone up in value too!
This is why I disagree with this point:
...he (Cameron) has made the people that voted for him richer.
By: John Green
- 7th January 2015 at 15:20Permalink- Edited 1st January 1970 at 01:00
CD
I don't think that it is a question - as you state, of comparative values. You don't have to sell your house to make a significant gain. Equity release will do that. That is what has been happening and continues to happen so creating an illusion of wealth.
Borrow an awful lot now and dramatically increase your capital for just a very modest increase in your monthly mortgage payments or other financial repayment plan.
By: charliehunt
- 7th January 2015 at 15:32Permalink- Edited 1st January 1970 at 01:00
All equity release does is to LEND you a percentage of the value of your property depending on your age for a fixed period of time at which point it has to be paid back with interest. This is usually effected by the sale of the house the proceeds of which you receive less what you owe the lender. Depending what happens to interest rates and lending rates over 15/20 years you might end up with less than you would have had you not borrowed the money.
By: waco
- 7th January 2015 at 15:35Permalink- Edited 1st January 1970 at 01:00
now I don't want any of you think I'm going soft.
But.......generally speaking JG's #60 was, I thought, very good. However, I think you will find the Thatcher government prevented councils spending revenue from sold council houses on building new/replacement properties. So I don't believe the consequences were entirely unintended.
By: Creaking Door
- 7th January 2015 at 15:58Permalink- Edited 1st January 1970 at 01:00
...so creating an illusion of wealth.
Yes, that's exactly what it is; an illusion of wealth!
Borrowing against the 'value' of your house (a house most do not actually own) or selling it (or part of it) and then renting it from the company you sold it to? It's all borrowing; and borrowing, in itself, doesn't make you wealthy.
By: Creaking Door
- 7th January 2015 at 16:32Permalink- Edited 1st January 1970 at 01:00
However, I think you will find the Thatcher government prevented councils spending revenue from sold council houses on building new/replacement properties.
But the council houses were sold-off at a fraction of their worth (because those living in them couldn't afford their true worth) so the revenue generated wouldn't allow a one-for-one replacement...
...anyway, that wasn't the point; the reduction of the council housing stock was also an aim.
But if you have to reduce the social housing stock, what better way to do it? Selling houses to those that cannot afford them at a fraction of their true worth.
By: waco
- 7th January 2015 at 16:50Permalink- Edited 1st January 1970 at 01:00
I see your point CH...............
But there is massive tax take shortage at present.......quite simply there is insufficient tax coming into the revenue.
This is due to the massive increase in zero hours contract employment, ultra low wage employment or low take self employment.
Allied of course to major businesses and the uber rich, just avoiding paying tax altogether. Which means.....as always....
the people in the middle getting crushed.
The only way around this is the creation of real jobs................
By: Creaking Door
- 7th January 2015 at 17:27Permalink- Edited 1st January 1970 at 01:00
I don't think many lenders if any will lend on mortgaged property...
But you can re-mortgage as your house gains 'value' and getting credit-cards and car-loans is far easier once you have the backing of a decent mortgage (debt)!
By: charliehunt
- 7th January 2015 at 17:34Permalink- Edited 1st January 1970 at 01:00
I certainly wouldn't quarrel with you over the necessity for REAL jobs.
And of course avoidance of tax, whilst entirely legal, is resented by many. Only the Chancellor can sort that out by closing the loopholes which enable avoidance. In fact the entire tax system needs a complete and radical overhaul - thanks to the best forgotten Brown we have one of the most complex tax systems in the world. Is it any wonder people are able to circumvent it?
By: charliehunt
- 7th January 2015 at 17:36Permalink- Edited 1st January 1970 at 01:00
CD - we are talking about equity release mortgages as far as I am aware and the criteria are quite different as neither capital nor interest is repaid until termination.
By: John Green
- 7th January 2015 at 17:59Permalink- Edited 1st January 1970 at 01:00
Charlie,
My reference was directed at the release of equity by any means acceptable to the borrower and the lender. If one borrowed only within certain limits, then the fairly standard annual rate of property appreciation of around eight percent or, more in exceptional times, would make the lender happy.
By: charliehunt
- 7th January 2015 at 18:08Permalink- Edited 1st January 1970 at 01:00
I appreciate that John but over a typical loan period of 15/20 years it is a brave man who guarantees you will come out on the right side. No lender will for obvious reasons. And of course much depends where the property is located there being wide variations in the increase of property prices.
By: John Green
- 7th January 2015 at 19:02Permalink- Edited 1st January 1970 at 01:00
I never failed to find a suitable lender. The conservative eight percent I mentioned was at one time, a national average which might still be current !
By: charliehunt
- 7th January 2015 at 19:49Permalink- Edited 1st January 1970 at 01:00
Are you talking about equity release lending?
House price inflation has dropped from 8.4% to 7.2% and the trend continues. Average equity release rates are 6.5% so there will be many areas of the country where you will end up on the wrong side of the equation when the house is sold.
By: Creaking Door
- 7th January 2015 at 23:42Permalink- Edited 1st January 1970 at 01:00
House price inflation?
My brother has lived in his house for ten years. He put it on the market last summer; and the valuation? Exactly what he'd paid for it ten years before! He didn't get a single offer.
(I know there was a financial crash but the average house price 'inflation' for him was 0% during that ten years!)
By: paul178
- 8th January 2015 at 02:33Permalink- Edited 1st January 1970 at 01:00
Equity release or lifetime mortgage as it is often called works on your age and the value of the property.
I have done this at the age of 67 and my wife 69 and we had an outstanding mortgage of £40k
Our house was valued at £250k
Release company said OK based on your age and life expectancy we will lend you £67k less the 40k to pay existing lender off.
So we took £10k(for double glazing and improvements) and left £17k to call off if we need it.
The rate is 5,95%pa which is added to your debt.
So we pay nothing just the debt rolls up until the last one of us dies or has to go into a home. Then the house is sold and any money left over goes to whoever we put in our will or the person in care. Should the housing market collapse completely and the house is worth nothing that is the lenders hard luck.(the debt cannot be passed on to your heirs)
So since taking that out 2 years ago the mortgage is now £56k something and the house is now valued at £325-£350k
Since the kids are well set up,hard luck if they want anything out of us if Nursing home fees gobble the balance up.
Any questions? One you might ask me is what will they lend? Well the youngest partner must be 65 or over and the older you are the greater the amount they will lend. So if you are an old badger in your 80s probably 75%+ of the property value.
Talk to an INDEPENDENT Financial consultant about this for the best deals out there.
Property rich but cash poor, what's the point there are no pockets in a shroud.
By: charliehunt
- 8th January 2015 at 06:00Permalink- Edited 1st January 1970 at 01:00
And your last paragraph summarises the subject precisely. I have the impression that equity release mortgaging is not fully understood by some. And of course there will be some like yourselves who see the equity value increase and others see it decrease. The one point EVERY financial advisor will make is that future equity values cannot be guaranteed so be aware if what you sign up to. No one can predict with any certainty where the market will be in another ten years.
Posts: 9,739
By: Creaking Door - 7th January 2015 at 14:55 Permalink - Edited 1st January 1970 at 01:00
I agree with much of your post, with one small caveat; just because your house goes up in value it does not mean you are more wealthy. Since, as it has been pointed out, people need a house to live in, you can only 'get' the money if you sell your house and find a house that is as suitable but much cheaper...
...but you can't.....because every other house has gone up in value too!
This is why I disagree with this point:
Posts: 6,535
By: John Green - 7th January 2015 at 15:20 Permalink - Edited 1st January 1970 at 01:00
CD
I don't think that it is a question - as you state, of comparative values. You don't have to sell your house to make a significant gain. Equity release will do that. That is what has been happening and continues to happen so creating an illusion of wealth.
Borrow an awful lot now and dramatically increase your capital for just a very modest increase in your monthly mortgage payments or other financial repayment plan.
Posts: 585
By: waco - 7th January 2015 at 15:28 Permalink - Edited 1st January 1970 at 01:00
now I don't want any of you think I'm going soft.
But.......generally speaking JG's #60 was, I thought, very good.
Posts: 11,141
By: charliehunt - 7th January 2015 at 15:32 Permalink - Edited 1st January 1970 at 01:00
All equity release does is to LEND you a percentage of the value of your property depending on your age for a fixed period of time at which point it has to be paid back with interest. This is usually effected by the sale of the house the proceeds of which you receive less what you owe the lender. Depending what happens to interest rates and lending rates over 15/20 years you might end up with less than you would have had you not borrowed the money.
Posts: 585
By: waco - 7th January 2015 at 15:35 Permalink - Edited 1st January 1970 at 01:00
now I don't want any of you think I'm going soft.
But.......generally speaking JG's #60 was, I thought, very good. However, I think you will find the Thatcher government prevented councils spending revenue from sold council houses on building new/replacement properties. So I don't believe the consequences were entirely unintended.
Posts: 9,739
By: Creaking Door - 7th January 2015 at 15:58 Permalink - Edited 1st January 1970 at 01:00
Yes, that's exactly what it is; an illusion of wealth!
Borrowing against the 'value' of your house (a house most do not actually own) or selling it (or part of it) and then renting it from the company you sold it to? It's all borrowing; and borrowing, in itself, doesn't make you wealthy.
Posts: 9,739
By: Creaking Door - 7th January 2015 at 16:32 Permalink - Edited 1st January 1970 at 01:00
But the council houses were sold-off at a fraction of their worth (because those living in them couldn't afford their true worth) so the revenue generated wouldn't allow a one-for-one replacement...
...anyway, that wasn't the point; the reduction of the council housing stock was also an aim.
But if you have to reduce the social housing stock, what better way to do it? Selling houses to those that cannot afford them at a fraction of their true worth.
Posts: 585
By: waco - 7th January 2015 at 16:32 Permalink - Edited 1st January 1970 at 01:00
Yes CD you are quite right, it is an illusion.
However, I find it amazing how many people think that its real money.
I'm fed up with people boasting how much they think their house is worth.
its a house...live in it !
Posts: 11,141
By: charliehunt - 7th January 2015 at 16:35 Permalink - Edited 1st January 1970 at 01:00
I don't think many lenders if any will lend on mortgaged property unless there is only a small percentage remaining unpaid.
Waco - it's hardly illusory for those who tax its value at death or propose taxing its value now!
Posts: 585
By: waco - 7th January 2015 at 16:50 Permalink - Edited 1st January 1970 at 01:00
I see your point CH...............
But there is massive tax take shortage at present.......quite simply there is insufficient tax coming into the revenue.
This is due to the massive increase in zero hours contract employment, ultra low wage employment or low take self employment.
Allied of course to major businesses and the uber rich, just avoiding paying tax altogether. Which means.....as always....
the people in the middle getting crushed.
The only way around this is the creation of real jobs................
And if I could solve that one..................
Posts: 9,739
By: Creaking Door - 7th January 2015 at 17:27 Permalink - Edited 1st January 1970 at 01:00
But you can re-mortgage as your house gains 'value' and getting credit-cards and car-loans is far easier once you have the backing of a decent mortgage (debt)!
Posts: 11,141
By: charliehunt - 7th January 2015 at 17:34 Permalink - Edited 1st January 1970 at 01:00
I certainly wouldn't quarrel with you over the necessity for REAL jobs.
And of course avoidance of tax, whilst entirely legal, is resented by many. Only the Chancellor can sort that out by closing the loopholes which enable avoidance. In fact the entire tax system needs a complete and radical overhaul - thanks to the best forgotten Brown we have one of the most complex tax systems in the world. Is it any wonder people are able to circumvent it?
Posts: 11,141
By: charliehunt - 7th January 2015 at 17:36 Permalink - Edited 1st January 1970 at 01:00
CD - we are talking about equity release mortgages as far as I am aware and the criteria are quite different as neither capital nor interest is repaid until termination.
Posts: 6,535
By: John Green - 7th January 2015 at 17:59 Permalink - Edited 1st January 1970 at 01:00
Charlie,
My reference was directed at the release of equity by any means acceptable to the borrower and the lender. If one borrowed only within certain limits, then the fairly standard annual rate of property appreciation of around eight percent or, more in exceptional times, would make the lender happy.
Posts: 11,141
By: charliehunt - 7th January 2015 at 18:08 Permalink - Edited 1st January 1970 at 01:00
I appreciate that John but over a typical loan period of 15/20 years it is a brave man who guarantees you will come out on the right side. No lender will for obvious reasons. And of course much depends where the property is located there being wide variations in the increase of property prices.
Posts: 6,535
By: John Green - 7th January 2015 at 19:02 Permalink - Edited 1st January 1970 at 01:00
I never failed to find a suitable lender. The conservative eight percent I mentioned was at one time, a national average which might still be current !
Posts: 11,141
By: charliehunt - 7th January 2015 at 19:49 Permalink - Edited 1st January 1970 at 01:00
Are you talking about equity release lending?
House price inflation has dropped from 8.4% to 7.2% and the trend continues. Average equity release rates are 6.5% so there will be many areas of the country where you will end up on the wrong side of the equation when the house is sold.
Posts: 9,739
By: Creaking Door - 7th January 2015 at 23:42 Permalink - Edited 1st January 1970 at 01:00
House price inflation?
My brother has lived in his house for ten years. He put it on the market last summer; and the valuation? Exactly what he'd paid for it ten years before! He didn't get a single offer.
(I know there was a financial crash but the average house price 'inflation' for him was 0% during that ten years!)
Posts: 2,841
By: paul178 - 8th January 2015 at 02:33 Permalink - Edited 1st January 1970 at 01:00
Equity release or lifetime mortgage as it is often called works on your age and the value of the property.
I have done this at the age of 67 and my wife 69 and we had an outstanding mortgage of £40k
Our house was valued at £250k
Release company said OK based on your age and life expectancy we will lend you £67k less the 40k to pay existing lender off.
So we took £10k(for double glazing and improvements) and left £17k to call off if we need it.
The rate is 5,95%pa which is added to your debt.
So we pay nothing just the debt rolls up until the last one of us dies or has to go into a home. Then the house is sold and any money left over goes to whoever we put in our will or the person in care. Should the housing market collapse completely and the house is worth nothing that is the lenders hard luck.(the debt cannot be passed on to your heirs)
So since taking that out 2 years ago the mortgage is now £56k something and the house is now valued at £325-£350k
Since the kids are well set up,hard luck if they want anything out of us if Nursing home fees gobble the balance up.
Any questions? One you might ask me is what will they lend? Well the youngest partner must be 65 or over and the older you are the greater the amount they will lend. So if you are an old badger in your 80s probably 75%+ of the property value.
Talk to an INDEPENDENT Financial consultant about this for the best deals out there.
Property rich but cash poor, what's the point there are no pockets in a shroud.
Posts: 11,141
By: charliehunt - 8th January 2015 at 06:00 Permalink - Edited 1st January 1970 at 01:00
And your last paragraph summarises the subject precisely. I have the impression that equity release mortgaging is not fully understood by some. And of course there will be some like yourselves who see the equity value increase and others see it decrease. The one point EVERY financial advisor will make is that future equity values cannot be guaranteed so be aware if what you sign up to. No one can predict with any certainty where the market will be in another ten years.