Mortgages Are Evil
February 25th, 2008 by Lianne
“Mortgages are evil horrid things that take all your money away for ever. Don’t get one. The end”
This was the statement from a colleague when I told her I’d started this site and I wonder how many other people agree with this?
Over the past few years, mortgages have certainly received a battering but is it really the mortgage lenders fault?
With rising house prices, it’s become ever more difficult for first time buyers to enter the market or even for those who have been without a property for a while. As the concept of supply and demand dictates, if the prices were rising and people were unable to get a mortgage then the prices should have stabilized somewhat as the demand decreased. However, as a result of the decrease in the number of mortgage applications, mortgage lenders decided they should relax the income multiples and make it easier for people to take on higher mortgages. This has certainly contributed to sustaining and even increasing the high prices.
Certainly in today’s climate, my colleague may be right. I’m personally locked into a mortgage with a high loan-to-value ratio, which is fine providing I don’t want to move. With only a slight drop in price, many people could find themselves in negative equity, i.e. they owe more on their mortgage than the house is actually worth. Sometimes, renting is quite an appealing option.
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February 25th, 2008 at 10:40 am
“Mortgages are evil horrid things that take all your money away for ever” hmm, a curious statement! It certainly does feel like the money is taken away for ever if, like me, you had to take on a thirty year mortgage term just to afford the monthly payments – nobody ever thinks that thirty years later is going to arrive do they. The thing is, nobody can predict what will happen in the next few decades, you could end up winning in terms of your investment, or you could end up losing out. With renting, losing is a dead cert – you know there is no return on that money.
Having only bought my house 18 months ago, a small drop in value is almost certainly going to leave me in neative equity (especially as I’ve spent about £20k rennovating the bloody thing). However, over say a five year period, how much would I have “lost” in rent? Like you, I will probably just stay put in my house whilst prices hopefully recover.