Do you ever wonder how people afford things?

[RedRobyn2021]

We're not poor, we have a little house (2 up 2 down) that us (and the bank) own, in a really nice place and we have a lovely dog and beautiful baby.

But sometimes I find myself comparing us to others around our age (I know I shouldn't)

We are so careful with money, we always have been. We own a little car which we had on finance but eventually paid off.

I know a couple younger than us in their mid 20s who live in a brand new 3 bed, with a baby and a dog, two horses, who have just had a very fancy big wedding, showing off their brand new truck on social media this morning.

Another couple I know same age as us (early 30s) have a bigger house, with two expensive cars and a baby too.

I am so grateful for what we have and I give myself a talking to often to remind myself of this. But occasionally, I will admit I secretly feel a little jealous and also like a failure, like I went wrong somewhere. How on Earth do people afford these things?

Please be kind, I know I am being incredibly materialistic, but surely I'm not alone in sometimes feeling like this?

How do interest only mortgages work? Do you never actually clear the capital?

I thought you couldn't get endowment mortgages anymore, particularly since the crash in 2008 but I am not an expert on mortgage products

How do interest only mortgages work? Do you never actually clear the capital?

At the end of the term you remortgage or sell, afaik (or clear the capital using savings/investments). If selling you rely on the value having increased enough to cover.

When we mentioned to my uncle that we were looking to buy a house, he said "You mean a flat?". I said "No, a house!". He was then most surprised that we went on to buy a 4 bed bungalow in a nice neighbourhood.

Then the next time he saw us, he outright asked us what we earned. Turns out he though we were each on about the same as him, but we actually earn around double that each. He was pretty shocked! He is an electrician by trade and I think because he sees us as "young" and doing office jobs (i.e. not "real" work) he just assumed we were earning a lot less. We aren't rich by any means, I think he's just a bit out of touch!

For us, it's two company cars. When you're not paying to run/service/tax etc a car that frees up a lot of money.

Also, our children are out of expensive child care stage.

DH has a job many people don't understand, but pays a good salary for around here.

We also chose to buy better in a worse location. So we could have lived anywhere within a 30 mile radius, and chose the "worst" city, but in reality it's a lovely place and is definitely on the up.

It's not always tick. The only debt we have is a mortgage, which isn't massive. It's well within our affordability, but it's a beautiful house with a big garden.

Anyone who says its "just tick" is, in my opinion, jealous.

I don't think "just tick", but I know more than one couple who have got themselves into a mess with debt. I agree most people are sensible, just not all.

Anyone who says its "just tick" is, in my opinion, jealous

I agree.

My DC got an almost 6 figure inheritance from a distant relative, as did my cousins’ DC. Some (single or divorced, 30s) used it to buy a house, but have had questions about affordability (including from divorcee exH). They have battered away the questions, why should they elaborate?

We have been above average earners but not particularly high (I was PT for last 24yrs) but…have had an inheritance from my parents, also a company share windfall, other share windfalls, and were lucky to buy very young, plus, whilst we are not frugal, we don’t spend on designer items or anything we don’t feel necessary. But we do buy new’ish cars and have some nice holidays. Maybe friends think they are all on credit but we have never had any credit apart from mortgages, everything is paid out of earnings or savings.

As I said on my pp, a friend has made nasty comments about me taking early retirement. She has no idea of our finances, so why comment?!

Unless anyone has a crystal ball to see their friends/neighbours finances, no one knows how they finance their lives, so speculation is pointless.

My best mate has always had a great lifestyle as they bought in London 25 years ago and have moved up and up the ladder and only ever paid INTEREST only (relying on capital growth)

Their mortgage (interest) on a £2 million property is much less than my repayment on a £400k flat

They're about to retire and have £1.4 million cash to spend on a house once they sell theirs

In the 25 years they've travelled abroad 3/4 times a year, spent hundreds of thousands on putting all 4 children through private school - they've had an amazing life and have just benefited from a really long period of low interest rates

Why do you need to know how they can afford it?

DH and I earn good salaries. We live in a house in inner London and go on nice holidays and drive a nice car.

Some of our friends are on even more money with combined salaries nearing the £200k mark.

It's annoying that posters on here presume people can't work hard and make their money they must have somehow been given inheritance, in debt or use finance. I came from a very working class family. I had no hand-outs, no inheritance. I saved up my deposit. I worked and studied hard at the same time and now earn a good salary. As do lots of people I know. I got there on my own merit.

I'm not saying people on lower salaries don't work hard but it's very patronising assuming people who have done well in life didn't get their by themselves!

Here's a mental health tip - don't compare yourself or your life to others. Those who often boast about their relationships are those who usually the most miserable. You never know what is going on in somebody's life even though it looks amazing to you!

OP is talking about people in their twenties, not nearing retirement age...

@Highlanders372

How do interest only mortgages work? Do you never actually clear the capital?

We had an interest only mortgage from 2007-2020. We were lucky that our flat almost tripled in value during that time, it was a bit of a gamble but we knew it wasn’t our ‘forever home’ so we just viewed it as renting from the bank for £400 per month, when to actually rent a flat that size in our area would have been around £2000 per month! I don’t think those kind of mortgages are available now.

@TheWayTheLightFalls

How do interest only mortgages work? Do you never actually clear the capital?

At the end of the term you remortgage or sell, afaik (or clear the capital using savings/investments). If selling you rely on the value having increased enough to cover.

There's also our situation- mortgage is offset so technically interest only but we make repayments every month so it's interest only on paper but is effectively a repayment mortgage.

TheWayTheLightFalls
How do interest only mortgages work? Do you never actually clear the capital?

We did when we moved to a bigger house knowing we’d eventually downsize. We moved to a 150k more expensive house and it cost £160 per month more.

@Highlanders372

How do interest only mortgages work? Do you never actually clear the capital?

@Highlanders372, they worked by your paying the bank's interest over the term of the mortgage whilst you paid into a separate investment plan. When the mortgage term was up the investment was used to pay off the outstanding mortgage, which was obviously as much as it had been at outset. The expectation was that the savings/investment plan would make as much and preferably over the amount of the mortgage (which it mostly did before the 2008 crash).

When investments did poorly, the plan might fail to reach the amount required, leaving a shortfall that the householder had to pay. If the house had increased in value in the meantime (they do tend to over 15-25 years) then one way to do it was downsize, but this wasn't always an option. (A lot of people were angry that this scenario (a shortfall instead of a surplus) happened despite the fact that every adult knows the stock market fluctuates and you might not get back what you put into it.)

I had an endowment (interest only) mortgage, we converted it years ago to be a repayment one (and subsequently paid it off, it wasn't a big mortgage) and have continued paying into the investment plan. This has handy life assurance built in so if I fell under a bus during the term of the mortgage, the full amount would be paid out regardless of the current value of the plan. It's currently not on track to meet its target, but fortunately that doesn't matter...

Our interest only mortgage was just that - we only paid the interest and didn't have a separate investment plan. We then paid it off when we sold and used the equity we had accrued through the rise in prices to put towards our next purchase. It worked out very well for us as we inadvertently bought a flat in an area which was not fashionable at the time, but is now one of the most sought out areas of Greater London. That was all down to luck rather than prediction! An endowment mortgage is a type of interest only mortgage, but not all interest free mortgages are endowment ones.

@LaurieFairyCake wow that's really interesting, thank you for sharing

They most likely get paid more. Don't let envy be the thief of joy, OP. Enjoy your baby and your home. When your child is older you want be better off. I remember when I struggled to pay rent when my eldest 2 children were small. Now all 3 children grown up. DH and I are quite well off and live on 6 bedroom house, have holiday home in France as Nd 6 btl houses. Now I can treat DC and dgc.

A lot of buy to let mortgages are interest only but you can only borrow 75% of the capital value and have to have a second property in which you live and a reasonable income to get one.

I had an interesting only loan after my divorce but I still kept paying a fair bit back to get the capital sum down and down (which had got to £1.3m as I married someone who earned a lot less).