to be irritated that people on here assume mortgage means security

[Purplepoodle]

Several times on aibu people have gotten very uppty with people who have mortgages. They seems to assume it means instant security, an asset ect. Its bugs me as I have been called out myself in threads for commenting and having a mortgage BUT I'm in huge negative equity, I can only afford to pay the interest which is likely to be the situation for a good few years. So no I dont feel privileged that I have a mortgage, it feels like a chain around me kneck.

deakymom - interest only means just that, you've borrowed say £200k, at no point are you paying back any of that debt, just paying the interest on the debt. At the end of the term, you still owe £200k, so interest only mortgages are only a good idea for a short period of time if you are going to be financially stretched for a limited period (say, on mat leave but then going back to work or dropping to one wage if the other person is going back to study for a set period etc), or you have some other way of paying off the £200k, like a different investment plan that would give you £200k at the end of the term, or a trust fund that would pay out at some point etc.

Unfortunately, a lot of people's 'plan' was that house prices would rise, they'd buy a house for £200k, pay the interest only, then in 5-10 years time, they'd have a house worth £300k, remortgage then with £100k equity so get a better rate, and start paying it back. Others just haven't thought at any point that they would pay back the debt, just that they'd own it for so long that it would be such a tiny part of the total value it wouldn't matter, or their financial situation would improve and they'd start being able to pay it back.

being in negative equity means that the "plan B" of "if it all goes wrong, we can sell up and rent" doesn't work because they still owe £200k but now own a house worth only £180k, so the bank would still want their £20k back, and at the point you sell the asset the loan is secured on, you have to pay it back.

This 'traps' you if you need to move areas, because unless you can sell your first house and afford to pay the bank back the difference, then you can't move as they will only give you a mortgage for the second house that's to it's value, if the second house is worth £200k they will only loan you the money to buy that house, you still will have to use the money you get from the sale of the first house to pay back the debt on the first house, and find the cash yourself for the shortfall. You can't carry negative equity to the second house, as that's effectively a new loan.

Hope that makes sense!

oh and it's not the case that you pay a set amount and at the end of that you own the house, you own the house the second you buy it, it's just you have a loan secured on the house, the loan total doesn't change with the value of the property, it's something you owe regardless. If you don't pay it, they can take your property to pay for the debt, but the debt and the homeownerships are separate things.

This is great for security on one way, because as long as you can pay your debt to the bank then you have security on your house, in negative equity it becomes a problem as you can't just clear your debts by selling up.

It's a bit like a car loan secured on the car, a new car might cost you £10k and if you borrow £10k from the bank, they expect you to pay that back plus interest, that the car after 5 years is worth more like £3k doesn't change the fact you borrowed £10k and that's what they want back. You own the car from the second you bought it, but you either buy it outright or borrow money to pay for it. If you borrow the money, the car isn't any less yours.

We own our home outright in our 40s and if we rented it ,we wouldnt be able to afford it.
It would be 3x what our mortgage used to be.
We were very careful,never thought of our house as a means to make money and had a huge dose of luck on our side.
If you are in financial difficulties its shit either way.

Mary talks a lot of sense. And it's the reason thousands of people are currently in arrears and losing their homes.

There is something magical about the moment when the mortgage is paid off and it's yours for good and all.

If you life out your life without needing residential care - and that's the luck of the draw - you have something to leave to your DCs (or whoever, the cats' home if you like).

Above all, when the nest is empty Authority cannot tell you that you are now occupying more space than you need, you must downsize. You can if you want; or you can stay put. That is what ownership is about.

Indeed. My advice to the young is buy before you breed (particularly as the new 2014 mortgage rules include childcare costs and other costs much more than the old rough multiples of earnings) and buy as soon as you can and wherever possible take out the usual repayment mortgage where at the end of the 25 year mortgage term you will own the house outright. Avoid interest only loans.

As A says once you repay the loan you can stay although it sounds like the state is moving to capital asset confiscation if Milliband gets in and if you have equity in a house of say £500k in a year or two (and starting at £2m) even if your mortgage is more than the value of your house they will be making you pay £12k a year extra tax or remortgage to release that every year as they are trying to encourage people not to work hard and not to buy a home to house children but instead to lie around waiting for those who earned their money to hand over their capital assets to those who did not earn much. Don't vote Labour unless you want your home confiscated year by year.

yanbu. a mortgage brings many responsibilites. like forking out for replacement boilers, central heating etc. Also negative equity issues.
Also make it much harder to separate when things go wrong. We are in a situation where neither can afford to buy other one out. If we do sell my share will not be enough to afford another property and unlikely to get mortgage.
i have been paying or contributing by sahm to a mortgage for 23 years (owned previously) but will end up using payout of my share on rent.
Sometimes think we may aswell have rented as separating would be easier.

Grregrow you are so, so right and now we had better both reach for the flameproof undies!

• Greengrow

o and we had an interest only mortgage with a serious shortfall so had to move to repayment so we are now paying a full replayment mortgage and into endownments.

Historically though house prices do go up, I think you have to take the long term view with buying. There are going to be bumps along the way and it's usually worth having redundancy (if appropriate) and critical illness etc cover. For most people I think there is more (not 100%) security buying compared with renting in this country.

We have a mortgage and we protect our payments, so when dh was sick for 8 months our mortgage was paid.

Our home is our security. As long as we pay each month for the next 12 years then we will always have a roof over our heads. just hope it stays in one piece until then so we can afford to fix it!

I bought in London in 2003 just before prices rocketed...it's all about luck and timing. Value of our garden maisonette starter purchase in Hampstead quite literally doubled over 18 months. Thank god I bought when I did. Felt no guilt about being Sahm for a few years as had made us £200k in 18 months (am a couple of years older than dh so was able to buy that crucial 2 years earlier)

Written - while trying to move in 2008/9 was tough, most people had the good sense to not bother for another year, those who didn't move in that 18 month period,

18 months? Maybe in London. some parts are still depressed.

The thought of a mortgage terrifies me.
With the job market as it is, nothing is certain. If I lost my job I couldn't pay my mortgage and no one else is going to pay it for me! It would cripple me. I rent privately and with an uncertain employment future I know that housing benefit would cover my rent should the worst happen.

best bet is live with your parents for as long as they the poor put upon sods will let you, save every penny you can and then, when there's a house price crash dive in and make a killing

I used to think that but seeing how my DS who is in his mid 20's is enjoying sharing a rented house with two friends has made me change my mind about this. I think he would be missing out a lot if he were still living at home with us and saving.

I agree!
Was being facetious tbh.
I think it is very important for young adults to fly the nest and live independently, the fact that many simply cannot afford to is tantamount to deliberate infantilisation and dis empowerment of a generation!