Reply to: Mortgage advice

[glashIFA@Paramount]

It's effing ridiculous. I blame the Scottish Parliament.

It's not the Scottish Parliament that are buying the properties at a rate of knots and pushing the prices up.

It's the old rule of economics - supply and demand. If everyone kept their money in their pockets prices would fall quick enough.

[oraclesmith]

It's effing ridiculous. I blame the Scottish Parliament.

The Scottish Parliament does seem to have set a new standard in property prices. Ahem.

http://www.undiscoveredscotland.co.u...ent/index.html

[scooterscot]

i blame the 'oh the banter james' types...

An agent I spoke to expects that the prices will double in town in ten years too. One place i asked about was sold the same week it was advertised. This is going to be fun i can tell...

[Euro-commuter]

Just to clarify - i didn't mean £300K was expensive for a 2 bed in Edinburgh, it's pretty reasonable really.

It's effing ridiculous. I blame the Scottish Parliament.

[glashIFA@Paramount]

EXPENSIVE!!!!

Just to clarify - i didn't mean £300K was expensive for a 2 bed in Edinburgh, it's pretty reasonable really. i meant, as I'm sure you all know, Edinburgh is an expensive place to buy

[scooterscot]

I'm looking in edinburgh for something not more than a 10 minutes walk from either haymarket or waverly, i think the 3 bed places must be going for over 350K - 300K for 2 bed seems to be typical for me requirements,

[glashIFA@Paramount]

Lots of good info, will probably go the repayment route.

Right what's the Edinburgh market like, 2 bed property offers over 300K what's that all about.

EXPENSIVE!!!!

[Euro-commuter]

There is in principal no financial advantage/disadvantage

In principle.

prin·ci·pal
–adjective. first or highest in rank, importance, value, etc.; chief; foremost.
–noun. a chief or head.

prin·ci·ple
–noun. a determining characteristic of something; essential quality.
—Idioms. in principle, in essence or substance; fundamentally: to accept a plan in principle.

[scooterscot]

Lots of good info, will probably go the repayment route.

Right what's the Edinburgh market like, 2 bed property offers over 300K what's that all about.

[oraclesmith]

Perhaps I could have made my original point more briefly.

There is in principal no financial advantage/disadvantage of a repayment mortgage versus interest-only. Repayment forces you to make regular automatic repayments, interest-only means you make payments at your discretion. In both cases you should be charged interest on the daily outstanding balance.

The difference is that a repayment mortgage forces you to repay a certain amount each month, whereas a flexible mortgage relies on you being disciplined enough with your money to make a repayment even when you'd rather spend it on a new PDA or whatever. So a flexi mortgage won't be good for someone who's money 'burns a hole in their pocket'.

We've got a smallish mortgage which is on an interest only basis with the option of overpaying up to £500 a month off the capital. It is always worth paying off the capital once the ISA's have been topped up, because there are few ways of saving which yield rates above that which we pay on our mortgage. ISA's currently take priority because our mortgage is on a discount rate which is slightly below the interest rate on the best cash ISA's, but I'm watching it carefully to ensure there is still a margin.

However, most normal taxed savings accounts simply aren't worth having if you also have a mortgage.

PS. If you have a repayment mortgage AND can afford to make regular overpayments, you'll see a significant effect on your monthly mortgage payment.

[glashIFA@Paramount]

Perhaps I could have made my original point more briefly.

There is in principal no financial advantage/disadvantage of a repayment mortgage versus interest-only. Repayment forces you to make regular automatic repayments, interest-only means you make payments at your discretion. In both cases you should be charged interest on the daily outstanding balance.

I'd nearly always prefer a repayment mortgage but over the maximum term available. That way the lender requires a lower set amount to be repaid each month and if you want to pay more you can - the important thing being, as already mentioned by the others, that you're in control of the level you pay rather than the lender insisting on an a higher amount.

You,ve also got the security of a repayment mortgage without having to rely on some sort of investment/ pension lump sum to repay it.

Just because you "sign up" to a long term doesn't mean you're stuck with it.

[IR35 Avoider]

Perhaps I could have made my original point more briefly.

There is in principal no financial advantage/disadvantage of a repayment mortgage versus interest-only. Repayment forces you to make regular automatic repayments, interest-only means you make payments at your discretion. In both cases you should be charged interest on the daily outstanding balance.

[IR35 Avoider]

I've always thought that repayments offer better value as on a interest only you are paying the interest on the whole thing.

Only a madman would sign up to a mortgage like that - is there actually a mortgage anywhere in the UK that works like that?

In the late eighties/early nineties there were some old-fashioned lenders who only calculated interest once a year on the year-end balance, but since then I think nearly everyone has switched to calculating it on the daily balance. All my interest-only mortgages have always given me credit for repayments from the day they received the money. They may sometimes have only re-calculated the standard monthly payment once a year, but that doesn't affect the financial result, it just meant I was making slight automatic overpayments until they did the recalculation.

[Fishface]

the problem with re-payment mortgages is that they 'front load' all the interest.

Meaning in about year 17 of the mortage you will eventually start to make serious chunks into the capital - before that its re-payment peanuts.

[lukemg]

Offset tracker from the Woolwich, every bean you have in your account has the same effect as paying that amount off your mortgage total for that day.
i.e. 60k mortgage + 5k in the bank - mortgage is treated as 55k for the day and interest charged accordingly.
Only good for people generally in credit though. Also means you can reduce the interest without tying up the money by paying chunks off, just put it into the account (or other linked accounts to keep it separate)
Essentially you get the mortgage rate as interest on the money, but no tax to pay as it reduces the loan on the house rather than paying a sum to you.
You need discipline for it to work as the cash is easy to get at.