![]() |
An Infinity Mortgage?Here in Spain the concept of a mortgage period of 20 or 25 years is something new. The general feeling by the banks is that want their money back more quickly than banks in countries in which they are accustomed to longer periods. The borrowers are also accustomed to the idea that the guiding principle is to pay off the mortgage as quickly as possible. First Timers The problem for all those people starting out on the property ladder is the amount of money that has to go out each month to put the roof over one's head. At least this is true for the early years, but not necessarily as the4 years go by, since the advent of inflation. Cases that we studied showed e.g a couple, whose monthly income was £400, having to pay £150 per month in mortgage payment. Although the interest fluctuations since then have meant varying payments, as a percentage of their current monthly income of £2,000 per month, the mortgage does not now seem so horrendous. Varying interest rates The mistake made by many lenders in boom times is to conveniently forget the possible variation in interest rates during the early years. While a doubling of the payment in the case mentioned above would not be a disaster now, had it occurred during the early years it could have lead to foreclosure, and them losing their dream home. In our study we found various examples of interest rates going from 3% to 16% in very short periods of time. Maybe the lenders should have insisted on doing the relevant calculations, assuming a high rate, to check if the borrowers could afford the payment during the first few years in the event of this occurring. Asking the potential borrower would not necessarily have produced a sensible result, as many that we spoke to said, "It's OK, we'll manage somehow." Unfortunately, for thousands of borrowers, this turned out not to be the case. One case showed an initial payment of £269 per month, on an income of £800 per month, which ballooned to £690 per month on an income of £900 per month, with devastating consequences. How long a repayment period ? Many years ago, a borrower, my father, tried to convince lenders of the idea of a much longer repayment period. In fact so long that he gave the idea the name, infinity mortgage. The idea was to pay the interest, at whatever the actual rate would be, but not to repay the capital. Naturally in the staid world of banking this fell on deaf ears, and several so called bankers laughed at the idea. Eventually he was able to persuade an institution to go ahead with his proposal, and he purchased a house. He is now nearing retirement and still has not paid off the mortgage, and continues to pay the interest. He is happy with the idea that, when we inherit the house, we will have to pay off the capital, and so are we. The current position ? The house is now valued at £280,000. My father's income is £5,300 per month. And the mortgage payment ? The last time we spoke of the matter it was the mighty sum of £7.92 per month. The capital to be repaid ? The not insignificant amount of £1,900. Whether your local currency is pounds sterling, euros or dollars, the principle is still the same. While the motivation at the time, as a penniless masters student, was to keep every payment down to a minimum, the capital repayment would not exactly have broken the bank once a few years had gone by. When he reached the point of what would have been the normal repayment period, and received advice from all and sundry that perhaps he might slip into the bank with a bit of loose change, and pay off the capital, he declined. He rather liked the idea of his infinity mortgage being just that, or at least being with him until his death. In that he will succeed, you know what some of these old folk are like. © Jenny Barclay About The Author Jenny Barclay majored in math and economics, and obtained a masters in viability of banking institutions. She is currently studying Spanish in Andalucia, Spain. This article may be reproduced on websites subject to credit being given to the author, and a link to her website. http://www.regent-estates-group.com
Today's Mortgage, Refinance Rates: May 28, 2023 | Rates Spiked Last Week and Remain High Business Insider 27% of 2023 Home Buyers Plan to Refinance Once Mortgage Rates Drop. But How Long Will They Have to Wait? The Motley Fool The Great Pandemic Mortgage Refinance Boom - Liberty Street Economics Liberty Street Economics - Why Older People Can’t Get New Mortgages The New York Times Compare Today’s Refinance Rates | U.S. U.S News & World Report Money What is mortgage refinancing and how does it work? Yahoo Finance Today's Mortgage, Refinance Rates: May 21, 2023 | Rates are Flat for now, but Should Drop Later This Year Business Insider How to get a low-cost mortgage refinance Yahoo Finance How to Refinance a Second Home in 2023 Investopedia What Credit Score Is Needed To Refinance a House | Chase Chase News & Stories Total Household Debt Reaches $17.05 trillion in Q1 2023; Mortgage ... Federal Reserve Bank of New York Monthly Mortgage Payments Could Increase Rapidly if the U.S. ... The Motley Fool Refinancing your mortgage could save you thousands — here are some of the best refinance lenders CNBC How To Remove PMI: A Complete Guide Zing! Blog by Quicken Loans CFPB: Choosing a Cheaper Mortgage Lender Could Save You ... The Truth About Mortgage How does mortgage refinancing work? CBS News Should I Refinance My Mortgage? - Buy Side from WSJ The Wall Street Journal Here’s how sharply mortgage refinancing has dropped off Yahoo Finance CFPB Launches Effort to Spur New Opportunities for Homeowners ... Consumer Financial Protection Bureau Today’s 30-year mortgage refinance rates hit lowest levels in 15 days | Oct. 28, 2022 - Fox Business Analysis | It Will Pay to Wait to Refinance Your UK Mortgage The Washington Post Small Business Loan Refinance Bankrate.com VA Refinance Rates - Current VA Loan Refinance Rates Today Business Insider 11 Home Refinance Loans For Bad Credit (May 2023) BadCredit.org Debt-Ceiling Deal Is Close. Recession And Stock-Market Drop May ... Investor's Business Daily Current 15-Year Refinance Rates Today Business Insider Refinance Closing: An Overview Zing! Blog by Quicken Loans 7 Refinancing Programs for Seniors Total Mortgage Compare Current 30-Year Refinance Rates Business Insider
|