First year of mortgage hardest

leahcim

I cannot figure out why people say that "the first year of your mortgage is the hardest". How is the second and third years going to differ. I can understand how it would apply if somebody who started a mortgage in say 1997, because interest rates were dropping and salaries were increasing across the board. But in 2004 interest rates are likely to increase, many people are on a pay freeze or get increases less than the rate of inflation.

On top of that most people take advantage of the banks lower interest rate for the first year or two after that is switches to the standard rate. So they will end up paying more to service their mortgage even if rates do not rise.

Can I assume that people just trot this piece of advice out without thinking or am I missing something.

eth0_

I'd imagine it's just the difficulty of adjusting to making a mortgage payment each month, it would take a while to get used to.

koneko

Probably because you have so many other expenses in the initial year (installations, furniture, etc).

I don't see any reason the actual mortgage would be harder though...

Gurgle

Nope, first year is easy - usually people will have been paying (more?)rent and the mortgage companies are giving 1-year discounted rates.

Its after the first year that it really hits.

Its just meaningless bullshìt that meaningless people spout.

jd

I think it may go back to days when interest rates were steady (but high), and inflation and wage increases were high. The amount repaid over the term stays constant, so if you get a pay increase the % you pay on your mortgage decreases.

shoegirl

Sounds like the sort of cak trundled out by people in cushy state employment with guaranteed pay increases. I know my parents struggled with their mortgages all their lives, and in the last 2 years are struggling harder than ever before.

Depends on your individual circumstances of course. If you are one of those lucky people who get guaranteed pay increases year on year in steady employement then it may stand true.

MG

As a general rule, it’s true for several reasons, not all financial.
1. Expenses for fees (eg solicitors), furniture, DIY etc are mostly once off items which occur only in the first year. Many of these cannot be financed so you end up paying thousands over up front. This does not tend to occur in subsequent years to anywhere near the same extent. Take a mortgage of 200k. At the moment you would have repayments in the region of €12,000 per annum. Fees, furniture could very quickly come to that amount again.
2. Interest on the mortgage is on a lower principal every subsequent year.
3. Many people buy as soon as they can afford to (say late 20s) but have not yet reached the peak of their earnings potential (say mid 30s). The repayments tend to become a smaller proportion of income.
4. There isn’t as much stress meeting banks, solicitors, worrying about getting the house, painting it, getting telephone connected etc in the second year.
5. As moving into a house often means moving to a new area, you are used to the area, possibly extra commute etc after a year


Naturally, if the interest rate rises it will change this perception but as this hasn’t happened in a few years, at the moment it is generally true to say that the first year is the hardest.

ToxicPaddy

eth0_ wrote:

I'd imagine it's just the difficulty of adjusting to making a mortgage payment each month, it would take a while to get used to.

With me this was the case.

The initial shock of handing over a large amount of money like that was a bit
frightening. :eek:

But as others here have said, once the first 12 months are over, the house will have been furnished (to some degree anyway!!!) and the payments to solicitors, surveyors, builders, painters, etc etc etc is all over and done with you suddenly realise that you have that all out of the way and its only the mortgage thats left to pay, so suddenly it doesnt seem so big anymore.

I think the first 12 months are when you get all the bits and pieces you need
for the house, furniture, flooring, appliances, fittings etc. Each month you
tend to budget a few quid from your income to cover these. Most people tend
to give themselves 12 months to get this all out of the way as its a nice
period of time, when based upon the scale of things, isnt that long. But yet
long enough to get most or not all of what you need to turn a house into a
home.

Granted there are those out there who are lucky enough to be able to do it
all in a fraction of time and those who arent so lucky where 12 month could
easily turn into 5 or 6 years.

Tox

RicardoSmith

Gurgle wrote:

Nope, first year is easy - usually people will have been paying (more?)rent and the mortgage companies are giving 1-year discounted rates.

Its after the first year that it really hits.

Its just meaningless bullshìt that meaningless people spout.

I agree with Gurgle. !st year or two is easy. It gets difficult when you have unexpected other bills/expenses that suddenly leave you with less money than you were expecting for a few months. Which is why you need some savings for those times.

parsi

The first year is more awakward overall - now the bills are all yours - no more splitting with housemates. If you want your white goods and carpets you pay for them all. If you have to get someone out to fix something it's all paid for by you.

After year 1 you have bought most of the big necessary items and you have learned to try and keep back a few bob for the things that go wrong.

I expect the next big step to be around year 8-10 when all the stuff you bought in year 1 goes bust ! Of course if you have a Potterton Suprima gas boiler then every year something will go wrong :-)

RicardoSmith

parsi wrote:

....I expect the next big step to be around year 8-10 when all the stuff you bought in year 1 goes bust ! Of course if you have a Potterton Suprima gas boiler then every year something will go wrong :-)

8-10 yrs? I take it you've not moved in long, live alone, and don't have kids, and all your white goods have 8-10yr waranties.

Gurgle

RicardoSmith wrote:

8-10 yrs? I take it you've not moved in long, live alone, and don't have kids, and all your white goods have 8-10yr waranties.

lol
I have never owned anything with a warranty beyond 1 year.
When I bought my house I went in to power city and bought the cheapest fridge, washing machine, dryer and cooker they had. Got the whole lot for £800 though I've had to repair everything except the cooker(so far).

parsi

RicardoSmith wrote:

8-10 yrs? I take it you've not moved in long, live alone, and don't have kids, and all your white goods have 8-10yr waranties.

wrong, wrong , wrong and wrong. In 7 years, wife, 3 kids and none of the white goods (except boiler) have gone wrong yet which suggests to me that it will be any day now (pessimism)...

RicardoSmith

parsi wrote:

wrong, wrong , wrong and wrong. In 7 years, wife, 3 kids and none of the white goods (except boiler) have gone wrong yet which suggests to me that it will be any day now (pessimism)...

Your lucky so. We've had a few things fail.... Theres also been problems with showers and plumbing etc.

parsi

Oh yeah the backup battery for the burglar alarm was starting to leak so it was changed during its annual service last month. So you can understand why I am expecting everything to go at once seeing as other people have had intermittent failures...