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Why use this system of mortgages?

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Comments

  • #92
    ei.sdraob
    Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    Dannyboy83 wrote: »
    The reason for the shoeing is because the board is half populated by total pessimist ****, who don't know why they are screaming and shouting slogans, who can't explain the reasons behind the slogans, they just shout them.

    PROPERTY=BAAAAAAAADDDD!!!!

    no you got that wrong > BAD LENDING=BAAAAAAAADDDD!!!

    nothing wrong with buying property for living in, hell i bought one recently (with no debt involved) after years of working hard, living like a monk :P and saving, yes it can be done

    but alot is wrong with wanting the types of dodgy lending that got us here
    the banks have finally copped on that they cant continue bad lending, if anything i find it amazing that they are giving away 92% mortgages still!

    you said that it be "hard" to save up 15 grand over 5 years for a 10% deposit
    I have shown you that:

    * in 5 years there's a good chance that this house (or similar ones) will drop in price by more than that amount
    * you will pay 15 grand in first 4 years in interest alone! barely scraping at the principal

    and of course all of that is assuming that rates are fixed and would stay low, the mortgage you seen is called "teaser" for a reason
    its incredible that banks who took so much money from us are still up to these tricks


  • #93
    murphaph
    Registered Users, Registered Users 2 Posts: 18,997 ✭✭✭✭murphaph


    Dannyboy83 wrote: »
    Thanks, good answer.

    About legging it to Australia, people who leg it to Australia now will be pursued regardless. It's not a viable reason imo. (just my opinion of course)

    Even if you declare bankruptcy, as far as I understand, you can still be pursued for every single cent, if you ever acquire any, at any future date.

    If 100% mortgages were an option, I imagine the market would begin to stabilise.
    Most people who sign onto property in this scenario are not buying investments, they are buying 'homes'.
    They are buying it to live in it.

    Its a completely different scenario compared to the last decade.

    Do we have any figures on how many homeowners have done a runner from Ireland since 2008?
    A bank would not practically be able to find you, nevermind sue you for monies owed if you wanted to disappear to the likes of Australia.


  • #94
    Dannyboy83
    Registered Users, Registered Users 2 Posts: 4,236 ✭✭✭Dannyboy83


    K-9 wrote: »
    Would a Rent to Buy scheme work for the deposit?

    The problem with the rent to buy schemes (which I've seen) is that most of the properties are still hugely overvalued.

    If I could find a rent to buy scheme at a multiple of 4 times my salary, I would certainly consider it.

    But most are minimum 6 times - it's just not an option for me, too much risk.


  • #95
    K-9
    Registered Users, Registered Users 2 Posts: 43,313 ✭✭✭✭K-9


    Dannyboy83 wrote: »
    The problem with the rent to buy schemes (which I've seen) is that most of the properties are still hugely overvalued.

    If I could find a rent to buy scheme at a multiple of 4 times my salary, I would certainly consider it.

    But most are minimum 6 times - it's just not an option for me, too much risk.

    If you could get one that reflects the market value when you go looking for the mortgage, that takes some of the risk out of it.

    Mad Men's Don Draper : What you call love was invented by guys like me, to sell nylons.



  • #96
    Dannyboy83
    Registered Users, Registered Users 2 Posts: 4,236 ✭✭✭Dannyboy83


    Sarn wrote: »
    In fairness, I would consider the above justification.

    If the banks were to start handing out 100% mortgages again where would the line be drawn? They were originally intended for 'professionals' in secure well paying jobs. The eligibility criteria rapidly disappeared which further fuelled our housing bubble.

    Good post.

    I would suggest the line could be drawn on something around the equivalent of the current criteria.
    i.e. 100% mortgage for a property which is 3-4 times the salary of the main earner.

    It doesn't need to be flexible.
    Its simple.
    If you fit the criteria and the bank stress test successfully, you are eligible.
    If you don't fit the criteria and the bank stress test was unsuccessful, you are ineligible.

    There are people out there who want to buy, who don't have the deposit and who are paying the equivalent sums in rent.

    Why not bring those sales forward?
    (given that the situation now is completely different to those sales which preceeded the collapse).

    The main two obstacles thusfar are:
    1) Interest rates
    2) Guarantor


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  • #97
    Dannyboy83
    Registered Users, Registered Users 2 Posts: 4,236 ✭✭✭Dannyboy83


    K-9 wrote: »
    If you could get one that reflects the market value when you go looking for the mortgage, that takes some of the risk out of it.

    Unfortunately, this is the 'trick' with rent to buy.

    When you sign on the dotted line for rent, you are agreeing to be 'locked in' to a price.

    So if I rent a property in 2010 which is valued at 240k, and by 2012 I have built up my deposit, then I still need to get a mortgage for the 2010 value (240k), not for the 2012 value (150k)


  • #98
    ei.sdraob
    Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    Dannyboy83 wrote: »
    Good post.

    I would suggest the line could be drawn on something around the equivalent of the current criteria.
    i.e. 100% mortgage for a property which is 3-4 times the salary of the main earner.

    It doesn't need to be flexible.
    Its simple.
    If you fit the criteria and the bank stress test successfully, you are eligible.
    If you don't fit the criteria and the bank stress test was unsuccessful, you are ineligible.

    There are people out there who want to buy, who don't have the deposit and who are paying the equivalent sums in rent.

    Why not bring those sales forward?
    (given that the situation now is completely different to those sales which preceeded the collapse).

    The main two obstacles thusfar are:
    1) Interest rates
    2) Guarantor

    Look

    i realize you think you have good intentions

    but I will make it simple


    we (the country) are borrowing money at 6% with 10-20 year repayment periods

    we are giving this money to banks directly or/and indirectly

    you think the banks will lend this at 2-3% now for 35 years?


    you need to be factoring in bank rates increasing sharply to at least 8% in future, hell they already went up 1.5% in one year regardless of the ECB rates remained flat

    there simply is no money in banks now

    and I would bet that if you go to the banks (BOI are doing that loan that caught your attention) you quickly find out how happy are they to lend you anything


  • #99
    Dannyboy83
    Registered Users, Registered Users 2 Posts: 4,236 ✭✭✭Dannyboy83


    ei.sdraob wrote: »
    no you got that wrong > BAD LENDING=BAAAAAAAADDDD!!!

    nothing wrong with buying property for living in, hell i bought one recently (with no debt involved) after years of working hard, living like a monk :P and saving, yes it can be done

    but alot is wrong with wanting the types of dodgy lending that got us here
    the banks have finally copped on that they cant continue bad lending, if anything i find it amazing that they are giving away 92% mortgages still!

    you said that it be "hard" to save up 15 grand over 5 years for a 10% deposit
    I have shown you that:

    * in 5 years there's a good chance that this house (or similar ones) will drop in price by more than that amount
    * you will pay 15 grand in first 4 years in interest alone! barely scraping at the principal

    and of course all of that is assuming that rates are fixed and would stay low, the mortgage you seen is called "teaser" for a reason
    its incredible that banks who took so much money from us are still up to these tricks

    Good post, I take all your points onboard here ei.sdaorab.

    But iirc, you spent time abroad working and saving, invested in Gold etc.
    None of that is available to me or many of the people I work with or went to school with us, at the present moment.
    Many of us have an unemployed partner, we already live like monks.

    Your points are fair, but I'm just trying to explain that you are trying to put a triangular peg through a square hole.
    Honestly, I am seriously good with money, very careful and repsonsible.
    However, since my girlfriend is unemployed, well, there is only so much you can do.


    I accept the argument that not everyone is entitled to own a house. I agree.
    I was mainly curious as to why the mortgage system which we have, is designed the way it is.
    It seems to lock a lot of potentially safe people out.

    I understand a car is a much smaller investment, but you can easily get a 100% loan for a car.
    If you couldn't, less people would drive.


  • #100
    Dannyboy83
    Registered Users, Registered Users 2 Posts: 4,236 ✭✭✭Dannyboy83


    ei.sdraob wrote: »
    Look

    i realize you think you have good intentions

    but I will make it simple


    we (the country) are borrowing money at 6% with 10-20 year repayment periods

    we are giving this money to banks directly or/and indirectly

    you think the banks will lend this at 2-3% now for 35 years?


    you need to be factoring in bank rates increasing sharply to at least 8% in future, hell they already went up 1.5% in one year regardless of the ECB rates remained flat

    there simply is no money in banks now

    and I would bet that if you go to the banks (BOI are doing that loan that caught your attention) you quickly find out how happy are they to lend you anything

    I'm aware, my sister was turned down for a sub-5k loan by an Irish bank, because she is a German resident.
    One of pals here in work in French, he was turned down by an Irish bank, (BOI), however, he rang up a French bank and they gave it to him without blinking.

    I have been approved for a mortgage by AIB, but it's not gonna happen because of the deposit.


  • #101
    ei.sdraob
    Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    Dannyboy83 wrote: »
    invested in Gold etc.

    Firstly I never touched gold :D (always suspicious of people trying sell it)

    Dannyboy83 wrote: »
    I was mainly curious as to why the mortgage system which we have, is designed the way it is.

    its not "designed" this way, it just is that way,

    there is alot of risk in lending now (92% is a way of pricing in some of the risk), and the banks still have holes in their balance sheets that you can drive a supertanker thru

    if anything im surprised banks are still being (on paper at least, dont know about practice) so loose with their lending

    if that mortgage was "fixed" for 35 years at that ~3% (which would be absolutely incredible offer!) then yes it seems like a no brainer as compared to renting, but its not, whichever way you look at it its not pretty

    Dannyboy83 wrote: »
    It seems to lock a lot of potentially safe people out.

    yes it might, but its better than the alternative where people who clearly cant repay these were given 100%+ mortgages and are now in serious trouble and things will only get worse


    if you want affordable housing then try to stop this madness called NAMA and Anglo and watch prices plummet to their real levels, letting the market do its own thing and cope with the oversupply


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  • #102
    changes
    Closed Accounts Posts: 959 ✭✭✭changes


    The Irish are hell bent on owning their own property. As soon as people are able to get mortgages again they will start buying.

    15% interest rates are unlikely anytime in the next 20 years imo(if ever). I have budgeted for a 6% rate on my own house.... god help me if it goes anywhere near 15% (and god help the country).


  • #103
    Dannyboy83
    Registered Users, Registered Users 2 Posts: 4,236 ✭✭✭Dannyboy83


    changes wrote: »
    The Irish are hell bent on owning their own property. As soon as people are able to get mortgages again they will start buying.

    Little wonder.
    I've been renting 7 years, I wouldn't like to tell you how much money I have lost or how many times I've been screwed over by landlords.

    If we had a similar system to Germany, I would be comfortable enough with it.But after 7 years of it now in Ireland, i can tell you with no exaggeration, it's hell.

    If Irish people are cowboys, then Irish Landlords are genetic clones of Billy The Kid.
    15% interest rates are unlikely anytime in the next 20 years imo(if ever). I have budgeted for a 6% rate on my own house.... god help me if it goes anywhere near 15% (and god help the country).

    I would have thought the same, but I don't know.

    Might be an interesting subject for a thread I guess?


  • #104
    Mad_Max
    Registered Users, Registered Users 2 Posts: 1,322 ✭✭✭Mad_Max


    You keep citing cheap housing at 150k(?). But sure if the banks were giving 100% morgages then everyone would be able to get a loan for some form of house. Demand goes up and then the cheap 'uns become not so cheap. Much like what we've just had happen to us.

    I just can't see how 100% mortgages would not re-inflate the bubble.


  • #105
    Dannyboy83
    Registered Users, Registered Users 2 Posts: 4,236 ✭✭✭Dannyboy83


    Mad_Max wrote: »
    You keep citing cheap housing at 150k(?). But sure if the banks were giving 100% morgages then everyone would be able to get a loan for some form of house. Demand goes up and then the cheap 'uns become not so cheap. Much like what we've just had happen to us.

    I just can't see how 100% mortgages would not re-inflate the bubble.

    Because that is just one factor.
    There are a multitude of factors which culminate to create a bubble.

    I wrote them down somewhere in the past, I will try to dig them out.
    .......
    ......
    ......
    Here, basically the opposite of these factors coming together helps create a bubble:
    http://www.boards.ie/vbulletin/showpost.php?p=63273465&postcount=12
    a) A sustained period of strong global economic contraction over a number of quarters.
    b) A sustained period of strong negative Irish economic growth over a number of quarters (GNP & GDP).
    c) The collapse in interbank lending.
    d) The Irish banks being considered bad risks to lend money to by their international counterparts, considering bond interest rates.
    e) The Irish banks considering home buyers as bad risks to lend money to.
    f) No significant reduction in the overhang of empty and un-sold properties in the national inventory.
    g) A prolonged period of growing unemployment
    h) Population decline driven by net emigration.
    i) Sustained decreases in average incomes.
    j) short to medium term rising ECB interest rates
    k) massive deviation from historical norms
    l) sustained increases in taxes
    m) sustained decreases in rents
    n) credit rating downgrade from AA+ to AA-
    o) public expenditure reform/cross border shopping/increased saving/smuggling & contraband= deflation
    p) property tax/local authority charges
    q) OECD recommendations : Mortgage interest tax relief should be reduced, full individualisation in the tax system, abolition of higher standard rate bands for single-income married couples, personal allowances cut, widen the tax base, Tax reliefs should be limited to the standard rate of tax and capped, some reliefs should be eliminated.
    q) fear of negative equity/ speculation on collapse


    This graph is somewhat out of date now, but the avg house price has generally been constant at around a €100,000 avg in Ireland for a while, before the pyramid kicked off.
    3785760797_465d1bfa6f_o.gif


  • #106
    Dannyboy83
    Registered Users, Registered Users 2 Posts: 4,236 ✭✭✭Dannyboy83


    Mad_Max wrote: »
    You keep citing cheap housing at 150k(?). But sure if the banks were giving 100% morgages then everyone would be able to get a loan for some form of house.

    Everyone wouldn't be able to.
    Only people who meet strict criteria.
    e.g. secure job, mortgage must be within 4x of your salary, must be stress tested to prove you can repay if interest rates rise to 8% etc. etc.

    I've heard a lot of talk here and various stories on different forums, a lot of exaggeration. But to the best of my knowledge, you still had to fit certain criteria to qualify for a 100% mortgage at the height of the pyramid.

    The whole subprime thing was more of an American issue than an Irish one AFAIK.


  • #107
    Dannyboy83
    Registered Users, Registered Users 2 Posts: 4,236 ✭✭✭Dannyboy83


    Anyway, I realise I am flogging a dead horse here and people are not interested in discussing this, I just figured it was an interesting issue and aside from the interest rate issue & guarantor, I'm still not entirely sure why we don't have some scheme like this.

    Risk assessment anyone?

    I mean, if they have scrappage schemes to stimulate an import market..........


  • #108
    ardmacha
    Registered Users, Registered Users 2 Posts: 7,476 ✭✭✭ardmacha


    This thread is based on a false premise. If a mortgage is a certain amount then you can rent for less than that amount, with falling prices the place you live in might not have adjusted the rent but somewhere else will. You can then save towards your deposit. If you cannot save then you should not take out a mortgage as you need some spare capacity. The government should remove mortgage interest relief etc for any mortgage more than 80%, this will prevent the problems we have seen arising again.


  • #109
    Dannyboy83
    Registered Users, Registered Users 2 Posts: 4,236 ✭✭✭Dannyboy83


    ardmacha wrote: »
    This thread is based on a false premise. If a mortgage is a certain amount then you can rent for less than that amount, with falling prices the place you live in might not have adjusted the rent but somewhere else will.
    But that doesn't appear to be the case.
    I've looked and looked and not found any 3 bed rental in Cork for anything approaching those figures.
    I understand the point your making, just saying that it does not appear to be happening.
    The government should remove mortgage interest relief etc for any mortgage more than 80%, this will prevent the problems we have seen arising again.

    I agree.
    Mortgage interest relief should never have been given in the first place.
    It is an artificial inflation of the real house value.
    By removing mortgage interest relief, the house should plummet by at least the same value, and quite likely significantly more, meaning a smaller mortgage is required.
    The Irish government were the masters of inflating the bubble, they seemed to have it covered from every angle.

    Anyway, Brian Lenihan has already said in Budget Dec'09 that the Mortgage interest relief will be withdrawn in July 2011, and will be phased out entirely for current beneficiaries by 2017, with cumulative drops in the interim.


  • #110
    Sleepy
    Registered Users, Registered Users 2 Posts: 24,566 ✭✭✭✭Sleepy


    As a renter, I can see where you're coming from. The problem as I see it is that rents are too high rather than the system of mortgage lending being flawed (it's just been fixed imho).

    There are, imho, two contributing factors to the high rents in Ireland at the moment, one which the market can fix and another which requires a change to our social welfare system:

    Many landlords paid too much for their properties and now 'need' to charge high rents in order to cover the mortgage on these properties. The market can fix this by forcing them to default on the mortgages if they can't afford to service them based on rental incomes and supplementing the difference out of their own cash reserves / income.

    However, rent allowance levels create an artificial floor for rents. We need to remove these set amounts and have rent allowance paid on a case by case basis (where the welfare officer checks the local market to see what alternatives exist in the area for the welfare recipient and arranges for the rent to be paid at normal market rates with a contribution towards this coming from the job-seeker's benefit/allowance (as under the current system). There may be a need to facilitate people with moving security deposits from one property to another etc. but I can envision a system where a landlord wishing to make their property available for welfare recipients (presumably something they'd do after failing to obtain a tennant on the open market) had to register with the welfare office that granting a leeway period for the previous landlord to release the renter's deposit from their former residence could be part and parcel of renting the property to the department.

    This would bring rents down to a more realistic level imho and remove the current imbalance where a mortgage payment for a house is lower than the rent for a similar property in the area.

    Obviously, it's not going to be done. This is, after all, the country where NAMA has been put in place in an attempt to corrupt the property market.


  • #111
    murphaph
    Registered Users, Registered Users 2 Posts: 18,997 ✭✭✭✭murphaph


    Agree with what Sleppy said, and I'm a landlord in receipt of rent from tenants on RS (I didn't jump on the bandwagon though, they have always been my tenants, and great ones at that, so I always keep the rent under the going rate for the area to keep them happy as they do such a good job of taking care of their home/my property).

    RS does provide an artificial floor in the market. No question, but rents are creeping down and I expect RS levels will be adjusted downwards gradually (they have already been reduced once, afterwhich I had to give a rent reduction to stay competitive for my tenants). I fully expect that my property will be renting for less come lease renewal time this year. I have no problem with it as the market should dictate rates, not my mortgage etc.

    Loads of landlords are clinging on to their properties and are reluctant to reduce rents, but these guys will go wollop sooner rather than later and rents will really begin to move, so have some patience Danny!

    Danny, one other quick point. You said you had "lost" money on rent. How do you come to this conclusion? You have exchanged money for a service (accomodation). It's no different than "losing" money for a hotel room or "losing" money to pay interest on a mortgage on a home. It's not "losing" money of course, it is simply a trade. You pay for the roof over your head directly (renting, hotel stay etc.) or you pay a bank for lending you the money to buy a home outright. If mortgage interest comes to more than the rent over your lifetime, you are better off renting and vice versa.


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  • #112
    Dannyboy83
    Registered Users, Registered Users 2 Posts: 4,236 ✭✭✭Dannyboy83


    murphaph wrote: »
    Danny, one other quick point. You said you had "lost" money on rent. How do you come to this conclusion? You have exchanged money for a service (accomodation). It's no different than "losing" money for a hotel room or "losing" money to pay interest on a mortgage on a home. It's not "losing" money of course, it is simply a trade. You pay for the roof over your head directly (renting, hotel stay etc.) or you pay a bank for lending you the money to buy a home outright. If mortgage interest comes to more than the rent over your lifetime, you are better off renting and vice versa.

    I meant I had lost money in that:
    A) I'm still struggling to get back a €1000 deposit from a property I finished renting in January 2009. There was no bad behaviour on my part at all. We kept the place immaculate.
    Simply a greedy cnut of a landlord.
    I've filled up the PRTB forms and have to send them off.
    It's just such hassle constantly having to go through this sh1te.
    (It's not just me either, it's a constant issue for many of the people I know who rent - there is feck all regulation in the Irish Rental Market)
    That same landlord also tried to screw us over by combining the gas meter of his personal property with our property!!
    Unfortunately we found out he had a history of this after we finished our tenancy. It'd be handy to have a name/shame site for landlords.
    I won't post his daft site on the open forum, but I can PM you if you wish.

    B) By moving properties, you are always losing various refunds/rebates on bills such as ESB/Gas etc. This has accumulated to quite an amount of money by now

    C) By not moving properties, I've always found the landlords have tried to screw me over by increasing rent rate etc.(with the exception of 1 who was very genuine, but the property was located so far away from my work that it was costing me a small mortgage on petrol, i.e. €300 per month at least)

    D) Constantly paying connection fees etc. e.g. last year I paid about €160 for an internet connection fee for Eircom. This is a regular thing.
    Landlords have always refused to refund this improvement to their property.

    This year, myself and my GF are sharing with another couple in a house share. It's just not worth it in my opinion, for the little money you save - you are losing all your privacy and personality clashes and differences in hygiene (e.g 2lbs of hair in the shower every time the girl showers and she never cleans up after herself:pac:), but hey, we gave it a shot.

    Unless things turn around, I will just try to find a decent property/landlord and try to stay there for the forseeable future until we are ready to emigrate (the plan is Canada).

    (As I said, if the renter was protected as in Germany, it wouldn't be such a nightmare.
    You cannot compare the German and Irish market tho.
    Hopefully this will change now that the whole pyramid is collapsing)


  • #113
    alejandro1977
    Registered Users, Registered Users 2 Posts: 505 ✭✭✭alejandro1977


    Dannyboy83 wrote: »
    I meant I had lost money in that:
    A) I'm still struggling to get back a €1000 deposit from a property I finished renting in January 2009. There was no bad behaviour on my part at all. We kept the place immaculate.
    Simply a greedy cnut of a landlord.
    I've filled up the PRTB forms and have to send them off.

    I lost deposit money before and took the guy to the Small CLaims Court; got it back no problem, the guy didn't show up in court.

    It could well be faster going down this route - assuming it's still open. Maybe the PRTB has taken over that role - I hope not - I hear it's a joke


  • #114
    [Deleted User]
    Posts: 31,896 ✭✭✭✭ [Deleted User]


    changes wrote: »
    The Irish are hell bent on owning their own property. As soon as people are able to get mortgages again they will start buying.

    15% interest rates are unlikely anytime in the next 20 years imo(if ever). I have budgeted for a 6% rate on my own house.... god help me if it goes anywhere near 15% (and god help the country).
    I'd be more concerned about wage deflation/stagnation combined with increases in taxes, food and fuel squeezing income tbh.


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