Repossession of homes: what's the big deal?

08-07-2013 05:19PM

jester77 wrote: »

Not that hard, all you need is a pen, paper and calculator.

You calculate unemployment of one or both parties, injuries and not being able to work for extended periods/rest of your life, children and child care costs/stay at home mom/dad, educational costs, death of a partner, interest rates over 10% like our parents had, etc, etc.

Most of these very likely to happen over the 25-35 years of a mortgage. If you cannot meet the repayments during those circumstances then you can't afford the mortgage. Doesn't take a genius to figure it out, the calculator will do the maths for you.

Leaving aside very large mortgages and just talking about normal mortgages I don't think its fair to calculate in both parties becoming unemployed as I don't think anyone would get a mortgage if this happened, especially if they are working in a fairly secure form of employment or in a job that even if they lost it would get another fairly easily.

In reality how many people could pay their, even modest mortgage if they became unemployed. None I'd say.

As far as sickness etc is concerned income protection is compulsory now for people getting a mortgage, at least for the people I know who got one recently it was. This will cover the mortgage if someone cant work for a long period of time due to sickness etc.

bnt · 08-07-2013 06:17PM

Ray Palmer wrote: »

Except that is not true and wild speculation.
...

Only if you limit your focus to Ireland as it is today (July 2013), without looking at the international consequences of the low repossession rate. Ireland currently has specific legal rulings (the Dunne judgement) that limit repossessions here - and they are soon to go away.

So we'll soon see Ireland's banks dealing with the same "to repossess or not to repossess" questions they ask in other countries. In the USA, a rise in house prices has led to a rise in repossessions, for exactly the reasons I gave: the banks get a better deal by repossessing.

But the USA also has banking rules about "taking bad loans off the books" by repossessing and the mortgage, even if it means a sale at a loss. In other words, when the loan is way in arrears, they have to repossess. I don't know whether Ireland will go down that route - but given that "poor asset quality" (understatement of the decade) is impacting Ireland's national credit rating, there's definite pressure to ramp it up, take the losses, and clean up the books. That means NAMA, too. :cool:

BattleCorp · 08-07-2013 06:19PM

jester77 wrote: »

Not that hard, all you need is a pen, paper and calculator.

You calculate unemployment of one or both parties, injuries and not being able to work for extended periods/rest of your life, children and child care costs/stay at home mom/dad, educational costs, death of a partner, interest rates over 10% like our parents had, etc, etc.

Most of these very likely to happen over the 25-35 years of a mortgage. If you cannot meet the repayments during those circumstances then you can't afford the mortgage. Doesn't take a genius to figure it out, the calculator will do the maths for you.

What you are saying is impossible to do. Nobody would be able to get a mortgage if you factored in both partners losing jobs, kids, death of a partner, etc etc.

A life assurance policy takes care of some of the problems but nobody can ever factor in losing their job. No job is 100% safe nowadays.

jester77 · 08-07-2013 10:28PM

ScumLord wrote: »

That's true, it's ultimately the person that's being conned that should know better. So let the banks continue on as they have done and when this happens again we'll just have to give the banks a pat on the bank for pulling the wool over everyone's eyes again.

How is the person being conned? It's basic maths, you sit down, work out future permutations and you can either afford the mortgage or you can't. Just because the bank is offering more than you can afford doesn't mean you should take it. If you do then you would be a fool and deserve no sympathy when things go pear shaped.

Brianna Thousands Palm wrote: »

Leaving aside very large mortgages and just talking about normal mortgages I don't think its fair to calculate in both parties becoming unemployed as I don't think anyone would get a mortgage if this happened, especially if they are working in a fairly secure form of employment or in a job that even if they lost it would get another fairly easily.

In reality how many people could pay their, even modest mortgage if they became unemployed. None I'd say.

As far as sickness etc is concerned income protection is compulsory now for people getting a mortgage, at least for the people I know who got one recently it was. This will cover the mortgage if someone cant work for a long period of time due to sickness etc.

BattleCorp wrote: »

What you are saying is impossible to do. Nobody would be able to get a mortgage if you factored in both partners losing jobs, kids, death of a partner, etc etc.

A life assurance policy takes care of some of the problems but nobody can ever factor in losing their job. No job is 100% safe nowadays.

It's not impossible, far from it. I sat down and did this and covered all my bases. If I become ill, my health insurance will cover the costs up to a certain time. After that I have berufsunfähigkeit insurance (don't know what the English term is), but it pays out the equivalent of my salary while I can't work, for the rest of my life if I am that unlucky. My partner has the same cover. If either of us die, then we have insurance that will pay off 66% of the mortgage. If I am unemployed I have 66% of my salary for 12 months, then I have to start using savings. I've fixed my mortgage for 20 years, so interest rates will have no effect for a long time, and by then my kids will have moved out so I might not even need such a big house at that stage.

irishjig69b · 08-07-2013 10:41PM

People are commenting sucide over these debts, op I really hope ur never in a position that u have to give up something u hold dear to your heart, either through job lose or health or just plane stupidity, when people bought their homes me included in the 'good times' none of us thought it would come to this a lot of homeowners are in deep deep trouble, with massive unemployment, kicking people outta their homes cause they can't pay for them is wrong, they should drop the repayments and look again in say 2/3 years when they could be in a better position to pay.......u were never in the position some find themselves in so in reality, until you are, button it

08-07-2013 10:51PM

irishjig69b wrote: »

kicking people outta their homes cause they can't pay for them is wrong

Perhaps, people who cannot afford their homes should, you know, live somewhere that they can afford?

Under your proposals:

You get - a free house (woohoo!)
We get - to pay for it.

BattleCorp · 09-07-2013 08:00AM

jester77 wrote: »

It's not impossible, far from it. I sat down and did this and covered all my bases. If I become ill, my health insurance will cover the costs up to a certain time. After that I have berufsunfähigkeit insurance (don't know what the English term is), but it pays out the equivalent of my salary while I can't work, for the rest of my life if I am that unlucky. My partner has the same cover. If either of us die, then we have insurance that will pay off 66% of the mortgage. If I am unemployed I have 66% of my salary for 12 months, then I have to start using savings. I've fixed my mortgage for 20 years, so interest rates will have no effect for a long time, and by then my kids will have moved out so I might not even need such a big house at that stage.

Health insurance covers costs up to a certain point and for a certain time. Income protection insurance only lasts for a certain period too.
Savings will only last so long too.

What then?

If you lose your job and your partner loses their job, then you will be ok for a year or two or maybe even three. What do you do if you still have 17 years left on your mortgage?

Frank Black · 09-07-2013 08:31AM

BattleCorp wrote: »

If you lose your job and your partner loses their job, then you will be ok for a year or two or maybe even three. What do you do if you still have 17 years left on your mortgage?

What do you think should happen in this scenario?

jester77 · 09-07-2013 08:38AM

BattleCorp wrote: »

Health insurance covers costs up to a certain point and for a certain time. Income protection insurance only lasts for a certain period too.
Savings will only last so long too.

What then?

If you lose your job and your partner loses their job, then you will be ok for a year or two or maybe even three. What do you do if you still have 17 years left on your mortgage?

If both partners should lose their jobs and can't find a job within 2 or 3 years then it's time to sell the house and move. 2-3 years is a lot of time not to find a job or acquire new skills. What else are they going to do?

corktina · 09-07-2013 08:58AM

the house next door to mine is identical and rented. If I had rented that instead of buying mine ,I would have quarter of a million smile vouchers in my bank (or pissed up against a wall somewhere) Can't sell mine for half what I paid. I would never reccomend someone to buy!

zl1whqvjs75cdy · 09-07-2013 09:22AM

corktina wrote: »

the house next door to mine is identical and rented. If I had rented that instead of buying mine ,I would have quarter of a million smile vouchers in my bank (or pissed up against a wall somewhere) Can't sell mine for half what I paid. I would never reccomend someone to buy!

That's an interesting point actually. Would the country as a whole be better moving towards a rental type model like they have in Germany? Obviously it would take some new legislation to provide long term security of tenure for families etc. but that type of system would have prevented the massive property crash.

I know it'll never happen, the Irish have this inherent need to own property, probably dating back to plantation times but it is food for thought.

Ray Palmer · 09-07-2013 09:24AM

ScumLord wrote: »

Now, how old old they have been when they bought their house 10 years ago?

Did you read the article? add 10 years to somebody who was in there 20s still doesn't make them 40. For what you said to be valid they all would have had to be in their late 20s and have all taken out 100% mortgages 10 years ago.

The facts simply don't back up what you said. I ask again tell us how many 100% mortgage holders are defaulting?

bnt wrote: »

Only if you limit your focus to Ireland as it is today (July 2013), without looking at the international consequences of the low repossession rate. Ireland currently has specific legal rulings (the Dunne judgement) that limit repossessions here - and they are soon to go away.

So if I limit myself to the banking system of the country we are talking about I am correct:rolleyes: However I can't be right if I am talking about the US. As we are talking about Ireland as you were what difference does that make?

Balmed Out · 09-07-2013 09:27AM

corktina wrote: »

the house next door to mine is identical and rented. If I had rented that instead of buying mine ,I would have quarter of a million smile vouchers in my bank (or pissed up against a wall somewhere) Can't sell mine for half what I paid. I would never reccomend someone to buy!

Have you a tracker mortgage ? If so and they were to be purchasing the house for so much less today but with much more expensive lending and having spent whatever renting for all those years you may find your not so hard done by.

Ray Palmer · 09-07-2013 09:51AM

Balmed Out wrote: »

Have you a tracker mortgage ? If so and they were to be purchasing the house for so much less today but with much more expensive lending and having spent whatever renting for all those years you may find your not so hard done by.

I've been saying this for a while. The maths is a lot more complex than people are saying.

There are people with negative equity that are paying less in mortgage payments than people who bought for less and they have many more years to go. When you bring in the ages of people you will find some who WANT to own probably never will. If you were in your 30s at the start of the boom and held off you may never own now as the bank won't loan you the money. They could possibly have large savings but I doubt that is common and if you had a job upset highly unlikely.

09-07-2013 10:37AM

corktina wrote: »

the house next door to mine is identical and rented. If I had rented that instead of buying mine ,I would have quarter of a million smile vouchers in my bank (or pissed up against a wall somewhere) Can't sell mine for half what I paid. I would never reccomend someone to buy!

How would you have a quarter of a million "smile vouchers" you would have been paying rent instead of a mortgage so you would not have been saving all this money you think you would be.

Also how can you advise someone not to buy especially nowadays with the bargains out there. Most places can be bought with monthly repayments much less than the equivalent rent. I've looked into it plenty lately even from a buy to let point of view and there is places with rent double the mortgage repayments (if you opt for a low repayment) or you could own the place is less than 10 years with a decent deposit and pay back the equivalent of the rent in the place.

I cant wait to buy myself, rent to me is throwing money away which could be going towards owning a place. There was a couple of years where buying wasn't wise in certain areas due to inflated prices but before that and now buying is the better option imo.

jester77 · 09-07-2013 10:42AM

Brianna Thousands Palm wrote: »

I cant wait to buy myself, rent to me is throwing money away which could be going towards owning a place.

Ridiculous comment. You could also say buying is throwing money away to the bank and you don't have the flexibility to move when you want a new job or change of career. Not a lot of difference between rent and mortgage interest payments over the long run.

09-07-2013 11:03AM

jester77 wrote: »

Ridiculous comment. You could also say buying is throwing money away to the bank and you don't have the flexibility to move when you want a new job or change of career.

The two main situations I'm waiting on to buy are (1) Getting a job back around my home place, I'd have no intention or desire to move once I get back or (2) know Im spending a few years in a place, buy something that's easy to rent out so when I move on I can keep it and rent it out. Plenty of bargains out there at the moment in city centers and near university's etc that can be let very easily.

jester77 wrote: »

Not a lot of difference between rent and mortgage interest payments over the long run.

There is a massive difference, for a start when you pay rent every penny is rent but even paying the same figure per month in a mortgage only a portion is going on interest and the rest is going towards the money you borrowed. Then after a number of years of this you own the place and have all that extra cash every month to do with as you please while the renter is still forking out every month.

Owning your own home is a very important thing in my eyes, this is what I was brought up to believe and I totally agree with it, I don't want to be living in someone else's house.

Ray Palmer · 09-07-2013 11:12AM

jester77 wrote: »

Ridiculous comment. You could also say buying is throwing money away to the bank and you don't have the flexibility to move when you want a new job or change of career. Not a lot of difference between rent and mortgage interest payments over the long run.

There is certainly a difference in the long run. It is only in the short term that there isn't much of a difference. Even on a variable rate inflation will rise rent above a mortgage in the long run. According to your statement somebody who bought a house in the 80s spent the same amount of money as somebody still renting from that point. That just isn't accurate. €300 mortgage payments versus €1500 rent fro the same property pretty much shows that. After that you are still renting.

Not many people need to be able to move every time they get a job. Many people with kids don't want to either.

There are benefits on both sides of rent vs buying. What you have said is not one for renting or true.

irishjig69b · 09-07-2013 12:14PM

Rojomcdojo wrote: »

Perhaps, people who cannot afford their homes should, you know, live somewhere that they can afford?

Under your proposals:

You get - a free house (woohoo!)
We get - to pay for it.

Maybe u should read the whole post to understand what I ment

floggg · 09-07-2013 12:27PM

irishjig69b wrote: »

Maybe u should read the whole post to understand what I ment

But if there is debt forgiveness, who do you think pays for it - given that any losses for the banks will need to be funded by the tax payer.

I believe in providing a safety net for citizens so I am not completely opposed to debt forgiveness in principle - but it has to be on the basis that they give up the keys and walk away.

I think it would be grossly unfair to expect non-home owners to bear the cost of debt forgiveness and get nothing in return - and indeed have their own ability to buy a house if they wished diminished - while the person who's debt they are funding not only gets to walk away from their obligations (or part thereof) but gets to keep a valuable asset that somebody else is having to pay for.

Frank Black · 09-07-2013 12:50PM

Ray Palmer wrote: »

I've been saying this for a while. The maths is a lot more complex than people are saying.

There are people with negative equity that are paying less in mortgage payments than people who bought for less and they have many more years to go. When you bring in the ages of people you will find some who WANT to own probably never will. If you were in your 30s at the start of the boom and held off you may never own now as the bank won't loan you the money. They could possibly have large savings but I doubt that is common and if you had a job upset highly unlikely.

If you were in your 30's at the start of the boom and have no savings now, you probably shouldn't be trusted with a mortgage.
Banks are lending (I know from personal experience) to people who can demonstrate a consistent saving record.

irishjig69b · 09-07-2013 12:55PM

floggg wrote: »

But if there is debt forgiveness, who do you think pays for it - given that any losses for the banks will need to be funded by the tax payer.

I believe in providing a safety net for citizens so I am not completely opposed to debt forgiveness in principle - but it has to be on the basis that they give up the keys and walk away.

I think it would be grossly unfair to expect non-home owners to bear the cost of debt forgiveness and get nothing in return - and indeed have their own ability to buy a house if they wished diminished - while the person who's debt they are funding not only gets to walk away from their obligations (or part thereof) but gets to keep a valuable asset that somebody else is having to pay for.

That's a very fair point, what I was trying to say maybe wrongly was that people are in trouble with mortgages and putting them out should be the last resort, don't get me wrong if people make no attempt to pay anything for a year or 2 then yeah but if some 1 is trying even a few hundred a month then maybe look at it and try help?

floggg · 09-07-2013 01:21PM

irishjig69b wrote: »

That's a very fair point, what I was trying to say maybe wrongly was that people are in trouble with mortgages and putting them out should be the last resort, don't get me wrong if people make no attempt to pay anything for a year or 2 then yeah but if some 1 is trying even a few hundred a month then maybe look at it and try help?

It is the last resort AFAIK.

I don't know the details but there are codes of conduct and regulations which prevent banks from repossessing family homes save in limited circumstances.

It's not happening willy nilly.

irishjig69b · 09-07-2013 02:01PM

I. Was under the impression it was rampant?

Ray Palmer · 09-07-2013 02:08PM

Frank Black wrote: »

If you were in your 30's at the start of the boom and have no savings now, you probably shouldn't be trusted with a mortgage.
Banks are lending (I know from personal experience) to people who can demonstrate a consistent saving record.

Never said the banks were not lending. Financial stability of owning a house makes a big impact on the mind as much as your credit rating. As I mentioned you could easily have had a job upset like those with a mortgage. The difference is you would have to use the saving from a deposit/savings.

Are you in your 40s looking for a mortgage? Banks are not so keen to lend to people closer to 50 they get without existing property. They can't take out mortgages more than 15 years.

Not many people at that age could save masses amounts of money while renting. For most to be able to save enough they will have had to be sharing a house to save on rent in order to do that. One thing to be in a house share in your 20s another thing entirely to be in your 40s. Throw in having a kid and you are unlikely to have any spare money for a deposit to compensate for the age and years of renting.

I think there is a lot of people unaware of what happens to your out look and prospects as you get older. These same people will most likely change their tune as they get older when the things they are concerned about become more complex.

Frank Black · 09-07-2013 02:32PM

Ray Palmer wrote: »

Never said the banks were not lending. Financial stability of owning a house makes a big impact on the mind as much as your credit rating. As I mentioned you could easily have had a job upset like those with a mortgage. The difference is you would have to use the saving from a deposit/savings.

Are you in your 40s looking for a mortgage? Banks are not so keen to lend to people closer to 50 they get without existing property. They can't take out mortgages more than 15 years.

Not many people at that age could save masses amounts of money while renting. For most to be able to save enough they will have had to be sharing a house to save on rent in order to do that. One thing to be in a house share in your 20s another thing entirely to be in your 40s. Throw in having a kid and you are unlikely to have any spare money for a deposit to compensate for the age and years of renting.

I think there is a lot of people unaware of what happens to your out look and prospects as you get older. These same people will most likely change their tune as they get older when the things they are concerned about become more complex.

Well tbh I'm not sure what exactly your point is. The subset of people you are describing (say those in mid-30's back at the turn of the millennium, who have not purchased property in the intervening years and have suffered job losses which have eaten up all their savings), while they may exist, must be a tiny percentage of the population.
I doubt it's a very big problem - I certainly haven't read much/heard much discussion of the 'phenomenon'.

Dostoevsky · 09-07-2013 02:43PM

Are many ordinary people on wages building homes any more without a mortgage? I have a decent amount of savings now and I'm thinking this may be the way to go. If it means not having the burden of a mortgage, I don't mind making it fancy shmancy over a number of years, rather than moving into something like the Ritz immediately.

I still think house prices in Dublin are hugely overpriced in historical terms, and that's why I'm holding off. It's only when people compare prices to, say, 2006, that they think they are good value. Far too many people are comparing prices to Celtic Tiger norms, which were historically super abnormal, than to historical norms. They are brewing up a storm if they justify a house purchase today on those grounds.

Ray Palmer · 09-07-2013 02:50PM

Frank Black wrote: »

Well tbh I'm not sure what exactly your point is. The subset of people you are describing (say those in mid-30's back at the turn of the millennium, who have not purchased property in the intervening years and have suffered job losses which have eaten up all their savings), while they may exist, must be a tiny percentage of the population.
I doubt it's a very big problem - I certainly haven't read much/heard much discussion of the 'phenomenon'.

It is pretty straight forward really. People who didn't buy during the boom times and were at a certain age then are not actually better off. More specifically they don't have what they want and never will as they missed the boat. They are literally too old to get the mortgages they need and will never get the money together to buy a property. I am not saying everybody has to buy a house just lots who did/do will never own.

Even if they do afford the deposit and get a mortgage the rate they are charging will wipe away any advantage of the cheaper house price.

People were actually correct in saying some people will miss the boat if they didn't buy years ago. While some people like to gloat about how they aren't in negative equity they are actually missing the fact that person in negative equity is in a much better situation in the long run and may very well pay less for their property than somebody buying now.

Geuze · 09-07-2013 02:51PM

Brianna Thousands Palm wrote: »

Also how can you advise someone not to buy especially nowadays with the bargains out there. Most places can be bought with monthly repayments much less than the equivalent rent. I've looked into it plenty lately even from a buy to let point of view and there is places with rent double the mortgage repayments (if you opt for a low repayment) or you could own the place is less than 10 years with a decent deposit and pay back the equivalent of the rent in the place.

I cant wait to buy myself, rent to me is throwing money away which could be going towards owning a place. There was a couple of years where buying wasn't wise in certain areas due to inflated prices but before that and now buying is the better option imo.

Fair enough.

But the attitude that "rent is throwing money away" is part of the reason we're in this crisis.

I accept you are making a good point about rental costs vs. mortgage costs now.

Note: 100 million + people in Switz, Germany, NL, France, etc. rent all their lives. They are not mad. They have lower un than us.

Dostoevsky · 09-07-2013 02:56PM

Ray Palmer wrote: »

People were actually correct in saying some people will miss the boat if they didn't buy years ago. While some people like to gloat about how they aren't in negative equity they are actually missing the fact that person in negative equity is in a much better situation in the long run and may very well pay less for their property than somebody buying now.

How so? I know somebody who paid €530,000 for a house in the summer of 2006. Two months ago the precise same house design (actually a bit better because your man was a chippy and added features) two doors up went for €220,000. How is somebody who pays €220k for that house better than somebody who paid €530k for the same house?

Repossession of homes: what's the big deal?

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