Any point in not just taking out a large mortgage?
Discussion
A mate was telling me last night he bought his house for £400k about 4 years ago.he has just sold for £750k. In the meantime he has paid off much of the mortgage. He is now buying a £1.5mn house with about an £800-900k mortgage.
His logic is that it will be worth over £2mn in 3-5 years so where else can he earn that tax free?
Another mate bought a house for £1m and it's now near £1.6m a few years later.
These chaps are still fairly young, 30 or so so bought aged 26 ish.
They all have what would generally be regarded as good professional jobs in London.
But, none of them, even for a minute, a split second even, stop to think what would happen if rates increased or if property prices fall. They ALL just think 10% pa is normal.
Is it me that is wrong or has the government just made house prices the only show in town? What's the point in ISAs, pensions, shares, bonds etc nowadays? Why not just borrow big money, make £500k tax free and forget about share save schemes, ISAs, pensions and the like?
His logic is that it will be worth over £2mn in 3-5 years so where else can he earn that tax free?
Another mate bought a house for £1m and it's now near £1.6m a few years later.
These chaps are still fairly young, 30 or so so bought aged 26 ish.
They all have what would generally be regarded as good professional jobs in London.
But, none of them, even for a minute, a split second even, stop to think what would happen if rates increased or if property prices fall. They ALL just think 10% pa is normal.
Is it me that is wrong or has the government just made house prices the only show in town? What's the point in ISAs, pensions, shares, bonds etc nowadays? Why not just borrow big money, make £500k tax free and forget about share save schemes, ISAs, pensions and the like?
hepy said:
The increase in property prices is why people shun pensions, and invest in buy to lets.
Not sure you would get as much growth outside of London and South East. I live in Lancashire and I'd be surprised if prices have gone up by 10% over the last 5 years. However, property is much cheaper so you could buy 2-3 buy to lets for the same price as one in the South East.
How do your friends afford the mortgage payments and deposits?
Some have help from parents but mostly they have just worked hard, have good jobs and so do their wives/girlfriends and they save up for the deposit and re the payments I presume they just pay them from income, no issues there.Not sure you would get as much growth outside of London and South East. I live in Lancashire and I'd be surprised if prices have gone up by 10% over the last 5 years. However, property is much cheaper so you could buy 2-3 buy to lets for the same price as one in the South East.
How do your friends afford the mortgage payments and deposits?
All this talk of multi asset investing, discretionary fund management and all the private banks that are wealth managers don't make that return.
It's all tax free too.
Sheepshanks said:
jonah35 said:
They ALL just think 10% pa is normal.
Yep - the guys in our head-office in the SE are just the same. Being from The North I find it a bit scary - they seem to have a completely different mentality and really do live life on the financial edge.
Where I am, house prices are just about back to where they were 10 years ago.
America is worse. A friend of mine has built a fantastic house in America, few million but it's so much bigger than a UK house. His and hers range rovers etc. ok, good incomes but the expenditure is so high it could go pop at any minute,
They're being proven right so far contrary to the crashists whilst living in a nice home/area.
ILoveMondeo said:
All depends how much they earn and how easily they can cope with an interest rate rise.
It'll only take a small BoE base rate increase to make their interest payment leap 50% come the end of their fixed rate periods.
It's certainly a risk, "experts" seem divided on when we will see the rate increase though.
You're right about it being the only show in town for a decent return, the rush to BTL from people cashing in their pensions will be interesting.
I think ISAs are still attractive though, for a long term investment, as you can build a large lump of cash for tax free income when rates are higher.
I don't know what they earn but I think the first couple I mentioned he gets perhaps £110 plus bonus and her maybe £100k so ok as far as a professional job goes but nothing extraordinary for lawyers/dentists etcIt'll only take a small BoE base rate increase to make their interest payment leap 50% come the end of their fixed rate periods.
It's certainly a risk, "experts" seem divided on when we will see the rate increase though.
You're right about it being the only show in town for a decent return, the rush to BTL from people cashing in their pensions will be interesting.
I think ISAs are still attractive though, for a long term investment, as you can build a large lump of cash for tax free income when rates are higher.
CoolHands said:
not many couples earn 200k so I hardly think your examples are typical.
I think more do than you think.Just some examples off the top of my head:
Mate works in Dubai as a pilot, not particularly clever but I know he gets about £10k per month after tax. Not a big airline etc.
Another mate is a gas man/boiler fitter and he prob takes home £5k per month after tax so nearly £100kpa.
Solicitors if you just go to uni and do what you're told are on over £100k at 30
Dentists the same with private practice income
Oil and gas contractors
IT contractors etc
Anyway, that wasn't my point.
My point was that all these well educated people just do not even consider the possibility that property could ever fall or that rates could go up significantly, I genuinely mean this. They think it is a one way street.
To be fair,right to buy, help to buy, help to buy ISA, low rates, im beginning to think they're right!!
trooperiziz said:
jonah35 said:
I think more do than you think.
http://www.ifs.org.uk/wheredoyoufitin/Earning over £100k puts you in the top 1% of the country, regardless of the people you know personally earning a combined income of £200k
However, if you do what is deemed 'well' in life eg work hard get good a levels go to a half decent uni and go after a good job then it is not extraordinary but you will have done well.
I look online at these payscales for financial directors, pilots, nurses, teachers etc and they all seem far lower than reality.
princeperch said:
The risk at present in taking out a large mortgage isn't the specific cost of finance, or the property value dropping significantly - its whether you can hang onto your job long enough to service the mortgage.
You think it won't happen to you (I did) but it can.
My missus and I are both solicitors. Well she isn't anymore because she got made redundant 2 years ago. Now that was an unpleasant thing to have to go through but I had actually planned for something like this happening along the way - so we didn't have an enormous mortgage, loads of crap on finance etc. we could pay the mortgage on my salary and all the other outgoings.
She's now changed career and is training to be a teacher because the legal market is on its arse, but we are still down 25k odd on the household income from 2 years ago. Many of our mates earned what we did (over 100k between us) but have mortgages of 350-400k plus.
Because we sold our flat at the height of the madness last year, we've got our mortgage down to 125k, and we'll be making some big overpayments to it in the next couple of years. I suspect I might inherit some money around about then or in the next 5 years which would pay off the rest. I can sleep at night- the house (worth about 450k ish) will be ours free and clear and we'll be in our mid 30s.
I genuinely don't know how people have these super sized mortgages. All it takes is for one of you to get canned and you'll probably be 5 or 6 pay cheques away from a very uncomfortable chat with your lender.
If you lost your job wouldn't you just sell up and downsize?You think it won't happen to you (I did) but it can.
My missus and I are both solicitors. Well she isn't anymore because she got made redundant 2 years ago. Now that was an unpleasant thing to have to go through but I had actually planned for something like this happening along the way - so we didn't have an enormous mortgage, loads of crap on finance etc. we could pay the mortgage on my salary and all the other outgoings.
She's now changed career and is training to be a teacher because the legal market is on its arse, but we are still down 25k odd on the household income from 2 years ago. Many of our mates earned what we did (over 100k between us) but have mortgages of 350-400k plus.
Because we sold our flat at the height of the madness last year, we've got our mortgage down to 125k, and we'll be making some big overpayments to it in the next couple of years. I suspect I might inherit some money around about then or in the next 5 years which would pay off the rest. I can sleep at night- the house (worth about 450k ish) will be ours free and clear and we'll be in our mid 30s.
I genuinely don't know how people have these super sized mortgages. All it takes is for one of you to get canned and you'll probably be 5 or 6 pay cheques away from a very uncomfortable chat with your lender.
Sheepshanks said:
princeperch said:
My missus and I are both solicitors. Well she isn't anymore because she got made redundant 2 years ago. Now that was an unpleasant thing to have to go through but I had actually planned for something like this happening along the way - so we didn't have an enormous mortgage, loads of crap on finance etc. we could pay the mortgage on my salary and all the other outgoings.
She's now changed career and is training to be a teacher because the legal market is on its arse, but we are still down 25k odd on the household income from 2 years ago.
That's interesting, because the OP specifically gave solicitor amongst examples of how loads of people are earning £100K+.She's now changed career and is training to be a teacher because the legal market is on its arse, but we are still down 25k odd on the household income from 2 years ago.
She presumably doesn't work in a magic circle firm in the centre of London where newly qualifiers can be on £80-100k.
Rosscow said:
jonah35 said:
I think more do than you think.
Just some examples off the top of my head:
Mate works in Dubai as a pilot, not particularly clever but I know he gets about £10k per month after tax. Not a big airline etc.
Another mate is a gas man/boiler fitter and he prob takes home £5k per month after tax so nearly £100kpa.
Solicitors if you just go to uni and do what you're told are on over £100k at 30
Dentists the same with private practice income
Oil and gas contractors
IT contractors etc
Anyway, that wasn't my point.
My point was that all these well educated people just do not even consider the possibility that property could ever fall or that rates could go up significantly, I genuinely mean this. They think it is a one way street.
To be fair,right to buy, help to buy, help to buy ISA, low rates, im beginning to think they're right!!
You know a gas man who is clearing £5k a month???? I think he's over-egging the pudding when talking to his mates Just some examples off the top of my head:
Mate works in Dubai as a pilot, not particularly clever but I know he gets about £10k per month after tax. Not a big airline etc.
Another mate is a gas man/boiler fitter and he prob takes home £5k per month after tax so nearly £100kpa.
Solicitors if you just go to uni and do what you're told are on over £100k at 30
Dentists the same with private practice income
Oil and gas contractors
IT contractors etc
Anyway, that wasn't my point.
My point was that all these well educated people just do not even consider the possibility that property could ever fall or that rates could go up significantly, I genuinely mean this. They think it is a one way street.
To be fair,right to buy, help to buy, help to buy ISA, low rates, im beginning to think they're right!!
Neil H said:
jonah35 said:
CoolHands said:
not many couples earn 200k so I hardly think your examples are typical.
I think more do than you think.Just some examples off the top of my head:
Mate works in Dubai as a pilot, not particularly clever but I know he gets about £10k per month after tax. Not a big airline etc.
Another mate is a gas man/boiler fitter and he prob takes home £5k per month after tax so nearly £100kpa.
Solicitors if you just go to uni and do what you're told are on over £100k at 30
Dentists the same with private practice income
Oil and gas contractors
IT contractors etc
Anyway, that wasn't my point.
My point was that all these well educated people just do not even consider the possibility that property could ever fall or that rates could go up significantly, I genuinely mean this. They think it is a one way street.
To be fair,right to buy, help to buy, help to buy ISA, low rates, im beginning to think they're right!!
Anyway, yes property is a good investment in the SE and I can understand people leveraging themselves up in the current market. We have a BTL and we're looking to get another one ASAP. With a good deposit you can borrow at 2% (bit higher for BTL), so you’re silly not to if you have the cash. Prices will not continue to rise as they have been, but they will trend upwards over the next few years. Even during the last 'crash' all that happened in my area is prices stayed the same for a few years. There are just too many people desperate to buy for prices to go down.
I don’t think interest rate risk is particularly high, it’s not as if they will jump several percent overnight. People have been saying rates will go up since 2010... However if Labour get in that £1.5m property could become much more difficult to sell if they go ahead with the mansion tax, this is probably the biggest uncertainty at that end of the market. Personally I would be waiting until after the election before committing to a large mortgage.
Look on pilot jobs network for pilot pay in Dubai. They get basic plus flight pay plus pay for working days off.
Solicitors, Google the pay for magic circle law firms.
Dentists can be on easy £100k plus with final salary pension
Oil and gas mates get £600 per day
IT mates anything between £300 and £900 per day
They could be lying but I don't think so, they're all brutally honest and don't care and would tell me to the penny if I could be bothered asking.
Getting off topic though, your statement that they will 'trend upwards' kind of implies what I mean,mine you state it's a fact they will rise.
They may well do and you may be right but it's the certainty that people believe that gets me
Condi said:
GG89 said:
Rosscow said:
jonah35 said:
I think more do than you think.
Just some examples off the top of my head:
Mate works in Dubai as a pilot, not particularly clever but I know he gets about £10k per month after tax. Not a big airline etc.
Another mate is a gas man/boiler fitter and he prob takes home £5k per month after tax so nearly £100kpa.
Solicitors if you just go to uni and do what you're told are on over £100k at 30
Dentists the same with private practice income
Oil and gas contractors
IT contractors etc
Anyway, that wasn't my point.
My point was that all these well educated people just do not even consider the possibility that property could ever fall or that rates could go up significantly, I genuinely mean this. They think it is a one way street.
To be fair,right to buy, help to buy, help to buy ISA, low rates, im beginning to think they're right!!
You know a gas man who is clearing £5k a month???? I think he's over-egging the pudding when talking to his mates Just some examples off the top of my head:
Mate works in Dubai as a pilot, not particularly clever but I know he gets about £10k per month after tax. Not a big airline etc.
Another mate is a gas man/boiler fitter and he prob takes home £5k per month after tax so nearly £100kpa.
Solicitors if you just go to uni and do what you're told are on over £100k at 30
Dentists the same with private practice income
Oil and gas contractors
IT contractors etc
Anyway, that wasn't my point.
My point was that all these well educated people just do not even consider the possibility that property could ever fall or that rates could go up significantly, I genuinely mean this. They think it is a one way street.
To be fair,right to buy, help to buy, help to buy ISA, low rates, im beginning to think they're right!!
Also oil and gas people dont earn £100k unless they're quite high up. About £50k for a specialist contractor, plus maybe a bit of extra cash for nights spent offshore.
It's getting more on earnings but the point of the thread is everyone seems to think property can only go up.
Hmm, not gone the way I'd have hoped.
If you work hard and do well you would work at the top of your profession.
The pay scales for plumbers and electricians etc are low because they want to declare low incomes.
It's not about whether you think £250kmpa is much money or not. Personally, I fully accept it is a lot more than most, BUT £10k per month could easily be spent. It would not allow flash new cars, £20k holidays 4 times pa, top private schools, Nannys etc.
Believe what you want about salarys but some lawyers earn over £100kpa, some dentists do, many contractors earn £600 per day, traders can earn a lot too. I'm not going to argue
My point being that all these people feel that house prices will only go up and, if this is the case why bother doing anything but take out a large mortgage. Eg a £500k house in London going up to £800k is £300k tax free. That is a lifetimes saving for most people. Even someone earning £100k could save what, £1-2kmper month? It would take an entire working life to save up that £300k.
If you work hard and do well you would work at the top of your profession.
The pay scales for plumbers and electricians etc are low because they want to declare low incomes.
It's not about whether you think £250kmpa is much money or not. Personally, I fully accept it is a lot more than most, BUT £10k per month could easily be spent. It would not allow flash new cars, £20k holidays 4 times pa, top private schools, Nannys etc.
Believe what you want about salarys but some lawyers earn over £100kpa, some dentists do, many contractors earn £600 per day, traders can earn a lot too. I'm not going to argue
My point being that all these people feel that house prices will only go up and, if this is the case why bother doing anything but take out a large mortgage. Eg a £500k house in London going up to £800k is £300k tax free. That is a lifetimes saving for most people. Even someone earning £100k could save what, £1-2kmper month? It would take an entire working life to save up that £300k.
vxsmithers said:
[quote=jonah35
I look online at these payscales for financial directors, pilots, nurses, teachers etc and they all seem far lower than reality.
My favourite quote. How can online salaries not be linked to reality? How much do you think a real life nurse earns???I look online at these payscales for financial directors, pilots, nurses, teachers etc and they all seem far lower than reality.
Or an FD for that matter. Genuinely interested
Not every online survey is correct!
pauldavies85 said:
Not much help but as a dentist qualified in the past decade, very few earn 100k let alone easy.
Maybe a older practice owner who hasn't got 500k or more of loans to pay off!
And dentists have never had final salary pensions, as they've never been employed by the
NHS. they are self employed contractors, associates such as myself are privately reimbursed by the practice, GP's work much in the same way.
You will know more than me.Maybe a older practice owner who hasn't got 500k or more of loans to pay off!
And dentists have never had final salary pensions, as they've never been employed by the
NHS. they are self employed contractors, associates such as myself are privately reimbursed by the practice, GP's work much in the same way.
However a quick Google shows many dentists do qualify for a DB pension.
Many dentists I have heard of have a couple of practices or something and get private and nhs income.
I have no idea how it works but I could bet a lot that some dentists have DB pensions.
TA14 said:
Condi said:
I love that phrase. Even someone earning 100k! Even someone earning as little as that eh?
What the f
k do the other 99.9% of the working population do?
You've still not got it have you? The demographics are wrong. Everyone in this country earns at least £100K p.a. and those people who appear to earn less do not really it's just that they declare less to the taxman:What the f
k do the other 99.9% of the working population do?jonah35 said:
The pay scales for plumbers and electricians etc are low because they want to declare low incomes. ... some lawyers earn over £100kpa, some dentists do, many contractors earn £600 per day, traders can earn a lot too.
now you can see why an extra £20 billion p.a. from stamping down on tax avoidance will be easy for all of the main parties. Is the OP an MP? He'd have a whale of a time in there 
vxsmithers said:
jonah35 said:
vxsmithers said:
[quote=jonah35
I look online at these payscales for financial directors, pilots, nurses, teachers etc and they all seem far lower than reality.
My favourite quote. How can online salaries not be linked to reality? How much do you think a real life nurse earns???I look online at these payscales for financial directors, pilots, nurses, teachers etc and they all seem far lower than reality.
Or an FD for that matter. Genuinely interested
Not every online survey is correct!
Your point about working hard and reaching the top of a profession is also true but there really arent that many positions to chase.
abundant city jobs and cheap money cant last forever. I hope you never feel the pain of redundancy or high interest rates because ive seen people who earn 100k begging for money 3 months after losing their jobs as they thought it would never happen to them.
Condi said:
jonah35 said:
Even someone earning £100k could save what, £1-2kmper month? It would take an entire working life to save up that £300k.
I love that phrase. Even someone earning 100k! Even someone earning as little as that eh? What the f
k do the other 99.9% of the working population do? Gassing Station | Homes, Gardens and DIY | Top of Page | What's New | My Stuff