New type of mortgage - how does this work then?
Discussion
Barclays Family springboard
Looking over this - it seems to mirror the endowment style of years ago to my uneducated mind.
How would parents for example, receive the 10% that they put in, back with interest on top?
Seems too good to be true so can only assume you get done via the rates charged?
Can anyone educate me on this?
Looking over this - it seems to mirror the endowment style of years ago to my uneducated mind.
How would parents for example, receive the 10% that they put in, back with interest on top?
Seems too good to be true so can only assume you get done via the rates charged?
Can anyone educate me on this?
Edited by Notshortnottall on Sunday 20th January 12:25
Doesnt look like an endowment mortgage at all. Looks to me like a mortgage version of the old fashioned loan guarantor that allows people to buy property with less of a deposit but less risk to the bank. After three years the stake in the property from the buyer will be higher reducing the risk and as such the bank release the guarantors money.
craigjm said:
Doesnt look like an endowment mortgage at all. Looks to me like a mortgage version of the old fashioned loan guarantor that allows people to buy property with less of a deposit but less risk to the bank. After three years the stake in the property from the buyer will be higher reducing the risk and as such the bank release the guarantors money.
My emphasis. Any financial product that relies on the continued growth of the property market is really quite dodgy. Sure, it'll probably work out fine, but what if there's another economic shock and house prices fall? How secure is the guarantor's home?davepoth said:
My emphasis. Any financial product that relies on the continued growth of the property market is really quite dodgy. Sure, it'll probably work out fine, but what if there's another economic shock and house prices fall? How secure is the guarantor's home?
its not based on continued growth though is it? lets say that you have a 100k mortgage with 5% deposit so have an outstanding balance of 95%. After 3 years that outstanding balance will be lower and therefore the stake the homeowner has in the mortgage will be higher than 5%. Yes I know that assumes that the value doesnt go down over the 3 years but it certainly isnt based on the value increasing. craigjm said:
Doesnt look like an endowment mortgage at all. Looks to me like a mortgage version of the old fashioned loan guarantor that allows people to buy property with less of a deposit but less risk to the bank. After three years the stake in the property from the buyer will be higher reducing the risk and as such the bank release the guarantors money.
Quite agree - what I'm sceptical about is that surely the value of your investment as a proportion of the overall (be it stock / shares / equity etc) can go up as well as down.The reason I was likening it to the endowment scenario of yesteryear, is that this appears to be just another "product" with which the banks will use (and possibly massively over-sell the benefits of) to generate profit. Accordingly I wouldn't want to fall foul of it like my parents did with their endowment policy which left them with a 30k+ shortfall at the end of their term.
I'm very wary of this type of thing. If it walks like a duck, talks like a duck etc.
it's all ok assuming the main borrowers are fairly honest and savvy. i foresee issues when the guarantor wants their charge removed to find that the stake not owned by the bank is being pursued by other interested parties as well.
after all, it'll take quite a while for say, 5% to become 10%, given the interest : principal balance being paid each month in the early stages being high.
after all, it'll take quite a while for say, 5% to become 10%, given the interest : principal balance being paid each month in the early stages being high.
Notshortnottall said:
Quite agree - what I'm sceptical about is that surely the value of your investment as a proportion of the overall (be it stock / shares / equity etc) can go up as well as down.
The reason I was likening it to the endowment scenario of yesteryear, is that this appears to be just another "product" with which the banks will use (and possibly massively over-sell the benefits of) to generate profit. Accordingly I wouldn't want to fall foul of it like my parents did with their endowment policy which left them with a 30k+ shortfall at the end of their term.
I'm very wary of this type of thing. If it walks like a duck, talks like a duck etc.
No, this is a product to help first time buyers in a period of uncertain house prices. The reason I was likening it to the endowment scenario of yesteryear, is that this appears to be just another "product" with which the banks will use (and possibly massively over-sell the benefits of) to generate profit. Accordingly I wouldn't want to fall foul of it like my parents did with their endowment policy which left them with a 30k+ shortfall at the end of their term.
I'm very wary of this type of thing. If it walks like a duck, talks like a duck etc.
Banks can't win, firstly they were criticised for too much lending and now for not enough. We're also seeing them get stick for being profit making entities, usually by people that are also moaning about the performance of their equity linked pension funds.
Consumers in this country are still on the breast of the over nannied state. Make your own decisions and don't blame others for your own choices.
CaptainSlow said:
No, this is a product to help first time buyers in a period of uncertain house prices.
Banks can't win, firstly they were criticised for too much lending and now for not enough. We're also seeing them get stick for being profit making entities, usually by people that are also moaning about the performance of their equity linked pension funds.
Consumers in this country are still on the breast of the over nannied state. Make your own decisions and don't blame others for your own choices.
Who's blaming anyone? All I'm saying is that there is a continued (and justified IMO) scepticism surrounding banks and the products they purvey. They fBanks can't win, firstly they were criticised for too much lending and now for not enough. We're also seeing them get stick for being profit making entities, usually by people that are also moaning about the performance of their equity linked pension funds.
Consumers in this country are still on the breast of the over nannied state. Make your own decisions and don't blame others for your own choices.
ked up big time and have a long way to go to secure the trust of Joe Public. If this is a lucid way in which to do so, then hats off to them. I've no issue with the banks being profit making entities as how else are they supposed to exist?What I and a lot of people take issue with is the underhand nature of their behaviour in the past. Which accordingly means I want to make sure I do my research on anything I may be interested in - in other words, being liable for my own decisions.
I'm not passing judgement on if this new product is good or bad - as I simply do not know. I'm just trying to find out some facts from people in the know.
eliot said:
Gross interest rate is 1.5% above boe base rate. Which isn't bad all things considered.
Ah, I couldn't find any interest rates when I looked. It seems it tracks the base rate for the 3 years you have to keep it in, pretty honest and simple to understand.Doesn't seem a bad way to get first time buyers in really.
craigjm said:
davepoth said:
My emphasis. Any financial product that relies on the continued growth of the property market is really quite dodgy. Sure, it'll probably work out fine, but what if there's another economic shock and house prices fall? How secure is the guarantor's home?
its not based on continued growth though is it? lets say that you have a 100k mortgage with 5% deposit so have an outstanding balance of 95%. After 3 years that outstanding balance will be lower and therefore the stake the homeowner has in the mortgage will be higher than 5%. Yes I know that assumes that the value doesnt go down over the 3 years but it certainly isnt based on the value increasing. This mortgage looks very simple to me. A buyer might normally require a 15% deposit, but they can't save that up. So they put in 5% and the bank lends 95%, BUT the helper puts 10% in this escrow type account to act as guarantor. So the bank is still lending 95%, but they're only at risk for 85%.
In 3 years time the buyer will have built some of their own equity in the property (house prices MAY have helped in the mean time too, but that's not required or part of this loan). So if the buyer then has paid down say 10% of the capital then they'd own 15%, the bank owns 85% and the guarantor is no longer needed so their money can be taken off risk.
Seems a good product to me.
The 'helpers' can help the buyer get on the property without having to actually give the money directly to the buyer and say good bye to it forever. Yes they can't access the money for three years but at least it will be coming back to them in three years time rather than being tied up in a property indefintely.
Seems a good compromise to me.
The 'helpers' can help the buyer get on the property without having to actually give the money directly to the buyer and say good bye to it forever. Yes they can't access the money for three years but at least it will be coming back to them in three years time rather than being tied up in a property indefintely.
Seems a good compromise to me.
Sarnie said:
Seems a good product to me.
The 'helpers' can help the buyer get on the property without having to actually give the money directly to the buyer and say good bye to it forever. Yes they can't access the money for three years but at least it will be coming back to them in three years time rather than being tied up in a property indefintely.
Seems a good compromise to me.
They get it back so long as the payments are up to date - but the key thing they need to remember is that the money IS at risk and would be called upon in the event the house was repossessed and the sale proceeds didn't cover the mortgage balance. The remainder of the mortgage balance would come out of the "helper"'s money before they get it back. Which is fine in most cases, and as you say, means that if things go to plan then they get the cash back sooner. (The alternative under the "old" method would be for them to put in the 10%, the buyer 5% so 85% mortgage. Then in 3 years the buyer has paid another 10% capital, so down to 75% mortgage. They could then re-mortgage back up to 85% freeing up the 10% to give back to the helper. Bit of a faff, but was do-able.)The 'helpers' can help the buyer get on the property without having to actually give the money directly to the buyer and say good bye to it forever. Yes they can't access the money for three years but at least it will be coming back to them in three years time rather than being tied up in a property indefintely.
Seems a good compromise to me.
Gassing Station | Finance | Top of Page | What's New | My Stuff