Rent's not dead money, this is

ntlbell

Saw this on the pin and posted it here for people that don't read it.

600e a month over 35 years for a house you don't own or can't stay in

the real dead money

http://www.tribune.ie/business/article/2009/jul/26/soldinto-life-long-debt/

gurramok

It just shows the deadly combination of a 100% mortgage on 2 people's buying power.

If one partner loses their job, they are screwed. Throw in a housing crash and they are screwed for life.

Bulls here should understand the danger of the above. Basing total borrowings on 2 peoples buying power for 35yrs is crazy talk. Its real people suffering as a result.

Iago

gurramok wrote: »

Its real people who over-extended themselves suffering as a result.

FYP.

To be honest while it's hard not to feel sympathy for people in these situations a large part of me thinks so what? If you aren't willing to be financially responsible then these are the consequences that you could face.

Could anyone have predicted just how bad it's going to get? Maybe not, but people have spent the last 15 years throwing money around like confetti never once considering who was going to pay the piper when the music stopped.

For every action we take there is a consequence to follow, having the attitude that "well I didn't know this was going to happen, so why should I have to pay?" just doesn't cut it for me (that's towards people who have that attitude as opposed to everybody) this recession will be good for the country in the long-term as it should teach good fiscal management to our generation, who never really had to worry about bad times, as well as the younger generation who are growing up in bad times.

ntlbell

Iago wrote: »

FYP.

To be honest while it's hard not to feel sympathy for people in these situations a large part of me thinks so what? If you aren't willing to be financially responsible then these are the consequences that you could face.

Could anyone have predicted just how bad it's going to get? Maybe not, but people have spent the last 15 years throwing money around like confetti never once considering who was going to pay the piper when the music stopped.

For every action we take there is a consequence to follow, having the attitude that "well I didn't know this was going to happen, so why should I have to pay?" just doesn't cut it for me (that's towards people who have that attitude as opposed to everybody) this recession will be good for the country in the long-term as it should teach good fiscal management to our generation, who never really had to worry about bad times, as well as the younger generation who are growing up in bad times.

the other worrying part is they closed in feb 07

the dogs in the streets were talking about serious problems from the last quarter of 06

if they had have picked up a news paper during the 6 months previously there was massive signs.

I do feel somewhat sorry for the couple as a human being you have to have some empathy for these people but the stupidity of people during the last few years just knew no bounds.

D3PO

Iago wrote: »

FYP.

To be honest while it's hard not to feel sympathy for people in these situations a large part of me thinks so what? If you aren't willing to be financially responsible then these are the consequences that you could face.

.

whilst i fully agree you cant help feel that the banks should feel some of the pain in these situations.

This scenario has only occured due to what cant only be described as professional misconduct by the bank. Any bank lending 100% based off of of the combined earning power of a couple should face some financial loss as a result of this kind of scenario.

in this story sounds like the bank get away scot free making money on the deal despite their flagrant disregard for any kind of proper loan underwriting.

ntlbell

D3PO wrote: »

whilst i fully agree you cant help feel that the banks should feel some of the pain in these situations.

This scenario has only occured due to what cant only be described as professional misconduct by the bank. Any bank lending 100% based off of of the combined earning power of a couple should face some financial loss as a result of this kind of scenario.

in this story sounds like the bank get away scot free making money on the deal despite their flagrant disregard for any kind of proper loan underwriting.

Where do you draw the line on a business that's designed to make money doing what it does and irresponsible borrowers

should banks take a hit for every time an "investment" goes tits up?

banks don't come to you with offers of hundreds of thousands of euro

you go to them.

I'm not saying the bank is totally in the clear here but where do we draw the line?

Stky10

ntlbell wrote: »

the other worrying part is they closed in feb 07

the dogs in the streets were talking about serious problems from the last quarter of 06

if they had have picked up a news paper during the 6 months previously there was massive signs.

I do feel somewhat sorry for the couple as a human being you have to have some empathy for these people but the stupidity of people during the last few years just knew no bounds.

You'd really hope that people about to make a lifelong financial decision would take their time and consider all the alternatives and possibilities. Unfortunately they didn't. They jumped in with both feet because their friends and family were doing so as well, and it became the acceptable thing to do. The entire aim was to get the biggest mortgage you possibly could. They became "property experts" because the few investments they did make became short term successes.

Let it be a lesson for the generations coming after them. If you keep investing money in something you don't have a clue of, sooner or later you're going to get creamed. Its a harsh lesson to learn, but its got to be learnt.

D3PO

ntlbell wrote: »

Where do you draw the line on a business that's designed to make money doing what it does and irresponsible borrowers

should banks take a hit for every time an "investment" goes tits up?

banks don't come to you with offers of hundreds of thousands of euro

you go to them.

I'm not saying the bank is totally in the clear here but where do we draw the line?

whats the point in making a mortgage application ? I mean if all the onus is put on the borrower to have the cop on and financial acumen to understand weather they can make the repayments or not. why have loan advisors checking the applications.

shouldnt we just be able to ring the bank and demand x amout of a loan over x number of years becasue we feel we can pay it back in that case

Im not saying the borrowers are off the hook this kind of things is stupid beyond belief, but there are lots of people out there that havent got a clue about what is affordable and whats not, that wouldnt even think about rising interest rates, etc etc Im just saying the bank are the professionals who should have the cop on to know if an application is viable in a stress tested environment.

so yes i do think they should take some hit for being silly enough to allow drawdowns on these type of mortgages

oceanclub

The problem is, in the last 8 years, we've seen people buying property worth 10 times their salary and putting less thought into it then they would buying a dress or a laptop. Any moron - and yes, many were absolute morons (one read of some AskAboutMoney threads will confirm this) - could get a huge amount of money and spend it on something idiotic, simply because everyone else was doing it. Blame all round.

NinjaTruncs

You also have to consider the other side where Banks/Mortgage Lenders and Estate agents were comminucating with each other about how much a person was approved for, thus allowing the EA to invent counter bids which would push the buyer to their limit.

Whatever about the argument that the buyer should have done more market research, the banks are getting away scot free, while the lay person has to repay every single penny borrowed. don't forget the Banks also insisted on getting valuations for a property before approving a mortgage, so they should be held liable somewhat also.

Also i would be a fool to say that prices weren't over inflated, you that to think that if the world financial sector hadn't gone tits up in the last 18 months would house prices have dropped so much, no one for sure can answer that question, but for every question that is asked about the current mess nearly everyone finds themselves in the banks have played some part in it.

ntlbell

D3PO wrote: »

whats the point in making a mortgage application ? I mean if all the onus is put on the borrower to have the cop on and financial acumen to understand weather they can make the repayments or not. why have loan advisors checking the applications.

We don't know anything about the application in this case, we don't know how much the couple earned, we don't know what they "claimed" to have earned etc.

but in general working out affordablity isn't that difficult we're talking 6th class math's and a bit of self investigation a dash of research, it's really not as difficult as one makes out.

D3PO wrote: »

shouldnt we just be able to ring the bank and demand x amout of a loan over x number of years becasue we feel we can pay it back in that case

i thought that's basically what happened, they ask for proof that you can, you show them and bobs your uncle?

D3PO wrote: »

Im not saying the borrowers are off the hook this kind of things is stupid beyond belief, but there are lots of people out there that havent got a clue about what is affordable and whats not, that wouldnt even think about rising interest rates, etc etc Im just saying the bank are the professionals who should have the cop on to know if an application is viable in a stress tested environment.

The banks are professional's correct but there's only so much they can do.

this wasn't a case of _one_ bank getting it wrong or _one_ person in a bank getting it wrong, this was nearly ever bank in western society.

a bank has to work out if they can get a return on the loan and make money that's there objective, it's not to help you, you need to help you.

a loan may be "affordable" as in you can make the repayments if this is the case a bank is happy, how easy it is to make them and what lifestyle choices you have to make to make that happen is not the banks concern

people are under this delusional mentallity that banks are there to "help" "advise" etc the banks just want to know one thing how much money can they make, they don't care about anything else and in a lot of cases they shouldn't have to have some form of cauntious

D3PO wrote: »

so yes i do think they should take some hit for being silly enough to allow drawdowns on these type of mortgages

when banks take a hit we take a hit the bank will never take the "hit"

when loans go bad _everyone_ else pays, e.g. interest hikes etc

the banks like the casion never lose.

snubbleste

Where are all those posters who screeched:
• If you don't buy now you will be priced out forever • Prices can only go up due to immigration etc. •Rent is dead money • Don't pay someone else's mortgage

dan_d

When we went for a mortgage over a year ago, the broker was thrilled to see us. We had a deposit (not that big), and both had good jobs. Her first question was "how much do you want?". Without looking at any of our financial information. Personally, I was completely horrified. Not nearly as horrified as she was when I told her how much we wanted and under what conditions. Not nearly as much as she hoped - it had obviously been a very, very long time since someone came in and said they didn't want to bankrupt themselves in the future by buying a house, and didn't want the absolute maximum amount possible.
I just thought that first question summed up the entire attitude of the banking and property industries for the last 10 years or so. If I, as a first time buyer (and other normal people) could see it, they why couldn't they? I'm not nearly as badly off as some people, but both of us work in the construction industry, and I'm worried - and I don't even have a problem yet. I can only imagine how people who are jobless and have an enormous mortgage feel. It's horrible. There's a level of responsibility on people themselves, but without a doubt, someone in power should have stepped in when things started going really mad and called a halt.

Kipperhell

gurramok wrote: »

It just shows the deadly combination of a 100% mortgage on 2 people's buying power.

If one partner loses their job, they are screwed. Throw in a housing crash and they are screwed for life.

Well then you read a different story as a key factor in the situation provided was the couple BROKE UP. We don't know if their combined income would have still serviced the mortgage! They effectively doubled their accommodation costs on less income.
It is a typically bias report emphasising a situation without any knowledge of how many such situations are actually happening. It is typical because it is going with the herd and supporting the fears no different from the stories that warned of the dangers of not buying.
People should not pat themselves on the back because little more than an opinion piece supports what they were saying.

L_gaucho

ntlbell wrote: »

banks don't come to you with offers of hundreds of thousands of euro

you go to them.

I'm not saying the bank is totally in the clear here but where do we draw the line?

Actually in the height of the boom, they did come to me, many times.. Letters thought the post, pre-approved loans. It made me furious, thankfully I wasn't sucked in.
I agree with another poster , it seem utterly wrong that the bank gets away scot free in the above example. Ultimately I suppose that defaulted mortgage could become a bad loan, which the state (ie our tax) buys back off the bank. (well maybe not in this case, as the guy is going to pay it, but you see what I'm getting at).

ntlbell

Kipperhell wrote: »

Well then you read a different story as a key factor in the situation provided was the couple BROKE UP. We don't know if their combined income would have still serviced the mortgage! They effectively doubled their accommodation costs on less income.
It is a typically bias report emphasising a situation without any knowledge of how many such situations are actually happening. It is typical because it is going with the herd and supporting the fears no different from the stories that warned of the dangers of not buying.
People should not pat themselves on the back because little more than an opinion piece supports what they were saying.

was the breakup not due to the financial strain of trying to service an 1800e a month mortgage on one wage?

if it could have been serviced on his alone surely he wouldn't have opted for selling the house and ouing the bank over 130k? which brings us back to guramok's point of stress testing against two incomes over 35yrs with no deposit not mentioning buying into a falling market at the time?

ntlbell

L_gaucho wrote: »

Actually in the height of the boom, they did come to me, many times.. Letters thought the post, pre-approved loans. It made me furious, thankfully I wasn't sucked in.
I agree with another poster , it seem utterly wrong that the bank gets away scot free in the above example. Ultimately I suppose that defaulted mortgage could become a bad loan, which the state (ie our tax) buys back off the bank. (well maybe not in this case, as the guy is going to pay it, but you see what I'm getting at).

did you all ready have business with them?

I've never got anything from a bank i didn't all ready have a credit history with or have i ever heard of it.

D3PO

ntlbell wrote: »

when banks take a hit we take a hit the bank will never take the "hit"

when loans go bad _everyone_ else pays, e.g. interest hikes etc

the banks like the casion never lose.

I know this is the fact, my point is I dont think this should be the case, if the back never loses there is no deterent to prevent a similar issue happening in the future.

Anyway the bank can lose, if you draw paralleles between this and NAMA its not consistent so the joe soap gets hammered whilst the developers get away with it.

NAMA will provide capital for the asset at a reduced rate will the developer have to pay the balance monthly over a 35 year period. Will he heck

Fine hammer the irresponsible loanee i have no problem with it, but I want the irresponsible developers to be hit with the same terms as the average joe soap.

wont happen though. FF and all their buddies get away scot free at mine and your expense

ntlbell

D3PO wrote: »

I know this is the fact, my point is I dont think this should be the case, if the back never loses there is no deterent to prevent a similar issue happening in the future.

Anyway the bank can lose, if you draw paralleles between this and NAMA its not consistent so the joe soap gets hammered whilst the developers get away with it.

NAMA will provide capital for the asset at a reduced rate will the developer have to pay the balance monthly over a 35 year period. Will he heck

Fine hammer the irresponsible loanee i have no problem with it, but I want the irresponsible developers to be hit with the same terms as the average joe soap.

wont happen though. FF and all their buddies get away scot free at mine and your expense

I wasn't really referring to NAMA.

It's a bit like say car insurance.

When claims go up, the insurance company's don't lose money, the other people who didn't claim do by paying more.

when bank loans go bad you pay more to get loans. so the people getting loans pay more because of the people that didn't keep up their payments

the bank never loses.

gurramok

Kipperhell wrote: »

Well then you read a different story as a key factor in the situation provided was the couple BROKE UP. We don't know if their combined income would have still serviced the mortgage! They effectively doubled their accommodation costs on less income.
It is a typically bias report emphasising a situation without any knowledge of how many such situations are actually happening. It is typical because it is going with the herd and supporting the fears no different from the stories that warned of the dangers of not buying.
People should not pat themselves on the back because little more than an opinion piece supports what they were saying.

Re-read..

The real cost of the practice was driven home by a report in The Drogheda Independent last week. Kevin and his girlfriend, both working at Lourdes Hospital, bought a three-bedroom house in a village close to Drogheda in February 2007 for €405,000 having secured a 100% mortgage with repayments totalling an €1,800 monthly. However, when his girlfriend lost her job, pressure mounted and the couple split up. Attempts to rent out their home failed and there were no takers for the property at the original price

One partner loses job on a 100% mortgage based on 2 incomes. One can only imagine the stress that couple went though trying to service it on one wage. Then they broke up.

inforfun

Kipperhell wrote: »

Well then you read a different story as a key factor in the situation provided was the couple BROKE UP.

I read this:

However, when his girlfriend lost her job, pressure mounted and the couple split up. Attempts to rent out their home failed and there were no takers for the property at the original price.

It is mostly thanks to people like this couple, who thought they would stay together forever, work both forever and took a mortgage as high as possible that i am now earning €150 a month less due to income levies.
And they want me to feel sorry for them? Nah, not going to happen.

subway

ntlbell wrote: »

600e a month over 35 years

not that it makes a world of difference, but the article says 300e a month over 35 years.

ntlbell

subway wrote: »

not that it makes a world of difference, but the article says 300e a month over 35 years.

Your right it doesn't make a world of difference,

But if you read the article I'm pretty sure it said 300e each, given them a total of 600e

daveyboy_1ie

dan_d wrote: »

When we went for a mortgage over a year ago, the broker was thrilled to see us. We had a deposit (not that big), and both had good jobs. Her first question was "how much do you want?". Without looking at any of our financial information. Personally, I was completely horrified. Not nearly as horrified as she was when I told her how much we wanted and under what conditions. Not nearly as much as she hoped - it had obviously been a very, very long time since someone came in and said they didn't want to bankrupt themselves in the future by buying a house, and didn't want the absolute maximum amount possible.
I just thought that first question summed up the entire attitude of the banking and property industries for the last 10 years or so. If I, as a first time buyer (and other normal people) could see it, they why couldn't they? I'm not nearly as badly off as some people, but both of us work in the construction industry, and I'm worried - and I don't even have a problem yet. I can only imagine how people who are jobless and have an enormous mortgage feel. It's horrible. There's a level of responsibility on people themselves, but without a doubt, someone in power should have stepped in when things started going really mad and called a halt.

In the same situation as yourself Dan, first time buyer and went to two places (bank & broker) who both were asking me how much I wanted before loooking at financial statements, I was so horrified and this was AFTER the crash and property values were falling. People are entitled to want to find a house and yes they should be responsible about things but we were all peddled the lie from day one that property does not lose value.

When we told the bank & broker (we chose bank in end) we were looking at an apartment and were actually only looking for 80% of the value of said apartment due to savings and we were then asked if we wanted more to 'furnish' the apartment, as much as 15K???. I actually snapped at the bank when the lady asked me for the third time asking her not to ask me again which to her credit she did not.

So yes we as a nation we must take responsibility for purchasing premises we clearly could not afford, but people are entiled to start families and settle down and if that is the going rate for premieses that is not their fault. Blame a government who encouraged banks to lend and let the construction industry boom and blame banks for giving away easy money. after all prices are determined by supply & demand, if we have 'free' money (no such thing) then we will spend it.

Four years ago I found out 30% of irish people work directly or indirectly for the construction industry and thats why I knew we were in trouble as a nation, before the sh!t hit the fan, no economy is sustainable in that environment but what did our government do? nothing but encourage the continued bad practices so we are all to blame, and if you have to pay more in taxes because of the mess we are in don't be so quick to point fingers at 'reckless' couples and families, we all had a part in this fiasco.

subway

your right, i missed that bit.
175,000 x 35years @2.23% = 600 per month

not a bad rate

Kipperhell

gurramok wrote: »

Re-read..

Actually I suggest you re-read it along with others here. The end result was due to them breaking up the article has said they broke up due to financial pressure but that does not eliminate that event from causes of their current situation. If you can blame them for getting the mortgage along with the banks giving it you can certainly say that breaking up made matters worse and is a factor of their situation

gurramok wrote: »

One partner loses job on a 100% mortgage based on 2 incomes. One can only imagine the stress that couple went though trying to service it on one wage. Then they broke up.

So what, any idea the financial strain and pressure from having a child. Do you blame the child or do you think maybe the relationship should be strong enough? No right to be high and mighty about what you saw was going to happen to the property market as so many tend to be here.

L_gaucho

ntlbell wrote: »

did you all ready have business with them?

I've never got anything from a bank i didn't all ready have a credit history with or have i ever heard of it.

I did , a current account, savings account. Point is , I felt they were offering me money I hadn't asked for, encouraging me to go into debt.
My credit card limit automatically increased without request to €5000:eek: even though the max I ever spent in one month was 1500€..

niallo27

ntlbell you should really remove the picture of Michael own with united legend over it, you might as well have a picture of gary glitter with music icon written over it, listen we all know they were foolish but why get off on seeing them suffer now.

Lets talk about the present though, who is better off the people who bought the house who are paying 800 a month mortgage now(based on 35 year mortgage) or the people renting next door for who knows 700, 750.
There must be some argument for dead money there

who_ru

ntlbell wrote: »

when banks take a hit we take a hit the bank will never take the "hit"

when loans go bad _everyone_ else pays, e.g. interest hikes etc

the banks like the casino never lose.

so now banks privatise profit but nationalise debt. that is effectively what we have in this country. which begs the question why have private banks at all if, as they are going to do through NAMA, they pass on all of their bad debt to the taxpayer, who in turn is obliged to pay higher interest on his/her loan to an institution that has just passed on generational toxic debt to the same person???? it's totally crazy.

we are told by Lenihan that these banks will pay a high price for this debt absorbtion, and that many of the assets passed to NAMA may yield a return to the taxpayer. all speculation.

Salvelinus

niallo27 wrote: »

ntlbell you should really remove the picture of Michael own with united legend over it, you might as well have a picture of gary glitter with music icon written over it, listen we all know they were foolish but why get off on seeing them suffer now.

Lets talk about the present though, who is better off the people who bought the house who are paying 800 a month mortgage now(based on 35 year mortgage) or the people renting next door for who knows 700, 750.
There must be some argument for dead money there

If the people renting were doing it on a short term basis to get a deposit together they are better off. If they buy in the next couple years they won't see the drop that people who bought in the last 5 years did, who also might never see the value rise to the peak.

niallo27

Salvelinus wrote: »

If the people renting were doing it on a short term basis to get a deposit together they are better off. If they buy in the next couple years they won't see the drop that people who bought in the last 5 years did, who also might never see the value rise to the peak.

We have saved 24 grand, we have being living together for 6 years going out 8, looking to buy a house 3 and a half times our salary which has dropped over a 100 grand since last year, but when i come on here i feel like a fool for even dreaming of buying, i think the big drop has come, i know they will continue to drop but not a the huge rate of the past year, anyone not think im mad for buying