I have several investment property interest only loans and I just phoned my NIB bank manager and was told that all of them have a 25 year interest only period. From the conversation I had, this seemed to be the norm??
Again - to reiterate - my own financial situiation does not on any way negate the general argument that was had about property being bought as a long term investm.ent
If you fund your property investment prudently and do appropriate stress testing\scenario analysis etc, I'm sure that is the case
You, on the other hand, borrowed interest-only on overpriced assets which are depreciating by the minute while the costs of funding are increasing and rental yields are falling. A perfect storm if you will.
This was not prudent but reckless.
It all comes down to your appetite for risk I suppose...good luck with your negotiations with your Bank Manager
One assumption i did make is that i woudl continue being able to make interest-only paymenst.
Only time will tell - but i reckon/hope that should be fine.
If that is not allowed then yes...I may be in trouble.
if your mortgage agreements are to hand, would you mind digging them out and seeing what they say about the reversion to a capital and interest schedule from interest-only? When is this scheduled to happen and is there any mention of negotiating a special deal as you appear to have placed a lot of hope in?
I would be genuinely interested to know and it will help people trying to advise you too.
Also, where do you get your number of 85-90% LTV - is that based on current asking prices in the area(s) for your properties?
Mortageg papers are not to hand at all.
One property is due to go to repayment next march.
2 mpre are to go to repayment in 2.5 years time.
The figure of 85%-90% LTV is a figure I have come up with going by what I know of teh current dublin market.
It's only an estimate obviously.
are you finding that your rents are falling on these properties or are they holding up? Do you have any empty periods between lets?
what would the effect be if another 100bps was put onto your mortgage rates? what about another 200bps? what rate are you paying now?
is your estimate of LTV based on asking prices or achievable selling prices?
what other sources of income have you got?
I know this may all appear a bit nosy but unless people know the facts, they are hardly in a position to advise you
The whole crux of that argument basically was, generally speaking,in nominal terms,does property rise in teh long term?
The answer is a resounding yes.
It always has and always will.
Am I wrong in saying that generally speaking, in nominal terms, everything rises?
Something increasing by 5% on average in an environment with 6% inflation is losing its value in real terms. In 30 years, a million euro might be the average industrial wage. Woo hoo, gold houses for all!
You are correct in that in nominal terms pretty much everything rises.
Teh difference is when teh money is borrowed (as it is for most propeties) then inflation doesn't count as much.
E.g. Lets say I took out a 100% mortgage for a property woth 1 million.
Lets say teh property rose 5% in teh year.
Lets also say that inflation was 5%.
Therefore - in real terms the value of the property remains flat.
Lets say you sell the property atthis stage. (Lets forget about tax, atamp duty etc.)
You get 1,050,000 from a buyer.
You pay teh bank bank their 1,000,000.
You still have 50k in your pocket - which due to inflation is only worth about 48k in todays money.
i.e. Bottom line - when buying property with borrowed money,it is nominal values that matter - Not real values.
OK, but that does not take into account the cost of borrowing the 1,000,000. You have dismissed this
Can we safely say then that this theory has more risk then originally thought?
http://www.askaboutmoney.com/showthread.php?t=59038
Shanegl, the OP has come here for advice. No need for gloating.
Shanegl, the OP has come here for advice. No need for gloating.
The properties are always renetd as they are all situated in Dublin 2.
If you are in it for the long haul then price dips mean little.
i.e. It's all cyclical.
That's teh nature of teh beast.
E.g. Lets say I took out a 100% mortgage for a property worth 1 million.
Lets say the property rose 5% in the year.
Lets also say that inflation was 5%.
You are correct in that in nominal terms pretty much everything rises.
Teh difference is when teh money is borrowed (as it is for most propeties) then inflation doesn't count as much.
E.g. Lets say I took out a 100% mortgage for a property woth 1 million.
Lets say teh property rose 5% in teh year.
Lets also say that inflation was 5%.
Therefore - in real terms the value of the property remains flat.
Lets say you sell the property atthis stage. (Lets forget about tax, atamp duty etc.)
You get 1,050,000 from a buyer.
You pay teh bank bank their 1,000,000.
You still have 50k in your pocket - which due to inflation is only worth about 48k in todays money.
i.e. Bottom line - when buying property with borrowed money,it is nominal values that matter - Not real values.