Interest only mortgages in a falling market?

Then.
Brendan said:
Your objections to interest-only seem to be on the grounds of over-borrowing? Howitzer, you seem to be confusing interest-only with 100% mortgages in the same sentence?
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Now.
Brendan said:
The problems were overborrowing and overspending. Interest only mortgages are only a problem, insofar as they facilitate overborrowing.
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Ok everyone can change their opinion as the facts change or become more apparant but what are we going to do now?

We're at a crossroads. People are looking for solutions. If we're now certain that IO mortages were a causal factor in overborrowing then they can't be part of the solution. People flying kites on the lines that 50 and 60 year mortgages are the solution are no better. There are 2 types of solutions on offer, those that help the consumer and those that help the banks.

(Disclosure: I do not own property or any banking shares. I am an Irish tax payer.)
 

I think the point still stands that if you have an investment mortgage and a residential mortgage, you pay down the residential mortgage first.

As for interest only contributing to wreckless lending, that would be a flaw in the approvals system. You should not be given a higher mortgage simply based on the fact you choose to pay it off over a longer period.

In terms of genuine solutions on offer, the only ones that make sense to me involve reducing your debts to arrive at a level of repayment your income can reasonably support over your working life.
 
Regulating at the product usage level is at the heart of US recent changes in consumer protection. New laws will make it possible to regulate for standard, simple credit products to counteract lenders ability to manipulate consumer behaviour into using too much credit. The underlying concept is a move towards regulating for safety standards - seems that a lot of dubious mortgage features and practices may be regulated out.

One of the problems with consumer protection is the belief in the "wise, rational and informed consumer" who acts to protect themselves against misselling. Using a mix of consumer education, producer disclosures and codes of conduct it's believed that rational consumers will act en-masse as a form of meta-regulation. US legislators have realised that this is not possible to achieve - the idea of safety standards in the use of credit and other products by consumers appears to be a strong move towards protecting consumers from themselves and from banks.

Kaplan
 
DerKaiser said:
I think the point still stands that if you have an investment mortgage and a residential mortgage, you pay down the residential mortgage first.
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Other than the security of clearing debt associated with one's family home, why would this be the case? Would it not be wise to clear down the most expensive loan as a priority, whichever loan that may be?
 
Indiansign said:
Other than the security of clearing debt associated with one's family home, why would this be the case? Would it not be wise to clear down the most expensive loan as a priority, whichever loan that may be?
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75% of the interest paid in any year on investment mortgages as allowed as a cost to offset against rental revenue in calculating taxable profit, so the interest cost of borrowing for an investment property is effectively reduced.

Things might not be so clear cut at the moment (mainly due to current low interest rates) for the following reasons:
The interest rate on investment mortgages might be higher
Mortgage interest relief on residential might not be at its ceiling

Also, if the % of interest allowed as an offset to rent on investment mortgages continues to be reduced, this will change.

And finally it obviously depends on the marginal rate of tax you pay
 
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I've recently asked my mortgage company to switch me from interest-only back to capital plus interest.
Will this effect my tracker status?

Thanks
 
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