An Infinity Mortgage?

Here in Spain the concept of a mortgage period of 20 or 25 years is something new. The general feeling by the banks is that want their money back more quickly than banks in countries in which they are accustomed to longer periods. The borrowers are also accustomed to the idea that the guiding principle is to pay off the mortgage as quickly as possible.

First Timers

The problem for all those people starting out on the property ladder is the amount of money that has to go out each month to put the roof over one's head. At least this is true for the early years, but not necessarily as the4 years go by, since the advent of inflation. Cases that we studied showed e.g a couple, whose monthly income was £400, having to pay £150 per month in mortgage payment. Although the interest fluctuations since then have meant varying payments, as a percentage of their current monthly income of £2,000 per month, the mortgage does not now seem so horrendous.

Varying interest rates

The mistake made by many lenders in boom times is to conveniently forget the possible variation in interest rates during the early years. While a doubling of the payment in the case mentioned above would not be a disaster now, had it occurred during the early years it could have lead to foreclosure, and them losing their dream home. In our study we found various examples of interest rates going from 3% to 16% in very short periods of time. Maybe the lenders should have insisted on doing the relevant calculations, assuming a high rate, to check if the borrowers could afford the payment during the first few years in the event of this occurring. Asking the potential borrower would not necessarily have produced a sensible result, as many that we spoke to said, "It's OK, we'll manage somehow." Unfortunately, for thousands of borrowers, this turned out not to be the case. One case showed an initial payment of £269 per month, on an income of £800 per month, which ballooned to £690 per month on an income of £900 per month, with devastating consequences.

How long a repayment period ?

Many years ago, a borrower, my father, tried to convince lenders of the idea of a much longer repayment period. In fact so long that he gave the idea the name, infinity mortgage. The idea was to pay the interest, at whatever the actual rate would be, but not to repay the capital. Naturally in the staid world of banking this fell on deaf ears, and several so called bankers laughed at the idea. Eventually he was able to persuade an institution to go ahead with his proposal, and he purchased a house. He is now nearing retirement and still has not paid off the mortgage, and continues to pay the interest. He is happy with the idea that, when we inherit the house, we will have to pay off the capital, and so are we.

The current position ?

The house is now valued at £280,000. My father's income is £5,300 per month. And the mortgage payment ? The last time we spoke of the matter it was the mighty sum of £7.92 per month. The capital to be repaid ? The not insignificant amount of £1,900.

Whether your local currency is pounds sterling, euros or dollars, the principle is still the same. While the motivation at the time, as a penniless masters student, was to keep every payment down to a minimum, the capital repayment would not exactly have broken the bank once a few years had gone by. When he reached the point of what would have been the normal repayment period, and received advice from all and sundry that perhaps he might slip into the bank with a bit of loose change, and pay off the capital, he declined. He rather liked the idea of his infinity mortgage being just that, or at least being with him until his death. In that he will succeed, you know what some of these old folk are like.

© Jenny Barclay

About The Author

Jenny Barclay majored in math and economics, and obtained a masters in viability of banking institutions. She is currently studying Spanish in Andalucia, Spain.

This article may be reproduced on websites subject to credit being given to the author, and a link to her website.

http://www.regent-estates-group.com

---

Desperately Seeking Good Leads, The Adventure Driven Loan Officer

As loan officers, the word "lead" is by far one... Read More

Borrow on a Budget: Getting the Cheapest Home Improvement Loans

Getting the cheapest home improvement loans isn't always easy. It... Read More

Home Equity Loan Tax Deductions

Interest - is an amount you pay for the use... Read More

Refinance Mortgage Rate and Mortgage Rates

Refinance mortgage rate is the best rate available to qualified... Read More

What is a Remortgage?

A remortgage is changing your mortgage without moving your home.... Read More

Home Mortgage Quotes Online - How Do They Compare To a Quote From a Broker in The Real World?

Online home mortgage quotes are very similar to the quotes... Read More

Home Equity Loan Risks

Home equity loans give individuals a tool to extend their... Read More

Buying a House or a Home?

A house is just that, a house, until someone lives... Read More

Residential Mortgages ? a Step Ahead on the Property Ladder

Doesn't Residential mortgage give the impression that they are a... Read More

Mortgage Clarksville - Find the Best Deal

Searching for a mortgage can sometimes be a hassle. Where... Read More

PayDay Loan Online - Quick Cash Advance Loans Online Are Very Convenient

Getting a quick cash loan, cash advance or payday loan... Read More

Homeowner Loans - Whats Available?

It isn't difficult to get a homeowner loan if you... Read More

Bankers Dont Want You to Know That You Pay for Your No Cost Home Loan Forever

With mortgage rates continuing on a downward trend, the competition... Read More

Home Equity Lines of Credit Vs. Other Conventional Loans

When it comes to getting money, you have two basic... Read More

What is a Repayment Mortgage?

A repayment mortgage is the type of mortgage that most... Read More

Mortgage ? What, Why, When, and How?

What is a mortgage? Here's what The New Merriam ?... Read More

What is a Self-Employed Mortgage?

Self-employed mortgages, as the term implies are mortgages designed for... Read More

No Deposit Home Loans

A few years ago, many of us would have had... Read More

Bad Credit Home Loans - Dealing With Bad Credit Mortgage Companies Online

Dealing with mortgage companies online can enable you to get... Read More

How Much Interest is Your Home Equity Earning?

How much interest are you earning on your home equity?... Read More

What is a Flexible Mortgage?

'Flexible mortgage' is a term that's used a lot, but... Read More

Securing the Best International Mortgage for Your Home in Spain

Are you one of a growing number of people planning... Read More

Is an ARM Right For You?

Let's start by taking a look at 7 key elements... Read More

Some Mortgage Loans are Available with Absolutely no Money Needed From You

Today, FHA will loan up to 97 percent of the... Read More

Commercially Viable Commercial Mortgages

Commercial mortgages are similar to residential mortgages. Usually taken by... Read More

A Mortgage Loan For Homes

Everybody wants to own a house because it is something... Read More

The Zero Down 80/20 Mortgage

This is an excellent loan for those that are lacking... Read More

HELOCs and Second Mortgages: Which One Should I Choose?

Whether you need some extra cash to pay off some... Read More

Home Equity Line of Credit - Finding The Best Home Equity Lender

Borrowing against the value of your home using a revolving... Read More

Bad Credit? With Poor Credit You Can Still Refinance Or Get A Home Equity Line Of Credit

Have you decided to refinance your home or apply for... Read More

Kings Bay Saint Marys & Kingsland Georgia Real Estate - Getting a Home Loan with Damaged Credit

So, you have made the decision that you would like... Read More

Home Equity Loan ? Not Just For Home Repairs, And Tax Deductible, Too!

Thanks to the combination of low interest rates and skyrocketing... Read More

Bad Credit Loans Authenticate What Is Positive About Bad Credit

This might not be the front page news but it... Read More