Are we in a bubble?

[Retired Climber]

2 minutes ago, doobin said:

I owe the bank 100k plus another 200k for the mortgage. Any advice?😬

Not really. Level of debt doesn't really tell us anything. If you owe 200 grand on a 5 million pound house you are in a very different position to someone who owes 200 grand on a half million pound house. 

It would be rather narcissistic of me to think i know how to run your finances better than you do. 

[skyhuck]

25 minutes ago, doobin said:

I owe the bank 100k plus another 200k for the mortgage. Any advice?😬

Someone once told me, "if your house is worth £100K and you owe the bank £50K, the bank has you by the balls, but if your house is worth £100K and you owe the bank £150K, you have the bank by the balls" 😬

[Retired Climber]

2 minutes ago, skyhuck said:

Someone once told me, "if your house is worth £100K and you owe the bank £50K, the bank has you by the balls, but if your house is worth £100K and you owe the bank £150K, you have the bank by the balls" 😬

I bet the source of that little gem was skint. 

[skyhuck]

4 minutes ago, Retired Climber said:

I bet the source of that little gem was skint. 

Nope. 

[Retired Climber]

1 minute ago, skyhuck said:

Nope. 

He probably is now. Anyway, we are going to be argueing semantics if we continue with this. There is a certain perverse logic to the statement, but that doesn't mean it's not a stupid thing to say.

 

No matter how you look at it (unless you are skint and are trying to win a cheap point against the bank) owing 150 grand on a 100 grand asset isn't ideal.

 

The point will become most apparent if the borrower wants to move (presuming the property is the primary residence). 

[skyhuck]

5 hours ago, Retired Climber said:

He probably is now. Anyway, we are going to be argueing semantics if we continue with this. There is a certain perverse logic to the statement, but that doesn't mean it's not a stupid thing to say.

 

No matter how you look at it (unless you are skint and are trying to win a cheap point against the bank) owing 150 grand on a 100 grand asset isn't ideal.

 

The point will become most apparent if the borrower wants to move (presuming the property is the primary residence). 

Yes, but if you don't want to move and can pay the mortgage, you are in a better position to negotiate terms, as the bank needs you to keep paying for them to ever get their money back. Whereas if your asset is worth more than the debt, if times get tough they can simply sell it from under you, take their cut and give you the change.

 

I knew a farmer who had an annual overdraft of over £1M, the bank loved him, Christmas cards, visits from the manager etc. After foot and mouth he had several £1M's in the bank. The bank lost all interest in him.

[Retired Climber]

3 minutes ago, skyhuck said:

Yes, but if you don't want to move and can pay the mortgage, you are in a better position to negotiate term, as the bank needs you to keep paying for them to ever get their money back. Whereas if your asset is worth more than the debt, if times get tough they can simply sell it from under you, take their cut and give you the change.

 

I knew a farmer who had an annual overdraft of over £1M, the bank loved him, Christmas cards, visits from the manager etc. After foot and mouth he had several £1M's in the bank. The bank lost all interest in him.

I agree with what you are saving, and from that perspective you are quite right. However, it doesn't make it a good position to be in. 

[doobin]

1 hour ago, Retired Climber said:

Not really. Level of debt doesn't really tell us anything. If you owe 200 grand on a 5 million pound house you are in a very different position to someone who owes 200 grand on a half million pound house. 

It would be rather narcissistic of me to think i know how to run your finances better than you do. 

The 100k is made up of a BBL of which I've spent 35k, and finance on three excavators and a dumper. I'm pretty chill about that, as my fairly realistic table of values has all my equipment at over 160k. I've always believed in buying kit to make the job easier and as a store of value. Most importantly though, I have the skills and contacts to use those assets in a variety of ways and industries to create a wage for myself.

The house is maybe worth 350k in the current overheated climate, I was just happy that we were offered a mortgage before lockdown and managed to find somewhere before the offer expired and also before prices went even more mental. Can't see self employed people getting many offers in the near future. It's a nice house and somewhere we both want to live for a fair few years yet, so I'm pretty chill about that too. My only 'regret' would be not fixing the mortage for ten years (went five), but who knows what else the government will pull out of the bag to try to prop up the housing 'market'?

 

I can't really do much other than try to ride out the coming crash with my skills and tools, I'm not at the point in life of having much spare cash, especially after taking on the mortgage. Timing has never been my strong point 😜

Edited March 28, 2021 by doobin

[John Shutler]

i’ve got various bits and pieces on finance, none of them are secured against my house and if i can’t pay for them the finance company will take them off me and pay me the difference in value when they sell them. i tend not to stress out about it to much to be honest, i need the equipment for the work i want to carry out so i also need the finance

 

I used to get a lot of anxiety about running out of work, until i stopped and thought about how ridiculous that statement is. A business that’s been running over a decade does not just run out of work. 

 

 

 

 

[Retired Climber]

23 minutes ago, doobin said:

The 100k is made up of a BBL of which I've spent 35k, and finance on three excavators and a dumper. I'm pretty chill about that, as my fairly realistic table of values has all my equipment at over 160k. I've always believed in buying kit to make the job easier and as a store of value. Most importantly though, I have the skills and contacts to use those assets in a variety of ways and industries to create a wage for myself.

The house is maybe worth 350k in the current overheated climate, I was just happy that we were offered a mortgage before lockdown and managed to find somewhere before the offer expired and also before prices went even more mental. Can't see self employed people getting many offers in the near future. It's a nice house and somewhere we both want to live for a fair few years yet, so I'm pretty chill about that too. My only 'regret' would be not fixing the mortage for ten years (went five), but who knows what else the government will pull out of the bag to try to prop up the housing 'market'?

 

I can't really do much other than try to ride out the coming crash with my skills and tools, I'm not at the point in life of having much spare cash, especially after taking on the mortgage. Timing has never been my strong point 😜

This is exactly why I said everyone's situation is different. Sounds like you've got it pretty much sorted (for you), but that wouldn't work for me. Around our way you can't buy a house for 350 grand that you'd want to live in. In fact, you couldn't buy anything; even the old ex local authority houses on the edge of the village go for about half a million. The average house price on our road would probably be getting on for twice that.

I won't be selling our main residence, but have other property to sell. We don't have a mortgage or any loans / credit and don't live a flash lifestyle so we are pretty much recession proof. If I can leverage an advantage from a situation I will. In fact, that's pretty much my day job. 

 

I can pay all of our household bills by working 2 days per month, but then you've got big expensive toys to play with all day, so I'll have to admit defeat; you win.