A 100% mortgage will place the debtor into an immediate negative equity position which will increase as rates rise and values fall.
Hang on a minute, we are talking about a development where a number of people genuinely did buy at peak prices of €360,000 and the vast majority were sold at @ €310,000 Mary and John are not buying it to sell it tomorrow.
Furthermore the interest they have been offered on the mortgage is 2%.
John might have bought 5-6 years ago for €310,000 at 4.5% interest like his friends had…. had he been offered the unit back in the day when not a single penny was offered in discounts anywhere, and 4.5% was seen as a very good mortage rate, if he had been offered the unit with €60,000 off plus 2% mortgage, well he may very well have thought about buying 12 of them! Good job Mary has more sense than John methinks.
Neither he nor I see this mid to long term purchase ending up in negative equity, that much I can say to both Mary and John with a fair degree of certainty, if nothing else, one would expect inflation to take care of that issue wouldn’t one?
Cost of entry may appear cheap at first glance but in the long term it never is.
Are you sure about that? This is €28,000 down and I think something like €850 a month mortgage. I have never in 20 years seen a deal like it, I really value your opinion because I want to understand this across all the views myself, but I find that comment a bit glib.
Also, this is not some distressed bankrupt stock bank sell off. These are really good, in fact handsome units, just look at the size of them. I also have seen a lot of talk about 100% finance but most of it I don’t believe and the rest of it is a likely distressed sale rip off, I wholeheartedly agree with Katy, and I would say to Mary and John, you absolutely don’t take 100% finance just because you can, that’s no the answer, you take it, if it really, really works in your case – that is all. Besides…
This developer is renowned, is continuing in business and profitably so, and just so happens to have an excellent relationship with his bankers who are very keen to help him see the project off and they both move on. That’s why they put the package together.
He thinks it is very funny, that somebody thinks they could come in and just make him a knock down offer for all twelve units, he says he has heard all that before himself, but this is not 2011 not 1977. He reckons such talk is all smoke and as tired as some of my old sales pitches often are in his book.