New property investment mortgage required

photo credit: Marvin Kuo

Somebody somewhere needs to create a new kind or mortgage for both property investment and home buying. Current mortgages are a bit like the old pre Dyson Vacuum cleaners that drew air through the bag. As the filled, the suction reduced making it useless.

Some clever sod, like the chap who invented the Dyson vacuum cleaner, needs to strip down the current mortgage and reassemble it in a form that makes sense to everybody. A mortgage that has fixed monthly payments for the duration, so as to negate interest rate changes, and with low monthly payments.

New homes developers lead the way

We’ve seen Redrow and David Wilson Homes offering new financial packages for first-time buyers this week, in attempt to boost sales. No doubt other developers will follow suit in the coming weeks. The point is developers of new homes for sale recognize the need to offer a financial package that is far more than a simple incentive, so why don’t mortgage lenders follow suit?

Why you should drink in moderation

You’ll probably think I’ve banged my head, but: If a property is expected to grow in value by 100% over a period of ten years, would it be possible to over value it by say 10-15%, and then use the surplus money to fund mortgage payments over a set period?

I’ll give you an example. You buy a property today for £100,000. A mortgage lender values the property, assesses its capital growth potential and agrees that it should double in value over the next ten years.

Therefore the mortgage company agrees to over value the property by 15% leaving a surplus of £15,000. The surplus is financed by the borrower, but never given to them. Instead the lender retains the funds to supplement mortgage payments over the next ten years.

If the interest rate is set at 6%, the monthly mortgage payments will be £575 per month on an interest only basis. The mortgage supplement will be £125 per month reducing the monthly payments to £450. This is a monthly saving of £50 per month.

I’m not the man to solve this problem (clearly), but I’m sure there are plenty who can. Create a new mortgage yourself, and share it with us below.

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