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Interest-only mortgage investment

Can anyone explain the point?

Solith
post 20.Jan.2012, 01:07 PM
Post #1
Joined: 9.Jul.2006

I'm considering buying (well, if I could find a spare 200,000:-) an apartment rather than renting in andra hand.

I couldn't afford a full mortgage, but friends say they have interest only mortgages, which I could afford.

But surely this means that the bank owns the capital, so any increase in the value of the apartment would only benefit the bank, right?

So how is it beneficial to spend 8000 a month on an interest only mortgage (inc avgift etc.) rather than rent at 6000 a month?
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PDX
post 20.Jan.2012, 01:13 PM
Post #2
Location: Stockholm
Joined: 2.Aug.2011

You would own the apartment; the bank only loans you the money. The apartment is a collateral for the loan.

Borrowing when you cannot afford to repay? Rethink... unsure.gif

~~~PDX~~~
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Solith
post 20.Jan.2012, 01:22 PM
Post #3
Joined: 9.Jul.2006

So if the value of the apartment goes up I could end up with more money than say sticking what's left of my salary in a savings account?

Either way, I can afford a lot more than the 8000 mortgage, it's just the deposit I need to get hold of.

I'm just looking at my options since renting in Uppsala is just a way to get ripped off by Swedes.
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swozzie
post 20.Jan.2012, 01:29 PM
Post #4
Joined: 8.Oct.2009

QUOTE (Solith @ 20.Jan.2012, 01:22 PM) *
So if the value of the apartment goes up I could end up with more money than say sticking what's left of my salary in a savings account?

Only when you sell of course and then you would pay capital gains tax . If you buy another property of higher value than the one you sell then that CGT is deferred.
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007
post 20.Jan.2012, 01:41 PM
Post #5
Location: Stockholm
Joined: 2.Apr.2006

QUOTE (PDX @ 20.Jan.2012, 01:13 PM) *
Borrowing when you cannot afford to repay? Rethink... unsure.gif

most swedish mortgages are set up with interest-only repayment. as long as the value of the property does not go down more than your deposit, you have no debt when you sell it. the housing market isn't set up as "your house is your retirement fund".

QUOTE (Solith @ 20.Jan.2012, 01:22 PM) *
So if the value of the apartment goes up I could end up with more money..

yes if. if it goes down you end up with less money
in addition to the abovementioned capital gains tax on profit, you must pay your selling fees (about 2-3% of the closing price)
QUOTE (Solith @ 20.Jan.2012, 01:22 PM) *
Either way, I can afford a lot more than the 8000 mortgage, it's just the deposit I need to get hold of.

that's a big part of being to afford something. also, you must factor in the monthly 'avgift'

QUOTE (Solith @ 20.Jan.2012, 01:22 PM) *
I'm just looking at my options since renting in Uppsala is just a way to get ripped off by Swedes.

out of curiosity, if you got a roommate would you charge him/her more than ½ your costs if you could?
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Solith
post 20.Jan.2012, 01:49 PM
Post #6
Joined: 9.Jul.2006

Ah, I'd forgotten CGT and the selling fee. Hmm.

And I suppose if I wasn't acting illegally then yes, I'd charge more than half. I just think it's an inherently anti-outsider system, allowing Swedes to rip everyone else off at will. What can you do though?
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Puffin
post 20.Jan.2012, 01:53 PM
Post #7
Location: Dalarna
Joined: 5.Apr.2006

If you are looking at buying an apartment you need to factor in much more than just the mortgage cost - most BR apartments have a monthly fee that must be paid on top of the mortgage

Also there are the repair costs - if your radiator starts leaking you can't call a landlord to get it fixed
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Solith
post 20.Jan.2012, 02:05 PM
Post #8
Joined: 9.Jul.2006

If you mean avgift then yes I've included that. And I thought some sort of insurance for these kind of costly accidents/repairs was a good idea.
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John.Smith
post 20.Jan.2012, 02:17 PM
Post #9
Location: Sweden
Joined: 12.Sep.2011

QUOTE (Solith @ 20.Jan.2012, 01:49 PM) *
I just think it's an inherently anti-outsider system, allowing Swedes to rip everyone else off at will. What can you do though?

??? That's twice you have said that???
Not a fair assessment I think considering non-Swedes can buy property too? The property market here functions like anywhere else... supply and demand. Where you live; demand outstrips supply thus the high rental prices... there is no conspiracy on the part of Swedes to screw outsiders (foreigners)...

Interest only seems to be the norm here. Property is reasonably stable with only minor fluctuations, location however is (as anywhere else) an important factor.
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swozzie
post 20.Jan.2012, 02:18 PM
Post #10
Joined: 8.Oct.2009

QUOTE (Solith @ 20.Jan.2012, 01:49 PM) *
I just think it's an inherently anti-outsider system, allowing Swedes to rip everyone else off at will. What can you do though?

what can you do in in this "rip off" situation ? sounds like you are thinking along the lines of " if you can't beat em join em" laugh.gif

PS: what you call a "rip off" others call supply and demand or market forces but you'll understand that better when it's you charging the rent wink.gif
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007
post 20.Jan.2012, 02:47 PM
Post #11
Location: Stockholm
Joined: 2.Apr.2006

QUOTE (Solith @ 20.Jan.2012, 01:49 PM) *
And I suppose if I wasn't acting illegally then yes, I'd charge more than half. I just think it's an inherently anti-outsider system, allowing Swedes to rip everyo ... (show full quote)

you can stop seeing it as an anti-outsider system. see below:

QUOTE (swozzie @ 20.Jan.2012, 02:18 PM) *
what you call a "rip off" others call supply and demand or market forces but you'll understand that better when it's you charging the rent wink.gif
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johnjohn
post 20.Jan.2012, 03:10 PM
Post #12
Joined: 10.Dec.2010

You say you can afford way more than the 8000kr mortgage. Perhaps then you should have a shorter term fixed loan where the interest is lower and thus you are building equity and stand a better chance of walking away with a profit.
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Solith
post 20.Jan.2012, 03:14 PM
Post #13
Joined: 9.Jul.2006

Yes, that makes more sense. So honestly I can't see why my friends did it, except to avoid queuing on the rental market (which is what I describe as anti-outsider, not the purchase market).
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erik68
post 20.Jan.2012, 03:28 PM
Post #14
Location: Sweden
Joined: 8.Sep.2011

QUOTE (Solith @ 20.Jan.2012, 12:49 PM) *
And I suppose if I wasn't acting illegally then yes, I'd charge more than half. I just think it's an inherently anti-outsider system, allowing Swedes to rip everyo ... (show full quote)

How's that different from most other places in the world?
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PDX
post 20.Jan.2012, 03:31 PM
Post #15
Location: Stockholm
Joined: 2.Aug.2011

You build your own hut from bamboo stalks and coconut leaves? rolleyes.gif

~~~PDX~~~
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