Help with large amount of debt

so-crates said:
several thousand euros which they would have to stump up, given that house price trends appear to be downward, their chances of having any surplus from selling the house is relatively low (as it is relatively new bought). They may even find themselves not being able to sell it for enough to cover the costs.

I would agree with jhegarty, had the same first thought as you, why hang onto an asset that is difficult to afford but then saw the fixed penalty and realised it probably wouldn't be beneficial.
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Is an asset thats difficult to afford really an asset?

I guess we need to fill in the unknowns here to make a positive call.

Freed up monthly income = ( ( Mortgage + Upkeep + Household Bills +
Life Insurance + [Mortgage Protection] ) -
( Rent + Apt Bills ) )

Assuming

Sell Price ~= ( Fixed Penalty + Sell Costs + Remaining Mortgage )


In the long run freed up monthly income paying down debt may be worth the hit in a fixed penalty, but I'm inclined to agree with on intuition you that filling in those blanks would be a lot of work for minimal gain.
 
No, not true, the debt is the liability.

Your asset: dwelling
Your need: Finance to pay for said dwelling so that prior owner will sign over the asset to you
Your liability: finance owed to bank
Your negotiating tactic to obtain said finance:
1) a promise to repay the amount borrowed plus a cost of borrowing (interest) over a term
2) a promise to allow the bank to take control of the asset if you renege on your repayments in return for their returning interest in the property to you once you have discharged your debt.

Bank's asset: your mortgage
Bank's security: your agreement to mortgage your property and your deeds
Bank's liability: to whomever they have "borrowed" the money from, be it other lenders or their own depositors.

The asset remains an asset at all points, your liability is the mortgage debt; that is the millstone.

Mortgage finance arrangements were originally limited to a very select group of people - those who held assets basically. You still need to "own" an asset to get a mortgage, hence the property is yours (or rather the bank agrees to give you your property back if you pay up cos you only have it all to yourself fleetingly, blink and you've missed it!) but the bank holds a metaphorical gun to your head by holding the evidence of ownership and the evidence of the agreement to relinquish your right to your property in the event of default.

At least that is my understanding!
 
so-crates said:
No, not true, the debt is the liability.

Your asset: dwelling
Your need: Finance to pay for said dwelling so that prior owner will sign over the asset to you
Your liability: finance owed to bank
Your negotiating tactic to obtain said finance:
1) a promise to repay the amount borrowed plus a cost of borrowing (interest) over a term
2) a promise to allow the bank to take control of the asset if you renege on your repayments in return for their returning interest in the property to you once you have discharged your debt.

Bank's asset: your mortgage
Bank's security: your agreement to mortgage your property and your deeds
Bank's liability: to whomever they have "borrowed" the money from, be it other lenders or their own depositors.

The asset remains an asset at all points, your liability is the mortgage debt; that is the millstone.

Mortgage finance arrangements were originally limited to a very select group of people - those who held assets basically. You still need to "own" an asset to get a mortgage, hence the property is yours (or rather the bank agrees to give you your property back if you pay up cos you only have it all to yourself fleetingly, blink and you've missed it!) but the bank holds a metaphorical gun to your head by holding the evidence of ownership and the evidence of the agreement to relinquish your right to your property in the event of default.

At least that is my understanding!
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Yes but if

Asset = sum(Liabilities on Asset) + Equity ( 300k - 285k = 15k )*

*Assuming no loans secured on equity.

And you can pick out the following liabilities

House Value Depreciation ( current climate )
Mortgage Interest
Upkeep
Household Bills
House Insurance
Mortgage Protection Insurance

(Management Fees)

Then where is the Asset in this instance?

I would argue that in this case the percieved Asset is a Liability.
 
Honestly, is what your are saying of any point or relevance to the OP?
You pointed out that the option of downsizing should be considered by the OP, jhegarty indicated that the reason it may not be viable for the OP is that they have over a year left on a fixed term and would be penalised for paying off early. Added to the current housing market and the costs of the transaction, it makes it far less palatable to consider at this juncture. That is the important discussion, everything else is simply semantics and of little value to the OPs plight from what I can see.

Also if you are going to argue (your wording) about assets and liabilities at least don't randomly lump in current and capital together!
 
so-crates said:
Honestly, is what your are saying of any point or relevance to the OP?
You pointed out that the option of downsizing should be considered by the OP, jhegarty indicated that the reason it may not be viable for the OP is that they have over a year left on a fixed term and would be penalised for paying off early. Added to the current housing market and the costs of the transaction, it makes it far less palatable to consider at this juncture. That is the important discussion, everything else is simply semantics and of little value to the OPs plight from what I can see.

Also if you are going to argue (your wording) about assets and liabilities at least don't randomly lump in current and capital together!
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I'm not arguing with you, i'm being merely curious.

You are right though, i'll break this off into another thread. Aplolgies for moving off topic.
 
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