MortgageGuy
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I have copied this interesting point to a new thread from this thread Why should a mortgage be paid off by retirement to be considered sustainable? Brendan
I don't understand why anybody would sign up to a deal where they make capital repayments for many years then are still in negative equity or at the strong risk of it, in that case they will never be an owner and may want to consider some other alternative such as mortgage to rent (which at least gives them tenancy options they can move on from).
This begs the question what are the benefits of ownership? If you own a mortgaged property the main restriction would be that you need the agreement of the lender to dispose of it and a requirement to keep up property insurance etc., which as a responsible owner you'd be expected to do anyways. If the objective is to own your own home, then negative equity is not any issue, as the value of any property held for the long term will fluctuate over time.
If on the other hand you're expecting to hold the property for a short period 5 to 10 years on the expectation that the prices will rise and you'll sell and move on. Then you're not talking about home ownership anymore, you're talking about an investment and you should assess it as such - high risk: your borrowing to invest in an illiquid asset, while at the same time failing to diversify your investments... I know people don't like to think about it that way, but that is exactly what it is, as people have discovered.
This is often driven by the perception that paying rent is dead money, as propagated by the lenders and others involved in the sell side of the property industry. But it is not, you get the benefit of the property for the period of the rental agreement, while avoiding what I have described in the previous paragraph. Most Swiss recognise that the same property will not suit them for the duration of their life and see renting as the obvious solution to avoiding the situation previously described. They will upsize during the period they are raising a family, but other wise they will rent a small property suitable for a couple - often moving to the country side in early retirement, when their health is good and to a large town or city in later life to be nearer to medical facilities etc...
Well that is the view from a country where homeownership is seem as a very low priority!
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