Luckily interest rates going up will be dealt with by young people who learnt their financial acumen on reddit

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[–]NuclearBadger 7 insightful - 3 fun7 insightful - 2 fun8 insightful - 3 fun -  (4 children)

Then you still owe the bank 500k + interest, minus whatever you paid.

The only problem is now you can never sell it to cover the debt.

[–][deleted] 5 insightful - 2 fun5 insightful - 1 fun6 insightful - 2 fun -  (3 children)

Not quite, actually. If the value of the house is inferior to the value of the mortgage, depending on local laws, the bank may have the right to "call" the difference for an immediate payment or, if the buyer fails to do this, take possession of the property. Here in Canada that is how things work.

[–]NuclearBadger 5 insightful - 3 fun5 insightful - 2 fun6 insightful - 3 fun -  (2 children)

That's crazy. Why would you get your house valued at all until you've paid it off, if that can happen if they undervalue it.

[–][deleted] 4 insightful - 3 fun4 insightful - 2 fun5 insightful - 3 fun -  (1 child)

The municipal administration evaluates all property periodically for tax purposes. For all these reasons, it used to be that you needed 20% down for a house. Then 10%, then 5%. Obviously coupling a 5% cash with very low interest has made everybody buy a house, and now that the pendulum is starting to swing the other way... Yeah it won't be pretty.

I saw this coming for the better part of a decade, and so we stayed in our modest home, renewing the mortgage for a locked 2.9% rate for 10 years (9 to go) at the end of which said home will be virtually paid off.

We don't have longer locked rates in Canada, that I know of. We will then easily sell it and get something nice in the hills on the cheap, since we are in the suburbs and by that time, remote housing will have cratered, and that will be just perfect for us.

[–]NuclearBadger 3 insightful - 2 fun3 insightful - 1 fun4 insightful - 2 fun -  (0 children)

Had a look at UK rules, and it doesn't matter, BUT, if you're experiencing what we're going through (stagflation), where your property value drops due to nobody being able to afford a home (not kicked in yet), while the variable rate goes up due to inflation, the chances of you keeping your house are hilariously slim.

You can't remortgage because your house is worth worse to the % you've paid, and the increase in interest % makes your repayments crippling.

I have about 18 months left before I have to remortgage so saving as much as humanly possible to lock in a new fixed rate before it gets wild.