Example 1
Examples from different years of initial buying
House bought in 1980 as a terrace for £45,000. Hoping to sell for the ‘value’ of £200,000 but minimal insulation. They have fully paid off their mortgage and when they buy anew they are expecting to have no difficulty in buying a £200,000 house. In fact, a house similar to theirs costs £180,000 after the Government decision because it is not insulated. The work is done with borrowed money, the house value rises again to £200,000, using a mortgage rate of 5% loan to pay for the work they spent less than half their previous fuel bill on heating. That mortgage will be fully repaid when they sell again. Since 1980 they have still made a huge profit.
House bought in 1990 as a semi detatched for £60,000. Hoping to get the ‘Value’ of £200,000 (it is on a rather tatty estate). Well looked after, near to a local school but on the edge of town and poor public transport or parking. Poor insulation and a ‘value’ currently is now £180,000. The mortgage is fully paid. This is a very similar story to the house bought in 1980.
House bought in 2000 as a terrace for £85,000. Hoping to get the ‘value ‘ of £200,000. Within walking distance of town centre, two bedrooms and bathroom. Notably cold in winter, no insulation factors. but slipped slates, and rot seen in roof space. Valuer said that it would cost £7,000 to reset the roof, which he said was necessary. Good and expert wood rot control needed for around £2000. The Valuer tells the Mortgage Company that would have to accept bids of £9000 less than the standard figure because of those factors. As such they would need a further house of the same type and would need a mortgage. Suddenly it became clear that because of their insulation they would get £20,000 less so they must accept figures of £171,000. Having bought a house for £180,000 but they must insulate and they had £9000 yet to pay on the old mortgage. So they need a total mortgage of £29,000, with £9,000 flowing on from the old house (which they can afford) and £20,000 for insulation. That could be a separate mortgage loan that would be paid off in 20 years by the lower utility bill costs. Meantime the house ‘value’ had risen to £200,000, and so the mortgage company could see new income and a low risk so the mortgage was offered. If before the end of the 20 yrs they wanted to move again then the increased value of the house would swallow up much (but not all) of the cost of insulation debt. They realised this was not a problem and went ahead.
House bought by a 60 yr old woman as a bungalow in 2010 for £175,000. On a bus route to town, near to a small set of shops built in 1930s. With a nice and well kept garden. She is selling to move nearer her children in another town. Hoping to get the ‘value’ of £300,000. However her house needed cavity wall insulation, PV panels and an ASHP (all coming to about £13,000). No mortgage as it was bought as a downsize originally. The new small house is built in 1995 also a bungalow. The Valuer said it would need cavity wall injection insulation (£3000), roof insulation (£250 with council help), a change of lightbulbs, double glazing (£5000), and an air source heat pump plus PV panels (£10,000) coming to £15,250). She would be on a pension so the current utility payments would be too much. A similar near her children had also dropped in value due to the demand for insulation factors. So she was £13,250 yet to find. All she could do was to take out a loan for the insulation perhaps guaranteed by her children as the insulation, or a potential Green Deal mortgage guaranteed by Government (if that takes place). Insulation would bring down energy usage and pay the interest. It was clear that with inflation the house being bought would go up past £300,000 fairly quickly. She was not expecting to live for 20 years so any remaining debt on the loan would be paid off by her Will executors. She felt that this meant that no problem was present.
Please go to Example 2 in this website to see the examples of houses bought a later points and Academic References for both Examples pages