Ideas for buying a house post-divorce

[OnthetracktoLondon]

Hello,

I'm wondering what I can do with regards finances and purchasing another house. Family home is now on the market and I am to get a 50% share (owned outright so no mortgage). I also have to repay solicitor fees to a sum of £12k (even though that was a complete waste of money)! Leaving me with approximately £125k, which isn't a lot.

Houses I am looking at are in the £250k region. What I don't want to do is get a mortgage at my age (52.5 years) and end up with no disposable income as I need a life and need to save extra for house/car maintenance.

I am going to see above making an appointment with an independent financial advisor but I'm wondering what to do about it all.

I have almost £80k, as it stands currently, as a lump sum with my pension that I can get at 60. I can also claim part of my private pension at 60, the rest at 67.

Has anyone done something - at a similar age to mine - that has worked out well? Or, can anyone give me any ideas on how to purchase a house at double value to what I'll have without having a big mortgage payment to find each month? I want to sleep at night! I have about £700 disposable income at the moment but it's usually all gone by the end of the month! Car needs a service in September etc.

Anyone?

could you look for a shared ownership house? Or mortgage and take in a lodger when you’re settled to add to your income?

I mean there's no magic way you can get a house for double and not have a mortgage payment. As PP has said, get a lodger? Or just live within means, and go smaller, get a flat. Do you need a house?

Get a cheaper house, maybe flat.

Do you have a job? Do you have dependent dcs?

This is what I would do in your situation assuming you have no dependent children (not advice just ideas!): -

Set yourself a goal of buying a suitable property at age 60, and work towards that, with minimal financial risk.

Between now and age 60, put yourself on a strict financial budget.
Pay off any debts. Save a rainy day fund so you are prepared for any unforeseen costs that arise, or temporary loss of income.

If you are able, ask to stay with any family living nearby for a while, to give yourself a chance to adjust to your new situation, and have some emotional support on-hand, and also to add to your savings and come up with a plan.

Then focus on reducing housing, transport and food costs in the medium term as these are likely to make the biggest impact on finances.
Buy a studio or 1-bed flat close to where you work - within walking distance if possible. Cash buyer from your share of the house sale. Check service charges and ground rent are as low as possible.

Start some heavy duty regular savings habits to build up a bigger house deposit to add to your pension lump sum at age 60. You could still set aside some of your income for a few luxuries and treats, but make it fit around your strict budget, not the other way round.

Keep your current car going for as long as possible.

At age 60, when you have access to your pension lump sum, combine that with the savings accumulated in the intervening seven and a half years.
Assess your salary income combined with your private pension income, and calculate how much of a mortgage you can comfortably afford without scrimping. Find a house to purchase that you can feel at home in. Consider also interest-only mortgages if you don't have sufficient income for a repayment one.

Later, when the state pension kicks in, you could start to pay down the capital or roll the balance into a retirement interest only mortgage (which has no fixed end redemption date).

You can access the lump sum from your private pension from age 55.

You could run a mortgage to age 70. £125k would cost around £880pm. Some lenders allow you to take it up to age 75.

Obviously you can pay it off before then with your pension lump sums.

Nothing is insurmountable.

I bought a house after my marriage broke up in my 50s. I was just lucky to get in before prices skyrocketed. If you can put 125,000 down on a house in the mid 200,000s the monthly mortgage payment shouldn't be very high. You'll likely pay as much or more to rent a place anyway. Plus, you will have an investment if you buy. I always recommend buying if it's at all feasible, as renting is just like throwing money down the drain.
I am currently carrying a mortgage of 100,000 in Canadian dollars and I am retired. I have built up about $200,000 in equity. When you eventually have more equity than you owe, you will be sitting pretty.

Thanks all. I think I’m going to have to lower my wants on this as I really don’t want to end up with very little disposable income left. I’m at a stage in life (and I’ve lost a lot of people around me) where I want to enjoy life more. I have two children (20 and 16) and no other family.

I work full time but my role can be stressful and I would like to step back, and do something else, at 60. I have worked hard and don’t want to end up in a position whereby I’m in a stressful role and worrying about money. I really think it would affect my mental health. I need to be sensible on this one.

I will arrange an appointment with an independent financial advisor and see what they suggest. I was thinking of a reasonable mortgage but over a longer term, but an amount (that’d be remaining at 60) to pay off when I get the lump sum.

OP - I'd contact London & County mortgage brokers to see if there are any interest only mortgages they recommend.

Buy your new home with a view to paying off £80k of the capital with your lump sum at 60 or whenever. Overpay the remaining £45k as you go i.e. treat it as a repayment mortgage.

I appreciate you want a life now but you don't want to be broke in retirement either.

Best of luck.

I'm in a very similar situation, and sadly there is no magic answer - lowering your wants (a lovely phrase!) is the best and only sanity-making option.

Assuming both your DC are still at home and will be for the foreseeable (and after that you'll want space for them to visit), then can you get more for your money by looking in a different area? £250k isn't much in many parts of the UK I know, (also my budget) but what's on offer for that amount does vary, and you might find something ideal for slightly less just a few miles out of your preferred patch.

The lump sum is definitely something to be factored in to housing costs as you say, as that'll take you to £200k ish, so long as your mortgage has the facility to be overpaid using that £80k in due course.

Wanting to ease back on work - again, same here - so think about whether you can realistically do something completely different or whether you'd be better negotiating less hours where you are, gradually over time if that helps with the adjustment (for you and the company).

All the best for happier and easier times ahead.

@gettingbacktobeingmeagain
I will probably change jobs soon as I won’t be able to reduce hours where I am, in the future. The job is based 88 miles away so I ask working it as a hybrid role. I work full-time hours over 4 days, which works well, but the trip across is quite isolated in parts and not ideal as I get older. I’ll see what I can do!

I work it as a hybrid role that should say!

If you are thinking of taking 25% tax free from your pension for your housing, just be aware that might disappear in the October budget.

A very close friend of mine was in this situation at 58. She bought a shared ownership house. From memory she bought a 40% share for around £100k. House is really nice. Much better than anything she could have afforded outright / with a mortgage.

Downsides are you have to pay rent - but it is below market rate. She pays around £400 pcm on a house that could command 4x that on the private rental market.

You don't have a free choice about location - you have to go where the SO houses are.

Guess it could be more difficult to sell but I don't think that was on her mind particularly . Shes planning to stay long term. She can also staircase up to a higher % of ownership.

It's not ideal but I think she felt it was the best solution in her situation to allow her to be able to live in a similar standard of home to the marital home as she was coming towards retirement.

What about interest only? Then make overpayments as and when you can?
could you consider a lodger as a form of extra income?
do you have to spend £250k on a property?

Nice little flat, no car and tons of spare cash

I seriously downsized when I divorced.

I would say keep it all as simple as possible and if you get a mortgage make sure it is manageable for you.

I used the equity to buy a very small house with no mortgage and that was the right thing to do. I took out my pension lump sum early and I live off that.

Don’t push yourself to the limit financially. When you get to your 50s hopefully you will have plenty of working life left but I was made redundant at age 50 and it changed everything.

We’ve just sold an investment flat to a lady getting divorced, aged early 50’s, tiny mortgage (£20,000). Two bedroom flat £128,000 in the Midlands. Apparently it ticked all her boxes!

I have just done exactly this (and was in the same financial position as the OP).

My house is just lovely...very large 3 bed semi in a beautiful small, new estate, rural area close to my job. I bought a 50% share outright, using my pension lump sum and pay £340 rent on the other half. It's a very desirable area and there's no shortage of people wanting to buy here, so I doubt I'd have trouble selling on if I ever wanted (needed) to.

@twentysevendresses yes my friend also took her pension lump sum to facilitate the purchase. She's really happy with how it's turned out.

@Tweeti that's good to hear...there can sometimes negative posts on here about shared ownership, but much of that is based on the 'old' scheme. The new (current) scheme has much more favourable terms and safeguards.

Glad your friend is as happy as me 🥰

What about paying the rental on shared ownership once you’re retired? Is there an option to buy the other half?

Yes there's usually an option to staircase up to full ownership in stages.

My friend worked out that she could afford the rent once retired on the basis of her pensions. So she decided it would work even if she could never buy out the remaining share.