£525k mortgage at 47?

[snoktruix]

Hi all,

I'm in a somewhat difficult financial situation. Due to general lack of financial acumen and foresight.. my partner and I (i'm 47, she 45) are still renting in central London (about £2.6k pcm). We only recently came to the giant realization that we are doomed in later life if we don't get on the property ladder. So we are thinking to finally buy a flat.

I do in fact have a buy-to-let property (worth about £360k, with £250k left on the mortage), but can't release the equity on it due to cladding problems which will take years to resolve.

We have about £100k in savings, and parents can help to the tune of about £70k total with stamp duty and deposit. So we are considering to buy a 2-3 bed flat in London, for around max £625k, with a £100k deposit leaving us with £525k mortgage and some savings buffer. (Due to the unsellable buy-to-let, we would need to pay the higher stamp duty rate unfortunately, but no way to avoid it).

Due to our age, this would need to be a 22 year term, so the payments will be on the order of £2.5k pcm, at the current rates. Our combined income is about £160k (that figure includes bonus).

Do people think this sound like a viable plan? I realize that taking on this level of debt, and payments, at our age is risky. But the alternative of renting into oblivion, with no other asset than that buy-to-let, seems worse. We seem to be a the point where it's do-or-die to get back on the ladder.

Any thoughts appreciated...

Best wishes
Jim

@VitalsStable

Are your bonuses guaranteed? The mortgage company wouldn't take DHs into account even though they've been at a consistent rate over the last 35 years.

Technically they are discretionary, but the mortgage brokers are able to take into account apparently. (Though not stock).

@Calmdown14

Get a good fixed rate and a mortgage that allows overpayment (lot are up to 10 per cent a year).

Look at the overpayment calculator on Money Saving Expert and play with the figures.

I'd set it for the 22years but aim to overpay where you can to reduce the term. That way you aren't overcommitted but can try and get ahead when you get bonuses or with a few hundred each month which can be cancelled in event of an unexpected bill

Feeling like Londoners costs you!

@Calmdown14 apologies, quoted wrong message !

I’d go for it but £625k for a flat even in London is quite a lot. There are lots of nice flats in SE for less than £500k

Your biggest risk would be not having a property to live in by the time you retire. Negative equity is never great but is still a hundred miles better than not having a property! Renting is money down the drain, if you stay renting you’re stuck in insecurity for life. Any other risk is minimal in comparison—you have more than enough income to make payments as long as you are careful and keep a buffer.

Moving out of London makes no sense as (a) you’d be paying a fortune to commute anyway and (b) why would you move from somewhere great to somewhere shit (alright fine, less good). I would never sacrifice quality of life for a property that’s a bit cheaper or a bit larger, unless your hobby is measuring floor plan size why would that be a priority.

Go for the mortgage. In 22 years time you'll be free of paying rent. Property prices will continue to go up, massively over two decades. There may be short term economic pain, but there may not be. You now know what property to avoid- go for a very long lease, a free-hold flat would be best (if you can find one, my son did), low-rise, small garden or balcony if you can.

It will be very hard on your partner working as a nurse til she's 67...... I am 56 and will go next year on nhs pension....none of my colleagues ever work past 60 .....we are all band 6 and 7 nurses....not working on wards but still couldn't work til 67

625 should get you a nice flat in a decent but not super glam area of London. These kind of flats are probably also at the lowest they’ll ever be, some people have had them on the market for a while so I’d look at the price point above and negotiate downwards.

Since you already have a property, bear second home stamp duty in mind too.

@Honeylemontea

I’d go for it but £625k for a flat even in London is quite a lot. There are lots of nice flats in SE for less than £500k

Hm, maybe that depends a bit on one's personal definition of nice. We were hoping for a decent 2-3 bed in somewhere not horrible in zone 3-4. The one we found was in Furzedown, where transport is not that great but the flat is lovely. Agreed we may need to make more compromises though.

Well there are cheaper properties you can look into. My spacious 2 bed, 2 bath, riverfront flat in a nice part of zone 2 was cheaper than what you’re looking at now (albeit we bought 2 years ago). So if you’re looking at a purchase price of £625k, then you’re looking at buying something really new or not worth that sum.

@Flowers500

Your biggest risk would be not having a property to live in by the time you retire. Negative equity is never great but is still a hundred miles better than not having a property! Renting is money down the drain, if you stay renting you’re stuck in insecurity for life. Any other risk is minimal in comparison—you have more than enough income to make payments as long as you are careful and keep a buffer.

Moving out of London makes no sense as (a) you’d be paying a fortune to commute anyway and (b) why would you move from somewhere great to somewhere shit (alright fine, less good). I would never sacrifice quality of life for a property that’s a bit cheaper or a bit larger, unless your hobby is measuring floor plan size why would that be a priority.

Many people manage renting in later life, when they retire etc.

Moving out of London makes lots of sense, there is no point living in London when most of your income goes on your mortgage. . I would never sacrifice quality of life for a property we all have to make compromises, I live in a house thats probably worth about 400k, but its massive, and its quiet. I'm half an hour by direct train to a large and bustling city, so i can go whenever I like, a taxi (if i want a night out, is only around £30 - and how often do we need to get a taxi home?)

I would be inclined to buy two more buy to lets elsewhere in the country and continue renting.

@WoodburnersRUs

Since you already have a property, bear second home stamp duty in mind too.

Yep, that is factored into my anxiety.

I’d buy a cheaper property and definitely increase pension contributions, your pot is very small. I think it’s better to spread your money about rather than tie it all up in property.
I wouldn’t worry about getting the mortgage paid off as you can always move to a cheaper property in 15 or so years. At least you would have built up some equity which you aren’t doing at the moment.
I think it’s time to think about the long term plan and part of that could be to live in a slightly cheaper area.

@PinkWednesdays

Well there are cheaper properties you can look into. My spacious 2 bed, 2 bath, riverfront flat in a nice part of zone 2 was cheaper than what you’re looking at now (albeit we bought 2 years ago). So if you’re looking at a purchase price of £625k, then you’re looking at buying something really new or not worth that sum.

Nice, in what area if you're able to say? Is it new build? We might consider it, but wary of a service charge (which I already pay on the buy-to-let, paying for the tenant's gym and swimming pool..).

To state the blindingly obvious, if it's just you and your partner - you don't mention children - why not buy a one or two bedroomed flat rather than 3 bedroomed?

@theleafandnotthetree

To state the blindingly obvious, if it's just you and your partner - you don't mention children - why not buy a one or two bedroomed flat rather than 3 bedroomed?

You're right, of course. I work from home mostly, so a home office seems a very nice-to-have, though admittedly I could make it work in a 1-bed though would probably find it annoying. 3 beds seems unnecessary I agree.

Your simplest solution is to move slightly outside London, buy a 3/4 bed house in a decent area for around 400k and reduce your mortgage term by about ten years. If you buy near Shenfield for instance, you would only have a 20-30 minute commute into centra London, quicker than the tube in many cases.

@WoodburnersRUs

Since you already have a property, bear second home stamp duty in mind too.

There's a common misconception about this (even among some solicitors!) but you do not have to pay higher rate stamp duty for your main residence. You do do initially but then have 18 months to claim it back from HMRC with proof that it's your main residence.

Disclaimer - I've i my experiences jr when selling a main residence abs buying a new one, rather than buying one for the first time, but Worth checking out OP.

Gosh that was gobbledegook. It was meant to say I only know this is definitely true if buying and selling the main residence. But worth checking if it also applies to buying for the first time a property that you will be living in. It's a big difference!

I think at your current stage of life I would prioritise location and buzz over size and buy something which leaves enough money to actually enjoy all that London has to offer. Maybe at a different stage of life you'll want something different, this doesn't have to be it forever.

@neverenoughchelseaboots

Gosh that was gobbledegook. It was meant to say I only know this is definitely true if buying and selling the main residence. But worth checking if it also applies to buying for the first time a property that you will be living in. It's a big difference!

It won't the first time, since I lived in the flat for a while then remortgaged to buy-to-let. Though I think it may still be the case that if I sold that flat within some time period of the second purchase, I could claim back the extra stamp duty. This might not be possible though since we don't know when the cladding is getting fixed (at least 2023 I think).

You can get very nice 2 beds in and around forest hill, honor oak park, Sydenham and crystal palace still for much closer to 500,000

@neverenoughchelseaboots

Gosh that was gobbledegook. It was meant to say I only know this is definitely true if buying and selling the main residence. But worth checking if it also applies to buying for the first time a property that you will be living in. It's a big difference!

Yes, it applies. We were caught out by it as DH already had a flat which is rented out.