£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

If you work remotely and your partner has very portable NHS skills you would be wise to get out of London whilst you can. Do you really see yourself working as hard as you do now all the way up to retirement or would you prefer to wind down to something less intense with a smaller mortgage?

Come to the countryside and chill, with that deposit you wouldn't require a big mortgage for somewhere quite pleasant and you can charge expenses when you go to site for work.

I am 50 with a huge mortgage, not quite at the size you're considering but not far off it either. I am not sure we will ever pay off the mortgage completely- I think we will sell and downsize before that time comes. It's not an ideal position but I feel better knowing that we are paying into a decent asset.

What about something like this? www.rightmove.co.uk/properties/115353740#/?channel=RES_BUY. Quiet area but you could walk to Blackheath.

@Unsureschool

Move to Birmingham, get a house for £300k. Everywhere is desperate for nurses and you could easily get a remote/ local job. Retire earlier and have much less stress

Again assuming that everyone wants to live in Birmingham, and thinks a bigger house is worth the location. This site is mad sometimes!

I will stay in London because the OP wants London. I don’t live in London and I work in software and there are lots of remote jobs. I only needed to go to the office once since Covid. But that isn’t the point. I won’t move to London just because there are more jobs and that’s the same as OP should not move out because he can get a bigger flat. If you can weather the increase in interest rate, the mortgage is lower than your rent, then there is nothing wrong with the amount. You can over pay 10% a year so the duration can end up shorter. Also you can draw down a lump sum on your pension on retirement. You can also sell your buy to let. It is definitely doable. I would also get a 2 bed minimum because working from home you want a bedroom to work in. Maybe look in a different area of London to get slightly cheaper.

@ChildrenGrowingUpTooFast

I will stay in London because the OP wants London. I don’t live in London and I work in software and there are lots of remote jobs. I only needed to go to the office once since Covid. But that isn’t the point. I won’t move to London just because there are more jobs and that’s the same as OP should not move out because he can get a bigger flat. If you can weather the increase in interest rate, the mortgage is lower than your rent, then there is nothing wrong with the amount. You can over pay 10% a year so the duration can end up shorter. Also you can draw down a lump sum on your pension on retirement. You can also sell your buy to let. It is definitely doable. I would also get a 2 bed minimum because working from home you want a bedroom to work in. Maybe look in a different area of London to get slightly cheaper.

OP says his pension fund is £65k so unless some serious contributions are made to that over the next few years any lump sum is going to make a very negligible impact on the mortgage!

Yes that’s fine, I’d overpay the mortgage if you can or just plan to sell one or other of the properties in say 15 years.
It’s better than renting

It will be very hard on your partner working as a nurse til she's 67
This, and also on you as well. My DH is in IT and is now 60. He is finding he's getting slower and slower! He doesn't expect to work until he's 67 at the same level. You need a plan in place for if you need to retire early, or take a job that is less taxing and pays less.

I'd suggest looking for somewhere cheaper on the outskirts of London - transport costs are unlikely to be as high as additional mortgage payments. Or even outside London with a reasonably fast train service. Although 160k sounds a lot to me, it's hard to judge without knowing take home pay. The advice used to be to pay no more than around a third of actual income (after deductions) so you could think about that. You can get insurance to cover possible illness etc.

I really would move - as a software engineer and nurse you can work anywhere in the country and have a 2-3 bed house in a nice area for half the price.

Are you sure your pension pot is only £65k - that’s incredibly low. Rule of thumb is C£350k of capital to generate £10k per annum income in retirement

Hmmm there is a way to avoid higher rate stamp if you're not married .

"Joint mortgage sole owner"

Apologies if I have missed relevant info

I don't think the cladding issue makes your property unsellable.

A studio in Wapping will be bought by a very rich sort as an alternative to gold or cash in the bank, I thought?

Firstly do you have critical illness and life insurance? I'd suggest getting these.
Otherwise I don't see the problem your mortgage will be less than what you currently pay in rent.

Though the term would be 22 years there's nothing stopping you selling earlier than this and moving to a cheaper area the money you'll have paid off would be sizable in 15 years or so so you could then have no mortgage or rent to pay at all.

I think it's a very good idea.

@HermioneWeasley as a software engineer and nurse, why be restricted to the UK? There are many places in the world which could welcome both of them and likely have lower property prices.

If the goal was financial freedom, judging from how the Filipino maids in my home country (Singapore) are able to buy land and houses back home with their meagre wages of £150 per month, I would say they should retire to the Philippines where they could both live like kings (they would need to be married though). But no one is suggesting that cos its insane to suggest to someone they should move country cos X country is cheaper. So I am not sure how suggesting a move to Birmingham/Wales /*insert random place that OP has no connection to is any better. And as a Londoner, I would probably sooner move country than leave London (Home Counties wouldn't be so bad if I could visit London at least several times a week).

Your name only sounds unfair to your partner. You just need a Deed of Trust to protect your larger deposit.

Do you plan on retiring in London? If not, then buy outside of London. Smaller mortgage payments and prioritise your pension (look into low cost index funds) as £65k is not very much. Historically appreciating house prices don’t outperform equity markets, I would buy a cheaper place and put more in stocks to increase your pension.

If you buy a cheaper property outside of London, could it be an option for you to rent it out? And you remain renting in London, where you want to live?

Relocate. Don’t get into huge debt. When the other property is sorted out, maybe you can sell both and move back to London then.
Good luck.

There must be some places in London that are a bit cheaper or properties a bit smaller. A mortgage that large with a pension so small seems risky to me. What if the OP can’t get a good rate after I’m presuming a five year fix term ends? OP is your partner Ok with you buying on your own?

I think you will be ok - we took out a big mortgage when DH was 45, last chance to buy the ‘big’ house. We make significant overpayments (similar income to you). It’s coming down. Go for a 5 year fix.

Also what's the timing on the plan?

If you're going to buy in Zone 3, you could halve your rent by renting in zone 3.

To answer the original question OP, I have to say a mortgage of £2.5k is perhaps too much - I think once you factor in life insurance to cover the mortgage (which I'm guessing will be a couple of hundred pounds at least) and the costs of maintaining a property - both of which you don't have now as renters, it will be more than your rent. Unless you have spare money I'd go for a smaller property so a smaller mortgage ideally over a shorter period.

re the original question, no way would we take that on, but early retirement means much more.

we are trying to move and actually could extend our mortgage a fair bit more but don't want to.

we are also very frugal, so again, horses for courses.

Given your jobs are fairly moveable, I'd leave London and go elsewhere.

£170,000 can literally buy you a decent house in some parts of the country. Zero mortgage required! Loads to save and put away for retirement and most importantly, enjoy! You won't need to work forever.

If you regret not having kids look into fostering. Why the hell not do what you want?

And as a Londoner, I would probably sooner move country than leave London (Home Counties wouldn't be so bad if I could visit London at least several times a week).

You'd rather live the rest of your life in the Philippines than in another place in the UK? I think that's a very unusual opinion!

I don't know why people keep saying leave London....I'm desperate to leave but I get a vibe from OP that he really loves it?