£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

The "problem" seems to be you can only afford a 600k second property... Cry me a river

Could you aim for a one bed plus box room to keep outgoings more reasonable

@DaisyNGO

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.

I was trying to do it ASAP, given our ages and the remaining mortgage term. I guess we could rent for a bit more in a cheaper place (maybe somewhere we might be able to buy) to build up more deposit, if that's what you're suggesting.

A few thoughts here. I would definitely not spend so much at your age (I'm the same age but also need to buy, so I've thought a lot about this!).

Move out of London, you will be fine and pleased that you don't have a huge financial burden, when you want to slow down. Both of you have jobs where you might age out/want to alow down before 67. Invest the difference in a pension. Future You will thank Current You.

Please protect your deposit etc legally and visit a lawyer about setting up a structure that is fair to you both as an unmarried couple.

And think very long and hard before moving to the Philippines - I lived there for a couple of years and I still refer to it as the Heart of Darkness - just saying!

@Animood Well no cos I don't come from the Philippines. But I would rather retire in Singapore (where I do come from) than in Birmingham and many singaporeans I know have taken that option (after working in London and the Home counties for many years). OP's partner is from the Philippines and it is genuinely cheap unlike anywhere in the UK. My point was that if you want cheap, actually look for cheap places, the UK is a first world country with minimum wage. I mean, OP only really needs a 'cheap' place to live when he retires, he can afford to sustain himself in London as long as he has an income.

But yes my DH's father moved to thailand. He had 100k from his divorce settlement and no pension and you cannot retire anywhere in the UK for that. He is very happy in thailand.

@HermioneWeasley

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

Yes unfortunately. I entered work late due to a long period studying, then worked for some time in companies without an employee pension scheme and didn't set up my own.

@Animood and I am not saying that OP should move to Philippines. I am just saying that it is a bit strange that posters suggest moving to 'cheap' places that the OP has no connection to? I mean, if you want 'cheap', why restrict yourself to the UK?

@Saltyquiche

Could you aim for a one bed plus box room to keep outgoings more reasonable

Yeah that sounds like a reasonable compromise (I guess this would just be a small 2 bed).

@TheNoonBell

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.

Where in the countryside should I be chilling, yo?

@Animood

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 would feel the exact same as the poster you quoted. If London wasn’t doable on costs I wouldn’t stay in UK for a second. I know many people who feel the same 🤷‍♀️

I would go for it - provided your salary alone is enough to secure the mortgage in your name (accounting for any associated bonus weighting - e.g. some lenders will account 50% of average of last two bonus payments as your "income")

So many Londoners in their 30s are taking out large mortgages on 30+ year terms - so I don't see how your situation is so much different except for perhaps the lower earnings growth potential.

With the buy to let - I would either keep it to help in retirement or if you do sell it, then use the equity to pay down a chunk of your mortgage - it provides some contingency at least.

The obvious answer is to move to a cheaper part of London, and get used to travelling a few stops on the train for the "buzz". Plenty below your budget in se London.

There's loads of flats on the market in the Royal Arsenal in Woolwich, and a lack of buyers. It's right by the crossrail which is due to open next year (or so they say).

Where we are in Plumstead (close to Woolwich). You could get a very nice house for that budget, and a small house for nearly half that! You can get a 2 bed house for as little as £350k in Plumstead. In your situation, I'd spend around £450 on a very nice house in Plumstead.

Be mindful of Capital Gains because you already own a property.

@kitcat15

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

She can retire and return. Work very part time plus pension will equate to a full time wage.

I would do it, you can always sell and release equity later in life if you want to stop working.

Plum "There's loads of flats on the market in the Royal Arsenal in Woolwich, and a lack of buyers"

Is that for the new builds?

We thought about that before deciding to leave London...maybe we should look to see if we can get more space.

So you plan take on a £525K mortgage; work until 69 and 67 (...assuming you are fortunate to have to good health to do so) and you've currently got a very small pension pot? Factoring all that in, I would be buying something smaller/cheaper/further out to reduce my outgoings and whacking the saving on rent into my pension.

I would look at cheaper parts of London to ease the pressure. Crystal Palace, Sydenham, Penge, South Norwood are all affordable and still have buzz.

www.rightmove.co.uk/properties/116521364#/?channel=RES_BUY

www.rightmove.co.uk/properties/116366357#/?channel=RES_BUY

www.rightmove.co.uk/properties/116270996#/?channel=RES_BUY

I’d be worried about interest rates going up which is going to happen next year. I’m sure fixed rate deals will become harder to come by and more expensive because of this.

625 is nuts. If move further out and look to spend about 400k.

[quote neverenoughchelseaboots]@PinkWednesdays we also paid higher rate as we had a house rented out. Then a family member with a buy to let moved and told us they were not paying higher rate as the purchase was for their main residence.

We investigated and found out that was correct but we were past the 18 month reclaim window. So we're currently in the middle of a professional negligence case against the solicitor who misadvised us that we had to pay higher rate.

Apparently lots of solicitors are getting wrong! [/quote]
This poster is correct. It's surprising how many solicitors get it wrong. Shocking negligence. It's literally Googleable information.

Personally, I would look at buying outside of London if you can.

Secondly if you don't mind working until retirement then that's fine, but maybe also take out some insurances for critical illness/ income protection so say something did happen to your health to where you couldn't work. You'd be protected. Good luck

[quote neverenoughchelseaboots]@PinkWednesdays we also paid higher rate as we had a house rented out. Then a family member with a buy to let moved and told us they were not paying higher rate as the purchase was for their main residence.

We investigated and found out that was correct but we were past the 18 month reclaim window. So we're currently in the middle of a professional negligence case against the solicitor who misadvised us that we had to pay higher rate.

Apparently lots of solicitors are getting wrong! [/quote]
Wait, so despite owning the buy-to-let, after purchasing a place that is provably my main residence, I can claim back the extra stamp duty within 18 months? (I was under the misconception I could only do that once selling the buy-to-let).

I think you have to sell the BTL within 3 years to get the refund on SDLT.

@snoktruix This is lovely and if Muswell Hill is not buzzy, I don't know what is! www.rightmove.co.uk/properties/109083476#/?channel=RES_BUY

@DaisyNGO

I think you have to sell the BTL within 3 years to get the refund on SDLT.

As I understand it he doesn't have to sell the BTL amp.theguardian.com/money/2016/nov/03/i-am-a-landlord-buying-a-new-home-will-i-pay-extra-stamp-duty