£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

Green - oh sorry, of course! Because the BTL has always been a BTL?

Mortgage advisers will know this I guess.

@DaisyNGO

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

This is what I thought too.

@DaisyNGO

Green - oh sorry, of course! Because the BTL has always been a BTL?

Mortgage advisers will know this I guess.

No, it was originally a residential mortgage, and switched to a BTL and moved out.

That was the same as my husband. Originally a residential property and then moved out and rented out since. We were caught by the extra stamp duty.

It seems a bit unclear since I'm renting so my "main residence" is being replaced on purchasing the new place (unless the BTL is technically considered the main residence).

[quote onlychildhamster]@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[/quote]
Love it! The natural light isn’t great in the second bedroom but that would make it ideal as a 1 bed plus study rather than a 2 bedroom

I live in zone 4 (South London) and my lovely two bed ground floor garden flat on a lovely road was £365. Why not look at cheaper properties ever so slightly further out? I have great transport connections to all the major terminals within 20 mins. If you bought a flat more in this region you would have no worries!

@snoktruix

It seems a bit unclear since I'm renting so my "main residence" is being replaced on purchasing the new place (unless the BTL is technically considered the main residence).

The way I read it the place you're currently renting is your main residence

Stated reasonably clearly here www.zoopla.co.uk/discover/buying/q-a-new-3-stamp-duty-surcharges/

"If you are moving out of rented accommodation or, say, your parents' home, this will NOT count as disposing of your main residence as you are not an owner or part-owner of that property."

Also interesting:

"where a purchaser acquires a new main residence on or after 1 January 2017, they may still be eligible for a refund if exceptional circumstances prevented them from selling their previous main residence before the expiry of the 3-year time limit."

"There was an answer to a Parliamentary Question on 22 April 2021 suggesting the extension could sometimes be used where the old home was a flat which could not be sold because of cladding issues."

I’d look for a 2 bed around £500k, as a compromise. Borrowing so much sounds possible but not ideal - and spending £100k less should get you into a better LTV ratio, so cheaper mortgage rates.

Plenty out there, especially in South London - www.rightmove.co.uk/properties/108341228#/?channel=RES_NEW .

Do you need to spend that much? I live in London and if you went leafy south east (Crystal Palace, gypsy hill, penge) for example, you could get a good sized two bed with a shared garden for 450, possibly even 400.

You need somewhere ok size and area, but you do not want to take on more than you really need to. It’s easy to say oh well I’ll just work to 70 - energy and physical health can run out in way you don’t imagine in your 40s.

If you can move out of London that’s easier too. Failing that, try and pick and area that is still moving up so you make a profit.

But you are on the property ladder with your one bed, so that will help in the long run.

@Hermione101

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?

Interesting idea, though not sure where, and I’d have 2 mortgages to pay plus the rent so getting a bit complex.

Longest fix you can manage and go for it I would say.

If you want to continue living in London you should buy but I think you should aim lower than £625k and some of the links on the thread show you could have an attractive property in SE London for less. You’ve already said that although your role is based in London you mostly work from home and as a software engineer you are in an industry which is probably one of the least likely to ever need to return to the office full time. This would mean you could just focus on making the hospital commute bearable.

Assuming you earn around £120k of the joint income you should really look at the pension situation. Ideally you’d be contributing £40k pa to maximise the tax benefit and to try and make up for all the missing years of contributions. At 47 it’s not actually that long before you can access it and a lump sum topped up by 40% would possibly be the most effective way to approach reducing the mortgage rather than (or as well as) overpaying.

I would go for it, you have time to overpay the mortgage while you have a good household income. Focus on early repayment.
Seriously consider purchasing a freehold property, you will not have enough control over service charges and u expected maintenance costs.

I would say if you want to buy in London, now is a good time, interest rates are low and you can get a cheap fix rate. I would suggest meeting with a financial planner & advisor who will be able to make suggestions that are right for you and DP for now and in 5 or 10 years time. Looking at mortgage options, insurance, wills and also tax implications of having income from a buy to let. Get a recommendation, it will help and relieve some of the stress. You are not in a bad position you need good advice and adjust for your future. Good luck hope you find your dream home.

On 160k of course you can absolutely afford that.

However you are nearly 50 and only have total assets of 260k and likely not become high earners over night. To me that shows a serious serious issue with money management!

So its obviously possible but you need to sort your finances quickly. I would go short, sharp and brutal for 5 years. 30k mortgage a year (2.5 x 12), 30k max spend for living. Save 100k a year straight into the mortgage - non negotiable. Put it straight in as an overpayment and its all yours in less than 5 years.

That might sound insane. But honestly its insane you got to this point pissing that amount of money away with nothing to show for it. Do it for your future and go on a huge holiday when your done

London can become tired very quickly when you’re in a flat with horrendous neighbour noise and frequent crime nearby. I’ve been there unfortunately. Fine in your 20’s and 30’s, but it wears thin. I’’d go for a lovely house further out. There are lots of fantastic areas with great community spirit and ‘buzz’ away from London.

@FrownedUpon but he is 47 in London.

Suburbs like Richmond and Finchley and Muswell Hill are very green, leafy and not too far from the action. they are also 'london' and the surrounding commuter towns like St Albans are actually not that much cheaper once you factor in commuting.

@FrownedUpon and he is clearly not tired of London if he wants to live in an area with buzz.

It sounds fine to me but if you want less risk/stress you could look for a smaller, cheaper property. Seeing as you don't have kids you really don't need 2/3 beds.

[quote onlychildhamster]@FrownedUpon and he is clearly not tired of London if he wants to live in an area with buzz.[/quote]
Exactly! Why can't people understand that not everyone wants to start to 'wind down' or 'chill out' or live in a rural idyll at bloody 47. Plenty of life left in me at that age and I've had/have the rigours of rearing children and going through a divorce. I live in a rural area at the moment but once my children are reared and gone I would jump at the chance of living in one of the greatest cities in the world. Could never afford it but a gal can dream

In your situation I would definitely buy but prioritise overpaying on the mortgage each month. A quick calculation shows a £1k pcm overpayment would take roughly 7 years off your mortgage and you said £4.5k would be manageable so £3.5k is more than comfortable. I would also look at getting some proper financial advice as for such a high income and at your age, you have very little to show for it.

@LemonSwan

On 160k of course you can absolutely afford that.

However you are nearly 50 and only have total assets of 260k and likely not become high earners over night. To me that shows a serious serious issue with money management!

So its obviously possible but you need to sort your finances quickly. I would go short, sharp and brutal for 5 years. 30k mortgage a year (2.5 x 12), 30k max spend for living. Save 100k a year straight into the mortgage - non negotiable. Put it straight in as an overpayment and its all yours in less than 5 years.

That might sound insane. But honestly its insane you got to this point pissing that amount of money away with nothing to show for it. Do it for your future and go on a huge holiday when your done

I'm sure the 160k is gross so won't be anything like that amount after tax and NI. Also if you want a low 5 year fixed rate most lenders will only let you overpay a max of 10% of the balance every year

Having had your fingers burnt once with a flat, I don't understand why you want another one. Freehold all the way!
You have mentioned a DP i.e. you are not married. Have you thought about the legal implications of various what-if scenarios?