£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

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

Ok I will give you that its not going to be exactly to my math, but I dont know the split of earnings so cant work it out.

OP is high enough earning they can get an offset so the 10% need not apply.

But I do still think they should make a short and hard effort to go no-spend.

@senua a lot of the freehold houses in London are Victorian with poor EPC ratings and under the government's new plans would be unmortgaeable. Each property has a risk; my flat is a 1930s build so no cladding issues and the freehold is owned by residents.

It's fine as long as you get a flex mortgage so you can over pay.

What kind of work do you do? My partner and I are planning to both work to our 70s but we have jobs we can do at home, part time or freelance, so unless we were hit by catastrophic ill health it's totally doable.

My husband is now 50 and we are about to take on a new mortgage over 25 years. I am a decade younger than him so they're willing to offer that to us.

Thanks everyone for very helpful advice & ideas. I'm obviously annoyed at myself for not having managed my finances better, but it seems there is hope.

I can see that it's essential I buy somewhere soon, but probably not overstretch myself too much on the purchase price in order to be able to put money into pension and savings.

I am a bit worried about the imminent rise in interest rates making it more difficult to afford the mortage, but at the same time it seems unwise to leap straight into a £500k+ mortage without shopping around for more affordable options.

Also not sure about the legal implications of sharing this or not with my DP, we need to figure that out.

1. I dont think 47 is that old! I think an issue my be your partners role as physically demanding jobs can be difficult to work up to retirement with.
2. if i didnt have kids and had a job in london i wld definitely want to live in or near london. mumsnet seems to be filled with people who once they hit 35 want to go and live in the suburbs. TBH i would even consider retiring to london to enjoy it!
3. i think the compromises are either cheaper flat /house in a different area of lonon and /or move to a town 30 mins away by train - though tbf these towns are often just as if not more expensive
4. could you if need be sell the btl property later to help clear the mortgage?

If it were me the main issue would be buying free hold - leasehold is just opening up lots of problems i think £600 cld get a house

@Undecided1985 600k is a very small budget for a London house. You would have to bet on a 'gentrifying' area and now that suburban living is more popular, it doesn't even get you much in the outer suburbs like high barnet.

600k is how much I am planning to spend on a 3 bed flat in zone 3. Agree it is a lot for a 2 bed, my 2 bed cost me £400k.

onlychildhamster

yes do agree but it would perhaps be achievable in some areas in less desirable areas of outer london? really a choice of location over price i agree and risk taking its all so personal.

but personally i would avoid leasehold if pos

also it would buy a terrace style house in say Hitchin / other commuter town which has a hospital nearby for the partner to work in?

@Undecided1985 might be ok for OP as it may only be him commuting from hitchin to London (season ticket £400 per month and even carnet tickets are not cheap). I asked DH last night if he would ever contemplate st Alban's cos we really love visiting (and even I the die hard Londoner wouldn't mind as much cos it is so well connected that it is almost like an outer suburb of north London) but he said no, stupidly high transport fares. It was just like a mental rejection of paying rail fares (and I think he would be the same even if he earned more). I don't know if OP is any different in that respect.

I think that's why my DH rejected all properties but the flat in east Finchley cos it was in zone 3 and he is used to zone 3 fares having grown up in zone 3.

onlychildmonster

completely get where you are coming from - I love London and dont understand the rationale that everyone needs to move out to country towns.

I also think often transport infrastructure is better in london eg no need for a car etc etc very handy actually for so many people of ALL ages not just twenty somethings also so much going on i think some commuter towns are very focused on families and if OP doesnt have kids there may be more social groups to join/take advantage of in london.

but if the OP wants london it will have to be a compromise in size and location

if however they do feel like they need more apace or to be freehold then commuter towns with a hospital near by for the partners work might be a possibility. and an investigation into whether OP can wfh a bit more

at the same time it seems unwise to leap straight into a £500k+ mortage without shopping around for more affordable options.

Its absolutely not unwise! If I were you I would be borrowing as much as they would allow me as its only going to get less and inflation will occur.

Please go and see a financial planner OP. In your instant I think they will pay for themselves in a month.

@Palavah

You are on the property ladder: most people don't own more than one property.

Good point

@Undecided1985 yes and it does save money not having a car which enables me to overpay more in mortgage. I don't know if OP has a car now but since his other half is a nurse who presumably does night shifts, a car would be essential for her if she moves to a country town and that would be an added expense. In London, it's really not needed as there are night buses.

@LemonSwan

at the same time it seems unwise to leap straight into a £500k+ mortage without shopping around for more affordable options.

Its absolutely not unwise! If I were you I would be borrowing as much as they would allow me as its only going to get less and inflation will occur.

Please go and see a financial planner OP. In your instant I think they will pay for themselves in a month.

That's an interesting take. On the other hand it leads to a large mortgage payment which arguably is risky.

Getting financial advice sounds like a good idea though. Any recommendations?

snoktruix have you spoke to your partner about buying a property on your own?

@CrimbleCrumble1

snoktruix have you spoke to your partner about buying a property on your own?

Yes, we're talking about it. Another area of uncertainty

For what it’s worth I’d go for it if I was you but I would probably either choose a slightly cheaper area or smaller property. You’ve had time in your expensive rental property in a good area and now it’s time to think about the future. Would you be able to afford the property on your own if you and your partner were to split up or she didn’t want to contribute towards your property?

@CrimbleCrumble1

For what it’s worth I’d go for it if I was you but I would probably either choose a slightly cheaper area or smaller property. You’ve had time in your expensive rental property in a good area and now it’s time to think about the future. Would you be able to afford the property on your own if you and your partner were to split up or she didn’t want to contribute towards your property?

At £600k, barely. At £500k, more comfortably. Not that we have any such problems right now, but I see what you mean.

@Rugsofhonour

The mortgage payments might be almost the same as your current monthly rent but what about all of the additional costs that you will have to pay as the owner of the property which you don’t as a tenant? We live in London and our service charge is £2000 per year as a leaseholder. What if you buy freehold and need to replace the roof or windows? Are you using all of your savings on the deposit? It all seems rather tight to me.

We will try to retain some safety buffer of savings (say £20k) and build it back. But yeah it will be all be rather tight it seems, whatever we do.

@bookworm100

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!

Where is that bookworm?

Look harder. There are really good two bed flats in zone two for less than you thin, there is HUGE CHOICE of London flats now, really search, open your area, obviously avoid cladding & high rise but seriously go through the market with tweezers, you could get a nice two bed with a bit of outside space for less. And freehold! Good luck!

Jesus Christ I’ve just looked back and seen your pension is tiny. Are you mad. You are currently paying over 40% tax right? You need to Chuck money into your pension to save tax and put money aside for retirement urgently. You’re nearly 50 but still speaking like a millennial .

Fgs downgrade your real estate ambitions and plough money into your pension and flex the tax relief muscles! I’m shocked a highly educated person with a phd hasn’t realised this.

Please don’t make financial decisions until you’ve seen an FPA, joined Which Money, and done some serious reading. You’ve made one error in real estate already (sorry, buying a studio was a terrible mistake, putting aside the cladding which was not your fault). If you’d bought a two bed semi in zone 6 with what you’d spend on that studio you’d be laughing now.

Don’t make any moves until you have put massive effort into educating yourself seriously on the rest of your financial life. Stop pissing away so much on rent; try living a bit more modestly for a year. And dont get a half million mortgage ffs.

Bromley borough. It's a gorgeous period property and was purchased in June, so that's a recent sale price figure too. Honesty, I think you'd be mad to buy anything else when you can get so much so much cheaper. Oh, and it's a good size private garden, didn't specify that.

@Bootikin

Jesus Christ I’ve just looked back and seen your pension is tiny. Are you mad. You are currently paying over 40% tax right? You need to Chuck money into your pension to save tax and put money aside for retirement urgently. You’re nearly 50 but still speaking like a millennial .

Fgs downgrade your real estate ambitions and plough money into your pension and flex the tax relief muscles! I’m shocked a highly educated person with a phd hasn’t realised this.

Please don’t make financial decisions until you’ve seen an FPA, joined Which Money, and done some serious reading. You’ve made one error in real estate already (sorry, buying a studio was a terrible mistake, putting aside the cladding which was not your fault). If you’d bought a two bed semi in zone 6 with what you’d spend on that studio you’d be laughing now.

Don’t make any moves until you have put massive effort into educating yourself seriously on the rest of your financial life. Stop pissing away so much on rent; try living a bit more modestly for a year. And dont get a half million mortgage ffs.

I know, the pension situation is not good.

Would you say then I should just be downgrading to a cheaper rental rather than buying say a modest 1-2 bed? (Assuming in either case that I seriously save more prudently and put more money into the pension).

The studio was a mistake in the sense that it's not convenient for us to live in, yes (and the cladding). Though hopefully sellable at some point.