Taking out a mortgage you might never pay off?

[Dairygirl]

How common is it for people to take out mortgages that they might never pay off? Suspect this might be especially true in London.

We are looking to buy our first flat c800k for a two bed in a decent area. Have the deposit and salary to allow. But not 100% we’ll stay in London with our jobs. If we move to another area of the UK our salary would fall drastically, but we’d work half the hours.

What's the alternative? Renting? You won't get a mortgage if they didn't think you could pay it off. I think it's fine, go for it.

Yes we know people who have bought large homes on a large mortgage and often interest only to house their family who then will take advantage of the rise in house prices to sell up when kids leave home and downsize to become mortgage free either in the same expensive area or move to a less expensive area to a similar house but again mortgage free having taken advantage of a rising housing market to increase their capital. This gives the benefit of living in a nicer house as a family and increasing equity quicker than investments might. Indeed they often save separately and pay off chunks of capital from time to time but never expect to pay for that house in full.

The interest is still often less than rent for a similar property.

But surely when you move from London you’ll either sell and pay off what is left of the mortgage from the sale or keep it and rent it out to continue to pay off the mortgage? So either way ( unless you die when the remaining mortgage will be taken from the estate I believe) you will pay off the mortgage?

£800k is a lot for a flat even in London. If you’re flexible about the area of London you could find a 2bed for almost half that. However are pp said, you wouldn’t be approved for the mortgage if you can’t afford it. But might be worth looking around as £800k is a huge chunk of change and can get a 3 or 4 bed detached house for that in the outer zones of London that have good transport links to the centre. If you can’t avoid stretching to your limit you will have more peace of mind.

What do you mean never pay off?
Whenever the house sells (through moving elsewhere, divorce or death) the mortgage gets paid off.

We've "owned" 4 houses. Only one of them - the current one - stands a chance odlf getting paid off and 100% owned by us.

Yes we are aware that there are cheaper areas - but we’d rather live in a small town or the countryside than the suburbs. That’s just us!

Few people expect to buy their first home and live in it for 25+ years until the mortgage is paid off. Most people end up moving for one reason or another. You sell your house, pay off the mortgage, and use what's left as a deposit on the next house and a new mortgage.

And that is why you need home insurance to get a mortgage.

I mean life assurance and mortgage protection sorry!

I don't understand what you mean by never paying it off. Are you talking about taking out an interest only mortgage?

With a repayment mortgage you usually start with a 20-30 year term and either have paid it off by the end or pay it off when you sell up and move on. If you leave London, you sell the flat, pay back the mortgage and get a new mortgage based on your new circumstances.