anyone bought a house they know they might not be able to pay off at the end?

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  • anyone bought a house they know they might not be able to pay off at the end?
  • Premier Icon scotroutes
    Subscriber

    It is very common in other countries to have a mortgage that you will never pay off. It seems to be something in the British psyche that we are used to the opposite.

    mudshark
    Member

    If you’re sure you can service the debt whilst earning then no problem selling up when you retire, may well want a smaller place then anyway and if you think house prices will go up nicely you could do very well.

    Premier Icon jambalaya
    Subscriber

    Yes.

    There is nothing unreasonable in assuming that you will sell the property rather than pay off the mortgage. Depends on whether you think you’ll retire in the property in some regards. My kids have up and left, do I need a 5 bedroomed house in a location convenient for work (and thus more expensive and in a busy place) when I am retired ?

    Premier Icon jamesgarbett
    Subscriber

    Under the new lending rules would you not have to “prove” you had some vehicle for paying off the capital and the interest?

    Premier Icon the-muffin-man
    Subscriber

    With this one though i’m not sure if we would clear the mortgage.

    Take the mortgage over 25 years rather than 20?

    teef
    Member

    In 20 years £569k will seem ridiculously cheap – go for it – let inflation do it’s trick. Bought my house 18 years ago and the neighbours just sold for almost 5 times what I paid – you always regrets not buying that house you could of afforded but didn’t take the risk.

    hora
    Member

    OP I’d look at a different argument as more key. Could you afford to keep paying the mortgage for 6months if your employer/work suddenly and inexplicably dried up?

    We are approaching a big hike in interest rates thanks to headless idiots wanting the dream of a bigger house/status symbol/something to show family and friends that are doing well.

    Please don’t join this bunch that is going to cost me more in monthly mortgage payments ultimately.

    Premier Icon piedi di formaggio
    Subscriber

    When interest rates go up (which they will), how does that change things for you?

    Premier Icon igm
    Subscriber

    “Stream at the bottom” – hmmm. Get a flood survey.

    Premier Icon Del
    Subscriber

    I’d be looking at another street. the one with the stream at the end of the garden will be under water in 20 years time, the other one uninsurable as a result. 😀

    peterfile
    Member

    Take the mortgage over 25 years rather than 20?

    Might not be possible if he is in his 40’s? Which I assume is the point of the OP?

    breatheeasy
    Member

    As long as you pay some of the value off (i.e. either into a savings account, or back to the mortgage provider).

    If paying interest only, then I’d say no. Even the little ‘retirement’ houses are going to rise in value, maybe even more than the bigger houses like you’re looking at – the 2 bed houses round our estate demand a significant premium over the 3 beds becuase they are on one floor and thus perfect for the retirement.

    freeagent
    Member

    Our current mortgage runs until i’m 70 (i’m 41) however it was just a vehicle to get the money we wanted at a rate we could afford.
    We’ve got to remortgage in about 8 months time, and i’ll be doing something similar.
    However i’m expecting that my career progression, and inflation will allow us to overpay, and/or shorten the terms when we remortgage again, so it will get paid up quicker.

    johndoh
    Member

    Might not be possible if he is in his 40’s?

    I got one over 32 years aged 46 (last July) – it is joint with my wife who is 37 but she will still be 69 at the end of term (although we do intend paying it off much earlier of course).

    EDIT: Freeagent in a similar boat to me.

    Premier Icon vinnyeh
    Subscriber

    OP I’d look at a different argument as more key. Could you afford to keep paying the mortgage for 6months if your employer/work suddenly and inexplicably dried up?

    I’m never sure how valid this is. Most people couldn’t, or wouldn’t want to, and would simply ask for a payment holiday. Which it’s in the bank’s interest to give.

    More importantly, interest only, or part repayment/part I-o mortgages are like hens teeth in the residential market.
    But if you can get the mortgage, and ithe house is in a high demand area, nothing wrong with stretching yourself.

    Not many houses round today worth less than they were 18 years ago.

    bikebouy
    Member

    No but my first house oooohhh 25years ago was bloody £40k! Damn if at the time I thought eeeeehhh?? fek? Whats gonna happen if I loose my Job/Partner blahdeblahblah??

    Sweat and cold shivers lasted for oooohhh 2 years after I moved in, thankfully it all calmed down once I’d gotten used to paying £250pcm for the mortgage..

    Many mates fell to the recesion back in the early 90’s. Same thought’s they had to mine as we all morphed into “hometrackworld” back then, one Guy took on £90k for a two bed appt in Stortford, jeeze the panic that ensued post redundancy then negative equity then reposession…

    Hell it killed families all over the UK..

    Never do I want to see that happen to anyone, therefore take care and be a realist.

    hora
    Member

    nothing wrong with stretching yourself.

    Right. After a recent long recession and another predicted.

    We are approaching a big hike in interest rates thanks to headless idiots wanting the dream of a bigger house/status symbol/something to show family and friends that are doing well.

    BoE’s still telling everyone they’re staying low (while at the same time telling everyone to stop pushing prices up). Not entirely sure whya they are planning to do about it though, short of seperating intrest rates for house lending Vs the rest of the economy somehow.

    We need a big increace in housebuilding, which will probably mean a big shift in town planning including easing the greenbelt out a notch.

    mudshark
    Member

    After a recent long recession and another predicted.

    Another?! When’s that coming then?

    Premier Icon ourmaninthenorth
    Subscriber

    Is this completely bonkers thinking?

    My instant reaction would be that it is (based on the “what if?” factor of health/plans changing/university fees etc). But then I’m in the “pay off my mortgage before I retire camp”.

    It is very common in other countries to have a mortgage that you will never pay off. It seems to be something in the British psyche that we are used to the opposite.

    But this got me thinking. I have no reason to doubt it, but I wonder if other factors in property ownership/inflation etc are different?

    You could just go with the one that you think will make you happiest and enjoy it for as long as you live there….

    johndoh
    Member

    Do you have any reasonable expectation that you may get an inheritance between now and your retirement too? It’s a bit morbid to think like that but it needs to be considered.

    ridethelakes
    Member

    The first one is well overpriced I think. I know which one you’re talking about and I think its been on the market for well over a year, maybe two.

    Premier Icon ourmaninthenorth
    Subscriber

    Another?! When’s that coming then?

    Next. After the recovery.

    Seems old Gordo didn’t manage to abolish boom and bust after all….

    Premier Icon jambalaya
    Subscriber

    Just as a follow up to @bikebouys post my first house was £75k (3 bed semi) and the one over the road was £95k (4 bed detached), I remember wondering how we’d ever afford to buy a house like that. My parents first house was £1.5k but then my Dad earnt £400 a year.

    ed34
    Member

    looking for a house at the moment as ours has sold, and theres 2 in the running, both in windermere

    One house is asking 485k and is a semi with no garage. I reckon its overpriced, but we would be able to clear the mortgage on this over 20 years.

    2nd house is asking 569k, much bigger, detached, same street as the first one, bigger garden with stream at bottom and double garage. With this one though i’m not sure if we would clear the mortgage.

    I’m thinkng the 2nd house is ultimately much better and would be nicer to live in. We can afford the mortgage interest, and some repayment of it but probably wont clear it all. Now if this was the case i’m thinking we could look at selling in 18 years or so and down sizing as kids will have grown up by then as well. Then when we sell, clear the remaining mortgage and get a cheaper house to stay in forever after that.

    Is this completely bonkers thinking? Anyone else in this position?

    Theres also the fact the there will most likely be some family inheritance from my elderley parents before the 20 years is up, but i’m not factoring this into my calculations at the moment.

    It seems like an ok idea at the moment as the LTV will only be about 45% max, so we should always be able afford something smaller in the future.

    paulevans
    Member

    ED34 – are you currently in Windermere? We’ve been here for 4 years now. I know both of the houses you are looking at and have referred to them in a few local valuations that I’ve done for some of the high street banks. Both very nice. If it were me and I was happy with the security of my income I’d go large. Windermere has weathered the housing crash well and prices have remained quite robust over the past 3-4 years.

    mudshark
    Member

    Worst case scenario you sell up and buy somewhere cheaper. Not sure how you can get a mortgage that you won’t be able to pay off at your current income level these days though.

    hora
    Member

    wouldn’t the OP be in negative equity though if he was to sell up/downsize?

    If he had to/recession he’d definitely be in negative equity?

    When I first went for a mortgage the Bank Manager told me to stretch as far as I could because over time the house prices would rise and I’d be sat on a great investment.

    After Labours recession I’d never do this. Plus you wouldn’t pay off the mortgage? Why would you do it OP!?

    Premier Icon DezB
    Subscriber

    wouldn’t the OP be in negative equity though if he was to sell up/downsize?

    Only if the house price went down dramatically. (Assuming he’s got a big deposit to put down).
    I don’t see how you can get a mortgage on it.
    I’d hate to have that much debt hanging over me.

    mudshark
    Member

    I’d hate to have that much debt hanging over me.

    It’s about managing risk really, some of us have houses worth what might seem crazy amounts simply by taking a risk and stretching ourselves. There are losers though so got to be sensible about making the decision to sell or get lodgers or cut back on other expenses.

    ed34
    Member

    paulevans – not in windermere at moment, live down towards kendal

    Sounds like you know the local market pretty well! Both are in Brook Road (as you already probably guessed!)

    what do you think of the actual valuations on them at the moment?

    Seems to me like theres a lot more house for the extra money on the detached one. I’ve heard the vendor of the semi is also a bit stubborn and not willing to budge on price much which would turn us away if she wouldnt accept something a bit more reasonable.

    johndoh
    Member

    I’d hate to have that much debt hanging over me.

    I wrestled with this one last year. I was within a few months of paying off a mortgage on a perfectly adequate 2/3 bed end terrace worth around £275k but decided to go for a 4 bed detached with a private garden (it was shared and openly accessible at the old place). Yes, I am back to having a big mortgage but it is serviceable (£650 a month at the moment) but already the house we paid £392k for last July are going for £500k+ so the way I see it, my kids will get a better inheritance and might actually be able to get on the property ladder themselves. If we’d stayed where we are we would be more comfortably off but we’d have squandered the ‘additional’ income and our two 4 year olds would have grown up somewhere with very little space of their own either indoors or out.

    Premier Icon midlifecrashes
    Subscriber

    Have you thought of a low cost with profits endowment policy linked to an interest only mortgage? Nice lady at the Bradford and Bingley sold us ours and she said at full term it’s likely to raise about double the loan amount leaving us with a very nice little windfall. I thoroughly recommend them. Ours is with Legal & General, sorry General Accident, sorry Norwich Union, Aviva.

    Premier Icon piedi di formaggio
    Subscriber

    …and that ^ never went horribly wrong for anyone did it

    Premier Icon midlifecrashes
    Subscriber

    It’s going much better than our Equitable Life pension. 🙄

    trail_rat
    Member

    “If we’d stayed where we are we would be more comfortably off but we’d have squandered the ‘additional’ income and our two 4 year olds would have grown up somewhere with very little space of their own either indoors or out.”

    sounds thoughtful but im planning to be squandering it on taking my kids to see the world as they grow up (and no i dont mean all inclusive hotel breaks in the carribean)and continuing to live in my 3 bed semi detached

    johndoh
    Member

    sounds thoughtful but im planning to be squandering it on taking my kids to see the world as they grow up (and no i dont mean all inclusive hotel breaks in the carribean)and continuing to live in my 3 bed semi detached

    We all have our own priorities though. Being able to take kids on holiday (which we have done and will continue to do) isn’t as high on my list as having outdoor space that they can play in. Right now we have renovated an old wendy house (given to us) and are making a ‘fairy garden’ behind a huge laurel bush – all made from scavenged bits (logs to make a small table and chairs from a tree felled at the in-laws’ house, wind chimes and musical instruments that I am making from old lengths of copper tube I reclaimed from a hot water system we changed etc). We have also made them a vegetable garden to grow things in. This is probably because most of my (and my wife’s) amazing memories as a child came from outdoor exploration and they couldn’t do that at the old house – simple as that.

    paulevans
    Member

    If you have the means to stretch then higher end house does seem to be the more interesting of the two, pound for pound. More space, detached but most important to me would be the off road parking and garage space. South facing garden?

    I would suggest both are perhaps slightly north of the mark in price, especially if you take into consideration the length of time they’ve been in the market. Only problem in Windermere is that owners tend to be very reluctant to reduce their expectations on price. Being able to move quickly usually counts for something these days.

    badnewz
    Member

    Debt = slavery. Go for the cheaper (!) house.

    legend
    Member

    One has no garage the other has a double. Forget the price difference, it’s a no brainer!

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