Paying the mortgage

[Deleted User]

PaulF81 wrote: »

First home cost 325k, recently valued at 400k after only 35k in renovations.

You are pretty well off then. A 10% deposit would be £32.5k, impossible for most people to save up in any reasonable amount of time. Then a 5x income mortgage would mean an income of nearly 60k/year. Well above average even for a working couple.

Apparently you can also afford to spend £35k on renovations. Just how rich are you?

[Deleted User]

Loughton_Monkey wrote: »

Personally I see nothing wrong with the strategy of keeping the mortgage into retirement. I retired 8 years ago and still have mine. It's IO, and I spent all the endowment money years ago on other things. Let the mortgage inflate away, as long as you can afford interest and final payback. I must, however, pay it back in a couple of years at 65.

None of us get to retire until 66 or 67, let alone a decade before that. Maybe if we are extremely lucky, but can't exactly bank on that. So when I said 30 years max I was assuming retirement at 65.

But I will repeat my rant that that the benefits of an 'Offset' mortgage must be at least considered by everyone. I cannot recommend them too highly. If you want, you can make it 'perform' exactly like an ordinary repayment. In which case you've lost nothing.

They only work if you have savings, but thanks to falling wages, a rising cost of living, rising rents and the vast mortgage itself few first time buyers are likely to have much money in the bank for the next few decades.

black_taxi_2

what max age do mortgage lenders use now

im 52,might upgrade,slightly bigger flat, close to being MF

PaulF81

DELETED USER wrote:

You are pretty well off then. A 10% deposit would be £32.5k, impossible for most people to save up in any reasonable amount of time. Then a 5x income mortgage would mean an income of nearly 60k/year. Well above average even for a working couple.

Apparently you can also afford to spend £35k on renovations. Just how rich are you?

32% deposit, saved up over 4 years of financial penury, on an average of 50k p.a. Gross and supporting a wife in full time education for 2 years, saved as I say in mq in the forces.

No mobile phone contracts
No holidays
No going out for meals,
No designer clothes and underwear that lasted 5 years

You get the idea.

Now I'm tax free living overseas, a lot more wealthy than I was!

Loughton_Monkey

DELETED USER wrote:

None of us get to retire until 66 or 67, let alone a decade before that. Maybe if we are extremely lucky, but can't exactly bank on that. So when I said 30 years max I was assuming retirement at 65.

I have to say I don't agree at all. People my age could equally well have said "None of us get to retire until 65....". This is wrong in both fact and attitude. To say "None of us gets our State Pension until age 67..." is perfectly correct and a reasonable statement.

Retirement at 55 (or any time lower than state pension age) is not down to 'luck'. It is largely down to recognising that if you choose a lifestyle that costs 100% [or thereabouts] of income, then you will retire penniless and have to live off state pension.

In recognising that early savings are the best savings, I would much rather take [as I did] small 'sacrifices' in living standard for my working/earning life, for which the reward is a continuation of that lifestyle at retirement - or even in early retirement.

I earned not a penny more than thousands upon thousands of similar people, with similar education, similar career, similar opportunities, similar choices available to them..... If most of these spent (rather than invested) then that was their choice. If they 'can't possibly' retire at 65 (let alone 10 years earlier) then that's nothing that I have to answer for, or explain. They have simply chosen to distribute their wealth differently.

DELETED USER wrote:

They only work if you have savings, but thanks to falling wages, a rising cost of living, rising rents and the vast mortgage itself few first time buyers are likely to have much money in the bank for the next few decades.

The thrust of my argument [for offset mortgages] was that there is always eventually an 'edge' and I said it could be both ways. It can become a lucrative home for savings, and equally (as for the last 4 years in my case) a lucrative source of cheap borrowings that can earn much more elsewhere.

Imagine that I had no savings in 2008. On a £210K amount withdrawn from my almost paid off mortgage, I earned over 4% (3.2% net), paying 1.5% mortgage interest. I netted £3,570 a year! Over 4 years that's £14,280 extra savings accumulated.

So to say "They only work if you have savings...." is wrong. And as you would assume from my comments above, if a house buyer is not going to have any savings over the whole course of a 25 year (or more) mortgage, then I have to say that's 0 out of 10 for financial management or common sense....

Tancred

wymondham wrote: »

Hi All

Just had a good read about and the price of houses is sinking in with me. There is a newbie who is quite casually talking about getting a 300k property for their very FIRST home (it's a 50% scheme, but never the less)!

How on earth are these people:

a. Going to pay for it
b. Hope to pay it off without going into their pension years?
c. Cope when rates rise, as they will.....

I'm pretty sure if I was buying now there is no way I could even imagine finishing the mortgage - I had enough of a struggle on our 30k house and I had a good wage!

How times have changed in quite a short space of time, and I fail to see how this can be considered good (house prices rise so fast)?

Speaking as a recent house hunter in mid Berkshire I can honestly say that I've seen thirtysomethings with kids buying 4 bed detached houses for £330-350k as if they were bags of sweets. And it's not even as if these people were top notch doctors, airline pilots and lawyers etc - just ordinary looking people driving second hand cars.

There is money in Britain.

[Deleted User]

PaulF81 wrote: »

32% deposit, saved up over 4 years of financial penury, on an average of 50k p.a. Gross and supporting a wife in full time education for 2 years, saved as I say in mq in the forces.

No mobile phone contracts
No holidays
No going out for meals,
No designer clothes and underwear that lasted 5 years

You get the idea.

Now I'm tax free living overseas, a lot more wealthy than I was!

These days two people living on £25k/year, no matter how frugally, is almost impossible in many parts of the country. Rent, energy and food easily eat that up. £50k is twice the national average. You were extremely well off and lucky to be able to do that. Good for you, but hardly a realistic option for most of us.

[Deleted User]

Loughton_Monkey wrote: »

In recognising that early savings are the best savings, I would much rather take [as I did] small 'sacrifices' in living standard for my working/earning life, for which the reward is a continuation of that lifestyle at retirement - or even in early retirement.

I earned not a penny more than thousands upon thousands of similar people, with similar education, similar career, similar opportunities, similar choices available to them..... If most of these spent (rather than invested) then that was their choice. If they 'can't possibly' retire at 65 (let alone 10 years earlier) then that's nothing that I have to answer for, or explain. They have simply chosen to distribute their wealth differently.

Make no mistake, it isn't a choice for many people. Rent is what it is, energy bills are unavoidable, other costs are rising faster than wages.

Personally I work hard and live frugally. Have done all my life.

Loughton_Monkey

DELETED USER wrote:

Make no mistake, it isn't a choice for many people. Rent is what it is, energy bills are unavoidable, other costs are rising faster than wages.

Personally I work hard and live frugally. Have done all my life.

Whilst not doubting your own hard work and frugality for a minute, I still rather disagree with your first sentence above.

It is only true for the extreme low percentiles - in which case benefits in retirement tend to keep income constant before/after retirement. It can also be true for a short period of time (for anyone).

My point can easily be proven by taking any person [in the position you describe] and note down the income. That defines the limit of spending which you advocate can barely be 'lived on', and certainly not cut. Once you have named that income, I can guarantee you would find hundreds of people in your own town, your own workplace who earn 90% of the figure you wrote down. They are living on it. Even assuming they, too, are spending 100% of their income it proves conclusively that your person could live on it as well - leaving 10% for pension/savings - whatever.

I fully understand the position you describe. I can fully understand a list of costs (rent, petrol, fares, basic food, bills...) adding up to £900, and there's only £950 coming in so only £50 for luxury/breakages/emergencies.... Actually, we've all been there at some time in our lives. But over the whole round, this position is untenable for too long, and can usually be traced to earlier decisions.....

You chose to live in that house at that rent, you chose to buy that specific car knowing what the repayments were, you chose the particular lifestyle you lead and by implication chose to surround yourself with costs that add up to £X which would not provide a necessary safety margin for (a) savings, or (b) petrol/tax/rent rises....

I have budgeted all my working life. I cannot underestimate the power of doing this and the power of budgeting in making all those hundreds of life choices. When you retire, it becomes even more important. When working, there are always promotions, new jobs, bonuses, windfalls, that can more than compensate for temporary pay freezes, gas bill hikes....

.... Now I'm retired, I have absolutely no 'leaway' at all. Yes, my savings interest, or investment growth will fluctuate around an average, but what I mean is my income is "what it will be" and there's hardly a thing on this earth that will change it. My occupational pension is not going to give me a 10% 'pay rise', the State Pension is going to go up purely by inflation. Hence if I go 'over budget' by any significant degree, for any length of time, then I'm 'stuffed'. Hence I have to live within budget, and I have to choose my lifestyle to fit within it. If I don't, no 'windfall' is going to come along and save me. But because I followed these principles when working, I have quite a comfortable retirement so I'm not complaining.

If not convinced, just try out this "theoretical"....

In a Desert Island Disks gone wrong, you actually do get consigned to that island, which is uninhabited and incapable of supplying any food/water whatsoever. You are told you will be there for 7 years exactly, which is 2,556 days. They guarantee that they will air-drop precisely 12.5 days of 'average sized' rations every week for 4 years. After that, you get nothing.

After 7 years, they will bring you back, and give you decent recompense for all your lost savings, and you resume your career...

You quickly work out 4 X 52 X 12.5 to be 2,600 days worth of food. Enough! Phew!

This emulates 40 years of earning, followed by 30 years of retirement. And you don't need to be Einstein to work out the consequences of choosing to eat anything significantly more than 7 'units' of your weekly shipment.

In principle, retirement planning is just like that. Eating, say, 9 units of food a week is literally suicide. Spending more than X% of earnings consistently is also suicide of the financial variety. And I'm afraid that perceived wisdom is that X is ideally about 75%, but certainly not above 85%

PaulF81

DELETED USER wrote:

These days two people living on £25k/year, no matter how frugally, is almost impossible in many parts of the country. Rent, energy and food easily eat that up. £50k is twice the national average. You were extremely well off and lucky to be able to do that. Good for you, but hardly a realistic option for most of us.

Luck had nothing to do with it.

1) I worked hard at school to be on a decent whack when I joined the jobs market rather than doss round the bike sheds smoking.

2) we had cheap housing as a result of service in the forces. Which involved being shot at and shelled on a regular basis in three differen countries. I call that a fair deal.

3) we were laughed at for shopping at Asdas and doing all our own car maintainance whilst others were buying Aston martins at 30. I am more than content with frugality now as we are reaping the benefits as a result of significant deflation during 08-10.