Pension or Mortgage following divorce

quandary1234

Looking for thoughts on the pro's and cons of the following.
I am in my early fifties and just divorced. I have about 50k left from the sale of the house after all the bills are settled. I have been renting for two years. I have decent pension pot (around 200k) with around 10k a year going into it. I am a 40% taxpayer.
I could buy another house but can't get what I want as I only have 12 to 13 years for the mortgage to run and prices where I live are very high. (I dont really want to still be paying for it when I retire).
I could buy a house which would be suitable to rent out and use the rental to pay off the mortgage as quickly as possible.
Finally I could invest the majority of the cash in my pension with a 40% top up in tax relief keeping some money to the side for emergencies. I have a fair bit of "spare" income each month and I do want to ultimately end up with a house which I own although by then my needs might well be more modest and in a less costly area.

Brynsam

People could pontificate and speculate but without having a full picture of your circumstances, you'd be getting a load of guesswork. Such 'free' advice is worth exactly what you've paid for it: nothing.

If ever there was a case for taking proper advice, after a full fact find, this is it.

Bimbly

Some mortgage companies will lend up to age 75. Others even up to 85. You have to show them you have the income to pay. Some will just ask you to say you'll stay in work until that time. Others will take pension income into account. A whole of market broker could help with this.

Are you up for the challenges / expense of buy to let? Have you thought about buying in the area you are currently in and then using the equity to downsize/move to cheaper area on retirement? A residential mortgage is cheaper than a buy to let. More help on the mortgage board.

If you have a buy to let, the rental could pay off your mortgage over time, but you'll still have to pay rent where you're living. I don't think this saves you any money.

Many would say that the tax advantages of paying into a pension outway mortgage overpayments while interest rates are low, especially as a higher tax payer. But you'd be looking to pay off that mortgage with part of your pension. Many use a tax free lump sum for this (or use it to move).

MEM62

Everyone will have their own views on where they want to be later on in life. Personally, I would not like to be facing retirement without owning my own home - even if that meant postponing retirement for a few years. Is there any realistic prospect of you being able to buy anything within a commutable distance from your workplace?

Also bear in mind that lift offers all sorts of twists and turns. It is quite possible that you would end up in a new relationship sometime over the next few years. That changes the game plan all over again. Of course you cannot plan on the basis of this being an expectation so plan on the basis reaching retirement being single.

justme111

so you do not want to pay mortgage when retired- that leaves you with options of paying rent while retired or relocate and hope the equity acquired in either rental house or the house you lived in will be enough to buy the house elsewhere outright or take a chunk of your pension, add those 50 k that hopefully will grow inveated by that time and buy somewhere outright.
I do not see what is the point of getting rental and paying rent yourself compared with buying where you want to live. Equity increase would be the same , even more in more expensive house. Paying charges and taxes both as a landlord and a tenant is bound to be inefficient. Mind , depends on the mortgage rate as well - I had a look and Santander seemed to offer ridiculously low rate for mortgage in retirement but there may be some caveats im eligibility.
Re buying a house to live in or investing - it depends on many additional factors- how high your interest on a mortgage would be , whether your pension would cover your rent and living, how flexible you want to be , how good at DIY. I take it there will be no automatic lump sum with this pension, will there?
My partner is/was in a similar situation so I mulled rhis topic over already amd the above are results of that mulling

enthusiasticsaver

Do you have any idea when you want to retire and how much you will need to live off?

I personally would favour owning my own home. You can get a mortgage for up to age 70 normally. You could clear it using your PCLS or move to a cheaper area at that point.

Personally I think BTL is more trouble than it is worth. Would you have to pay 40% tax on rent received?