Best options for older buyer

RakeAboot

Hello folks. First post and hopefully not too tedious.
At the moment I am 52. I have a house which I bought 30 yrs ago worth approx £185k and which has been mortgage free for a couple of decades.
I am retiring at 55 with a Sipp valued at approx £1 million (if it stays reasonably stable).

I have seen a house which I and my wife both like and think we would like to buy to live in when we retire.
House is approx £200k.
What are my options for buying it.? I've never sold a house or bought one on the market , so am inexperienced in this part of financial life.
I'd like to look at all options, including renting the current home, taking a mortgage and paying it off either with the SIPP or by selling the current home.
At present I am employed and earning around £40k a year basic, and have no massive debt, just a car loan or two.

Thoughts on what you would do ?.

bolwin1

option 1. Renting your place out & buying the new house. Lots of complicated rules & regulations around becoming a landlord - have a quick search for them. It's a lot of hassle. Not be done lightly. You would also need to get a buy-to let mortgage & unless you've got a decent deposit, you're unlikely to get one.  

Option 2. Using the SIPP to pay for the house. As you probably know, this isn't available for another 3 years until you are 55.

Option 3. Sell your place, take a small mortgage to cover the buying & selling costs & the price difference. When you are 55, pay the remaining balance with a lump sum from the SIPP, or simply pay the ongoing monthly payment with your pension withdrawals. 

If it was me, I'd be going for option 3. 

RakeAboot

What about taking a 25 yr interest only mortgage , running it for 3 yrs and paying it off with the SIPP, and renting out current place anyway (which would likely cover the payments, no?)

Not too afraid of taking on running a rental.

bolwin1

Read posts 3 and 4 that cover what you'll need to learn as a landlord before deciding you're really happy to go down that route. https://forums.moneysavingexpert.com/discussion/6128866/becoming-a-landlord-for-the-first-time/p1
It's not my idea of retirement. 
Don't forget, you'll need to pay stamp duty or £7,500 (assuming 200K costs) as it's your second home. You'll also need over 10% deposit before lenders would consider talking to you. Also, you might not pass affordability checks for a £200K mortgage, given your car loans & 4 times salary requirement. Most residential mortgage lenders won't count rental income towards your total income until you've got a couple of years history of receiving it (& why should they - if you are relying on it & don't get a tenant in month one, you've got a problem). 
Clearly, if you can wait until you are 55, none of this is a problem.  

bolwin1

You might be able to remortgage your place for e.g. £100K & put this towards a Let to Buy mortgage though. You'd need to  ensure that rental income will cover 125% of your buy-to-let mortgage repayments. 

dimbo61

Do you want to become a Landlord ?
Is your home a suitable property to rent out ? Good yield ?
You should be able to get a mortgage at 52 as many lenders will look at your income and pensions if you want to buy a second property.
You have a £1,000,000 pension pot 25% you can take as a tax free lump sum and the rest should give you a pension for the rest of your life.
Consider an offset mortgage as you could use the lump sum to offset the mortgage debt.
Speak to a whole of market mortgage broker and your accountant.
Check with local letting agents how much your home would rent for.

RakeAboot

Never heard of an offset mortgage, sounds like an interesting idea.

House should bring between £750 and £900 a month.

RakeAboot

Offset only works if the savings are with the lender. So no good. Mainly cause it isn't savings

SpoonKat

RakeAboot said:

What about taking a 25 yr interest only mortgage , running it for 3 yrs and paying it off with the SIPP, and renting out current place anyway (which would likely cover the payments, no?)

Not too afraid of taking on running a rental.

is it possible to get a 25 year mortgage when you are over 50? asking because I am 53 and wanting to move in the new few years but will be looking for a mortgage 

MovingForwards

SpoonKat said:

RakeAboot said:

What about taking a 25 yr interest only mortgage , running it for 3 yrs and paying it off with the SIPP, and renting out current place anyway (which would likely cover the payments, no?)

Not too afraid of taking on running a rental.

is it possible to get a 25 year mortgage when you are over 50? asking because I am 53 and wanting to move in the new few years but will be looking for a mortgage 

As long as you have the private pension to support yourself and paying the mortgage into retirement. Speak with a good broker to see what options are available.