Crunch time, do we complete on house in Spain?

Thrugelmir

Bossy_bird said:

Me and hubby both 43 and trying to avoid slipping into our respective mid life crises by actively engaging in pension planning. 

The first stage of which is to take on an additional £225k of debt. More mortgage debt owed than the value of your pension investments. Leveraging sounds attractive when interest rates are low. As they start to rise and asset prices fall. Then the downside can be magnified considerably. 

Bossy_bird

Thrugelmir said:

Bossy_bird said:

Me and hubby both 43 and trying to avoid slipping into our respective mid life crises by actively engaging in pension planning. 

The first stage of which is to take on an additional £225k of debt. More mortgage debt owed than the value of your pension investments. Leveraging sounds attractive when interest rates are low. As they start to rise and asset prices fall. Then the downside can be magnified considerably. 

This is a really good way of looking at it. Does it matter that we have £500k equity in house or should we not count that? 

Thrugelmir

Bossy_bird said:

Thrugelmir said:

Bossy_bird said:

Me and hubby both 43 and trying to avoid slipping into our respective mid life crises by actively engaging in pension planning. 

The first stage of which is to take on an additional £225k of debt. More mortgage debt owed than the value of your pension investments. Leveraging sounds attractive when interest rates are low. As they start to rise and asset prices fall. Then the downside can be magnified considerably. 

This is a really good way of looking at it. Does it matter that we have £500k equity in house or should we not count that? 

Depends on what your future plans are. At the moment it's just a number. That may rise or fall, or simply remain unchanged. 

squirrelpie

jamesd said:

I suggest that you greatly increase your mortgage term with the goal of doing most repaying with the tax free lump sum from your pensions. This is because it gets you tax relief in effect on your capital repayments and because investment growth rates are currently expected to be well above mortgage interest rates, so you're expected to make more money than the extra interest cost.

Just to say that the possible value of 'current expectations' is well illustrated by the current crisis in the energy market. Unless the mortgage is a long-term fixed rate, you can be exposed to unexpected large interest rates at some inconvenient time. I speak as one who experienced 17% inflation decades ago.

bostonerimus

Mortgages right now are fantastic value, but will they stay that way? If you could lock in todays low rates for the lifetime of the mortgage then it would be great, but part of retirement planning is knowing how much you'll need to live on and the making sure your pot can supply that income. Also it makes life far less stressful if you go into retirement without expenses like mortgages to cover. 

cfw1994

I’d take the contrarian view and say (in summary) GO FOR IT!
😎👍
Of course there will always be concerns….

….but you’ve built a very decent pot up for your young (yes!) age.  

You sound like the goals drive you forwards: why not set this one?

I do agree with jamesd that your TFLS would be able to help pay things off, but that is a few years away.
What might cause me to pause is if I had other significant outgoings looming - school fees can take a chunk, for a number of years, for example, maybe funds to help start the kids off with cars or deposits later - but if not, then why not. 

IF you have doubts….then press pause.  If not: I say again, go for it!  (just remember this is the internet, I could be a small puppy stabbing my owners keyboard whilst waiting for dinner to arrive……🐶)

There are always doomsayers here pointing out we are due a recession, rates could be high (I was a mortgage payer when they hit around 15%!), jobs could disappear…..but the world does keep moving forwards, and whilst some businesses will indeed struggle (& this winter could hit a few), others will prosper.  Interest rates will indeed rise (OECD suggest 3% by end of 2022), but if you can lock in for a period, happy days!

If you could head into retirement with the ability to downsize your UK home, have it as your bolthole and move to warmer climes, why not 🌞

GunJack

just a thought...OP, are you basing the size of the current spanish property being too small on your trips there with the kids? If so, they won't (shouldn't) be living with you when you retire over there.....so is it big enough for the 2 of you??

...and if you can only spend 180 days p.a. there, is it worth taking on a large mortgage in order to do so?

Sunnylifeover50plan

If you don't complete is there any financial penalty - loss of deposit?

Anonymous101

GunJack said:

just a thought...OP, are you basing the size of the current spanish property being too small on your trips there with the kids? If so, they won't (shouldn't) be living with you when you retire over there.....so is it big enough for the 2 of you??

...and if you can only spend 180 days p.a. there, is it worth taking on a large mortgage in order to do so?

The second point here is the most important for me. If number of days usage has been limited post brexit then it may have changed the strategy somewhat. Unless you intend to rent it out in your fallow periods then it may now be more efficient to rent.

I_want_to_break_free

Assuming you only have British passport you will be limited to 90 days in any 180 unless you have a special visa etc.  Also, Spanish property may not be as quick and easy to sell on if /when you want to.  And having a property in Spain does cost all year round so dont under estimate the running costs.  Not sure as you are both working how often and long you plan to visit and stay in Spanish property.  Maybe you can work from Spain?  If not, it does seem a big commitment for staying in property just a few weeks each year.  Assume you have looked at renting similar property.  There is also risk of squatters.  So a lot to consider.  We bought in Spain in 2019 and retired.  We spend most of our time in uk with much time in the autumn winter in Spain.  Finance wise it does not make sense, but we love the place and pace of life etc.  Hope you get a place if not now then when its right for you.