Mortgage at 80...

Ciprico

I would appreciate any comments anyone has on an elderly relative (early 80s) buying out-right, or via a Mortgage.

For example a retirement flat in the South East, costing some £600k

He could buy it cash from proceeds of downsizing, or, I suppose he could take on a mortgage with hefty deposit

I read about "Retirement Interest Only" Mortgages - so such things do exist

I'd be interested to know the communities thoughts on this....
(but not on a retirement flat costing 600k!)

lisyloo

What would he do with the cash if he gets a mortgage?
it’s about comparing the Rio mortgage with the “lost opportunity”.

Marcon

Ciprico said:

I would appreciate any comments anyone has on an elderly relative (early 80s) buying out-right, or via a Mortgage.

For example a retirement flat in the South East, costing some £600k

He could buy it cash from proceeds of downsizing, or, I suppose he could take on a mortgage with hefty deposit

I read about "Retirement Interest Only" Mortgages - so such things do exist

I'd be interested to know the communities thoughts on this....
(but not on a retirement flat costing 600k!)

Without knowing his objective, 'thoughts' are going to be pretty irrelevant and unhelpful. Why would he want to take out a mortgage rather than paying in cash from downsizing? With interest rates rising, so too will the cost of borrowing - and are likely to do so at a faster rate than interest rates on savings will increase. What does he want to achieve?

Thrugelmir

Irrespective of any other considerations. Why borrow money when you've no need to? 

lisyloo

Thrugelmir said:

Irrespective of any other considerations. Why borrow money when you've no need to? 

You can sometimes make money by borrowing, if there is an “opportunity”.
I made £8k one year by stoozing an offset.
It’s “edge” cases though and whilst I don’t know a lot about Rio mortgages I expect they aren’t a bargain.

Linton

RIO (Retirement Interest Only) mortgages do exist. You can get RIO type mortgages at rates fixed for your lifetime.  Last year they were available at around 3%. with the option of either paying the interest or letting it roll up in the loan. In a year or two's time that could be seen as a real bargain.

So it seems to me that for people with no obvious beneficiaries trading-up in retirement with the aid of a RIO/Equity Release could be a very attractive option as you could buy a house at up to twice the value of your current one and with roll up it would not impact your retirement savings.  However whether doing it at 80+ is sensible is another matter bearing in mind the hassle and stress you get with any house move.

sevenhills

Linton said:

RIO (Retirement Interest Only) mortgages do exist.

A SIPP has an age limit of 75 to claim the minimum tax relief. Do other pension products have this age limit?

Bimbly

You will probably get a more tailored response on the mortgage forum:

https://forums.moneysavingexpert.com/categories/mortgages-endowments

These products do, as you say, exist. At that age, it may be sensible to use a broker.

Linton

sevenhills said:

Linton said:

RIO (Retirement Interest Only) mortgages do exist.

A SIPP has an age limit of 75 to claim the minimum tax relief. Do other pension products have this age limit?

A RIO is not a pension product, it's a commercial mortgage much like any other mortgage with the key difference being that instead of a fixed end date a RIO mortgage ends on the death of the mortgagee or the sale of the house.  Because the lenders dont want to have to wait too long to get their money back they restrict the age at which you can buy one.  In theory 55 I think but you probably dont want to look at them until you are 65+.

Therefore there is no tax reief.

Ciprico

Fwiw my motivation to investigate this was I was questioning the benefit of having so much money tied up in a property at that stage in one's life...

A similar question would be if you had no house, 600k in the bank and 10 years to live...

...would you spend it on a house...

I don't think I would...

Nebulous2

Ciprico said:

Fwiw my motivation to investigate this was I was questioning the benefit of having so much money tied up in a property at that stage in one's life...

A similar question would be if you had no house, 600k in the bank and 10 years to live...

...would you spend it on a house...

I don't think I would...

You might, if you regard it as essential that you live in a £600,000 house. 

Of the three straightforward options - rent, buy with mortgage or buy outright - buy outright may well be the best one.......