Is this one of the worst financial decisions ever?

mumf

Paying one’s mortgage off is a good thing. It was our priority,and happened 12 years ago for us. We married and buying a house in the late 80’s was a big deal to two working class kids.We were on moderate income- indeed still are. We have kept the house well maintained,paid  moderate amounts into pensions,and saved moderate amounts of money. We are not rich,but we don’t think we are poor either - although organisations like The Rowntree Foundation say otherwise! However,because we own our house outright it makes a big difference to what ‘poor ‘ is. 

Right now I am very ill and don’t have another lifetime left i.e. Retirement,as my expectancy is short. Positively though,we have zero debt,moderate income and live quite well. Most importantly my wife will be ok when I am no longer here. 

Finance is all about moderation. I do smile when some folks are banging tens of thousands into pensions each year,and wonder if they will manage in the future!😃 None of us know the future,and trust me,if you get a terminal illness,any previous’concerns’ mean absolutely nothing. 

Take care. X

dunstonh

On the plus side, with the mortgage paid off, he can now use equity release and spend the rest of his life drawing on that and putting himself back into debt.

Albermarle

Suhusa said:

eastcorkram said:

CalJo99 said:

Did he say how much his house is worth? He could sell up, downsize, put the difference into a pension pot, then keep adding to it while he's still working.

I do think, though, that those who go into retirement without owning somewhere to live are in a precarious position. If possible, one should always own the roof over one's head. Then it's just a case of paying council tax and utilities, and keeping food on the table................

Have often wondered how that works in , for example, Germany, where I always hear that most people rent. Which makes me wonder, firstly, who owns all the houses, and secondly, how do they all afford the rent, once they stop working?

There's no section 21 in Germany and you've generally got much more rights as a renter (there are accepted values for how much can unilaterally decrease your rent to make the landlord make repairs, for example). The standard is to expect you'll live in your home (whether rented or owned) until you die or move in a care home. Also, because buy to let is not that much of a thing it's often cheaper to rent (this is currently changing because the housing markets starts overheating). There's also no property ladder. People generally only buy one house in their life (the ideal is to buy a plot of land and build your house; if you buy one that's already standing then it will be completely gutted and rebuilt at the very least) and deposits are larger than in the UK. If you rent you will also live somewhere long term on a permanent contract due to the aforementioned strong renters rights, and unless you're one of the poor souls with their rent indexed to inflation, the rent increases will be fairly moderate, compared to the UK (the one thing outside indexed rents that drives rent increases is people moving, because there are fewer restrictions on rent increases between renters). Due to the costs of buying a house a lot of people leave buying to their 40s (30s if you earn well), so essentially people who buy take a huge chunk out of their savings 20-30 years before retirement and won't have much money left over to save while they pay off their mortgage, while renters can continue to save. For reference, what I paid in the Northwest outside the big cities would still count as a madly overpriced rent in Germany. Berlin is on track to approaching these values, and even the perpetually expensive Munich is quite a bit cheaper than Southeast England.

As to who owns the houses - some towns and cities still hold on to their housing stock, others have sold their stock off to big coporations (Vonivia and Deutsche Wohnen are some of the giants). Housing cooperatives own a noticeable chunk of stock (in the low double digits on average) - you have to buy shares to be come a member but then you live cheaper and even more securely, which is why they're madly popular in cities to the extent that they have even closed off their waiting lists. There are also people or families who rent out a building (I used to live in a flat in a building which has been in the same faimily since 1900).

The attitude to housing is simply quite different in Germany. I know I shocked my British colleagues when I said 'why would I want to own a house?', whereas in Germany it's quite reasonable to say that you don't want the hassle of owning a house or flat. Also as a fun fact, the value of your house is not counted towards your assets unless you're rich because a) most normal people don't know the value of their house anyway and b) because it's not something you'd sell to make money (in the same way as you wouldn't try to cash in the clothes you wear or the bed you sleep in) unless you're approaching extremely dire financial straits.

Thanks for the interesting details.
However I think the accepted wisdom that UK are a nation of homeowners, whilst renting is much more popular on the Continent, is not really true in reality.
The home ownership % in Germany low at around 50% . However in France it is 65%, similar to UK ( which has dropped in recent years)
Many European countries have significantly higher rates of home ownership than the UK. 
Homeownership rate in countries in Europe 2021 | Statista

Suhusa

Albermarle said:

Suhusa said:

eastcorkram said:

CalJo99 said:

Did he say how much his house is worth? He could sell up, downsize, put the difference into a pension pot, then keep adding to it while he's still working.

I do think, though, that those who go into retirement without owning somewhere to live are in a precarious position. If possible, one should always own the roof over one's head. Then it's just a case of paying council tax and utilities, and keeping food on the table................

Have often wondered how that works in , for example, Germany, where I always hear that most people rent. Which makes me wonder, firstly, who owns all the houses, and secondly, how do they all afford the rent, once they stop working?

There's no section 21 in Germany and you've generally got much more rights as a renter (there are accepted values for how much can unilaterally decrease your rent to make the landlord make repairs, for example). The standard is to expect you'll live in your home (whether rented or owned) until you die or move in a care home. Also, because buy to let is not that much of a thing it's often cheaper to rent (this is currently changing because the housing markets starts overheating). There's also no property ladder. People generally only buy one house in their life (the ideal is to buy a plot of land and build your house; if you buy one that's already standing then it will be completely gutted and rebuilt at the very least) and deposits are larger than in the UK. If you rent you will also live somewhere long term on a permanent contract due to the aforementioned strong renters rights, and unless you're one of the poor souls with their rent indexed to inflation, the rent increases will be fairly moderate, compared to the UK (the one thing outside indexed rents that drives rent increases is people moving, because there are fewer restrictions on rent increases between renters). Due to the costs of buying a house a lot of people leave buying to their 40s (30s if you earn well), so essentially people who buy take a huge chunk out of their savings 20-30 years before retirement and won't have much money left over to save while they pay off their mortgage, while renters can continue to save. For reference, what I paid in the Northwest outside the big cities would still count as a madly overpriced rent in Germany. Berlin is on track to approaching these values, and even the perpetually expensive Munich is quite a bit cheaper than Southeast England.

As to who owns the houses - some towns and cities still hold on to their housing stock, others have sold their stock off to big coporations (Vonivia and Deutsche Wohnen are some of the giants). Housing cooperatives own a noticeable chunk of stock (in the low double digits on average) - you have to buy shares to be come a member but then you live cheaper and even more securely, which is why they're madly popular in cities to the extent that they have even closed off their waiting lists. There are also people or families who rent out a building (I used to live in a flat in a building which has been in the same faimily since 1900).

The attitude to housing is simply quite different in Germany. I know I shocked my British colleagues when I said 'why would I want to own a house?', whereas in Germany it's quite reasonable to say that you don't want the hassle of owning a house or flat. Also as a fun fact, the value of your house is not counted towards your assets unless you're rich because a) most normal people don't know the value of their house anyway and b) because it's not something you'd sell to make money (in the same way as you wouldn't try to cash in the clothes you wear or the bed you sleep in) unless you're approaching extremely dire financial straits.

Thanks for the interesting details.
However I think the accepted wisdom that UK are a nation of homeowners, whilst renting is much more popular on the Continent, is not really true in reality.
The home ownership % in Germany low at around 50% . However in France it is 65%, similar to UK ( which has dropped in recent years)
Many European countries have significantly higher rates of home ownership than the UK. 
Homeownership rate in countries in Europe 2021 | Statista

Yup, that's definitely not a division along the lines UK vs the Continent but rather other historical factors come into play.

michaels

Key factor in the UK is the imbalance between supply and demand.  If house prices were closer to build costs (because we did not restrict housing land) then rents would also be much lower.

Lots of houses in the SE sell for £1m but would cost about £250k to build excluding the price of land - imagine what house prices and rents would be without the restrictions.  Of course there are other costs to the environment of increased hose building but we all pay a massive price for protecting fields that relatively few actually see and even fewer walk through.

A useful stat

Since 1990 Germany population is up by about 1m or just over 1%.
UK population is up 9m or about 15.5%

Perhaps explains UK house price bubble more than any other single number?

westv

The mortgage being paid off isn't really relevant to the original point. We'll it's not the main point. That is the fact the chap threw away 22 years of CS pension.

Aristotle67

Albermarle said:

Thanks for the interesting details.
However I think the accepted wisdom that UK are a nation of homeowners, whilst renting is much more popular on the Continent, is not really true in reality.
The home ownership % in Germany low at around 50% . However in France it is 65%, similar to UK ( which has dropped in recent years)
Many European countries have significantly higher rates of home ownership than the UK. 
Homeownership rate in countries in Europe 2021 | Statista

I have come across people in the UK who are totally against owning their own home. My parents-in-law are an example (more specifically, my now deceased father in law). He did not want the hassle of having to maintain the exterior, the roof etc. He thought it much better to rent and let the landlord, housing association or council be responsible for such matters. My father was similar; not only had he never wanted to own a house, but he never wanted to own a car either, and so he didn't. I believe it is a generational thing and also a trait of the old working class, those that were born in the 1920s and 1930s. Many older working class people were happy with their lot, accepted that was who they were, and did not approve of social mobility (or social climbing as they would call it; as illustrated in Whatever Happened to the Likely Lads?). Also, their parents never had the opportunity to buy property and so they too had no desire to do so. Of course, not everyone took that view; but some did.

In response to the OP's question, it sounds like this was an example of a person living for today and not for tomorrow. I have known quite a few people like that, and have they regretted it later in life!

Brie

I'm amazed at the people I've worked with in the financial industries who are hopeless when organising their own finances. 

Like the chap who insisted that he didn't want to be in the company health scheme and bought his own health insurance instead.  So paid, not a lot, maybe £25 a month out of his after tax pay instead of getting the better cover for "free" (taxable benefit of costing about £5 a month)

Like the other chap who decided to take all his money out of the share purchase and share save schemes at work "rather than lose it all" when we were being made redundant and thus got taxed on it.  If he had asked I would have told him to hold on and cash it all in after the redundancy when there would be nothing lost.

And like yet another chap who thinks that money is all to be spent immediately rather than saved or used to pay off debts, that holidays should all be first class as that saves money (??), that won't consider buying a house/flat because his landlord has to fix everything (but doesn't) and can't kick him out (but is about to).  And wants to be a budget counsellor.  

westv

michaels said:

Key factor in the UK is the imbalance between supply and demand.  If house prices were closer to build costs (because we did not restrict housing land) then rents would also be much lower.

Lots of houses in the SE sell for £1m but would cost about £250k to build excluding the price of land - imagine what house prices and rents would be without the restrictions.  Of course there are other costs to the environment of increased hose building but we all pay a massive price for protecting fields that relatively few actually see and even fewer walk through.

A useful stat

Since 1990 Germany population is up by about 1m or just over 1%.
UK population is up 9m or about 15.5%

Perhaps explains UK house price bubble more than any other single number?

Google tells me Germany had 72.81m in 1990 and 83.2m in 2021 - an increase of 14.27%

michaels

westv said:

michaels said:

Key factor in the UK is the imbalance between supply and demand.  If house prices were closer to build costs (because we did not restrict housing land) then rents would also be much lower.

Lots of houses in the SE sell for £1m but would cost about £250k to build excluding the price of land - imagine what house prices and rents would be without the restrictions.  Of course there are other costs to the environment of increased hose building but we all pay a massive price for protecting fields that relatively few actually see and even fewer walk through.

A useful stat

Since 1990 Germany population is up by about 1m or just over 1%.
UK population is up 9m or about 15.5%

Perhaps explains UK house price bubble more than any other single number?

Google tells me Germany had 72.81m in 1990 and 83.2m in 2021 - an increase of 14.27%

This is where google took me Germany - Place Explorer - Data Commons - see chart under demographics - could your 73m be a pre-unification number?