The Senior Wonder Years!

helensbiggestfan

Yes, pleased to say my income has risen.  Around £17k, excluding side hustles. My vintage clothing/bric a brac is currently on hold. I find it's mainly seasonal so I just take the summer off. I am about to get serious about house hunting so I probably won't restart again until after I have settled in to a new home,  

re senior mortgages. More and more financial institutions are now prepared to offer mortgages to retirees. Traditional building societies are surprisingly forward thinking on this, whilst some of the big boys such as banks have been lagging behind, but they are finally waking up to the power of the "grey pound".  They have realised that senior mortgages can be a lucrative and relatively risk free market for them.  The good news (for us) is as fewer and fewer young people are able to afford to buy a property lenders will probably be scrambling for our business in order to maintain their profit margins, so that they will vie with each other to offer attractive products. 

As with any other type of mortgage lenders are looking for a "safe bet".  When you think about it a pension is guaranteed whilst a salary might not always be as safe and secure as we might hope. People can get sick or made redundant at any time so in many ways taking out a mortgage in retirement is actually safer than when working.  And, whilst you can self insure, most  income protection policies have a whole raft of stringent terms and conditions and some policies aren't worth the paper they are written on.  Most of them only pay out for a year.  

Generally the lender will charge a higher rate of interest than offered to a younger person and yes, you are right, the lender will also be more amenable to those with a decent amount of equity, generally at least 60% but some prefer 75%.  

I would only use my pension income, not my side hustle in my calculations.  If a borrower wanted to include any business income then they would have to show evidence of business earnings, usually three years books.  

As you might guess senior mortgages are a very specialised area so it's best to use a broker to get best advice and the most attractive deals.  There will probably be a brokers fee, in addition to the lenders fee, but then nothing worth having is free is it. 

Hope that helps.  

[Deleted User]

@helensbiggestfan. Many thanks for your informative response. I have done quite a bit of research myself into mortgages for seniors. I was interested to get your viewpoint and experience.
I may never need another mortgage but always best to be prepared.
In my case, on the death of my older relative I will own 70% of the house, and this amount will be enough for me to buy a another suitable place outright. However, good to know there our options should I need to keep back funds for renovations etc.....
At the moment my pre-tax retirement income is about £34500 a year, all index linked, so I should be seen as a safe bet lol! I would probably not go below 90% equity. Hopefully, all a few years away.
Thanks again for your response.

helensbiggestfan

[Deleted User] said:

After another rethink, I have changed my mind about paying the car loan off so early! I have decided that I want to keep my Cash ISA. The loan repayments are easily affordable. Instead I will concentrate on making overpayments as and when I am comfortable to do so. I made a good start in August with a £400 overpayment even before the first regular DD payment, which is due to go out in the next few days. I like the idea of the challenge to reduce the term by making overpayments.

Baron......I am going to use this quote to illustrate why, at the age of 73, I am about to take out a mortgage. Your method of car purchase explains it beautifully.  

I know some people think it's a daft idea to burden oneself with mortgage debt at such an advanced age but, believe it or not, there is method in my madness.  I can afford to buy my next house outright, but I wont be doing that. I will borrow as much as I can, probably approx 25% of the purchase price.  I will invest the left over cash.  Even with todays higher interest rates mortgages are still a cheap form of borrowing, especially when one takes inflation into account.  

Mortgages and loans are LEVERAGE,  something used by wealthy people the world over.  It's how the rich get rich and how they stay rich. They always borrow as much as they can, they always hold back as much cash as possible in order to reinvest and increase their wealth. I was always a tad nervous about borrowing money but not any more, not since I worked for several millionaires and learned a few of their tricks, how they think, their attitude to debt.  I never fully understood how it all worked until I picked  their brains.  

In a nutshell I learned that leverage is about using other peoples money (usually the banks) to buy assets and saving your cash to invest in ways to make even more cash.  This is what Baron did.  By deciding not to redeem his loan straight away and letting his ISA grow.  Personally I don't regard cars as assets as such. They are liabilities in that they cost money and don't usually appreciate in value so they don't contribute to wealth building. However, the principle remains the same, spending other people's money to acquire what you want.  

As long as your can afford the payments and don't over commit then borrowing isn't always a bad thing. Sometimes debt can be "good debt". I've never tried snoozing but the principle is the same.  Cheap borrowing to fund higher yielding investments. 

What a pity it took me 60 years to learn this stuff.  Just think if I had acquired this knowledge when younger I too could have been a millionaire by now. Hey ho.  I might not benefit that much from my new found knowledge at my age but I am at least building the foundations of generational wealth for my children and grandchildren.  

I have taught it to my sons and they are both putting it into practice and are doing well.  

If I die before the mortgage is redeemed it will be paid off by either life insurance, rising property values or cashing in my investments. My sons can decide how best to proceed. 

[Deleted User]

@helensbiggestfan. Fantastic post. Thank you!

helensbiggestfan

Crossed posts.  

Glad you found mine useful.  Yes your income should be plenty should you decide to take out a mortgage. It all depends on property values of course.  Where I live property is generally much more affordable than London and the South East, so my comparatively low income is enough.  

Organgrinder

In a nutshell I learned that leverage is about using other peoples money (usually the banks) to buy assets and saving your cash to invest in ways to make even more cash.  This is what Baron did.  By deciding not to redeem his loan straight away and letting his ISA grow.  Personally I don't regard cars as assets as such. They are liabilities in that they cost money and don't usually appreciate in value so they don't contribute to wealth building. However, the principle remains the same, spending other people's money to acquire what you want.  

It's only worthwhile if your investment returns more than the interest on your loan.

Eg... I still have a mortgage at 1.64%. This is invested at approx 5.5%. So my return is greater than the interest I am paying.

Same for my stoozing, I borrow at 0%. I get a net return.

For me, borrowing on a loan type scenario would not return more than the interest paid. The best interest rate I can find for a £25k loan is 6.5%. The best ISA rate is below this.

Hats off to @[Deleted User] if his investment rate is better than his loan rate.

Some speculate....and there is a risk in that you don't know the return. It could fall in value. But it could increase too eg the units my pension is invested in have grown over 17% in a year. It very much depends on your attitude to risk and whether you can afford a loss.

[Deleted User]

My loan rate is not as good as my investment rate, but I don't care lol! I have a great newer car and I will be overpaying the loan.
 
Maybe some people think they can still count their money when dead lol!

I have a guaranteed pension income and a fully paid for house. I am in my 60s.and Now is the time to give more priority time to wants rather then needs and only save a little!

@Organgrinder are attitudes towards money are very different. However, at my age I can respectfully disagree

Organgrinder

We all do what is right for our circumstances. And quite rightly so.

My post was to clarify what borrowing to invest means. In general, it is highly unlikely that you can borrow money and guarantee a return. 

My attitude is very risk averse. I make money from things like bank switching and stoozing because they are virtually risk free and take little effort.  And as I've said before this buys holidays I would not otherwise be able to afford.

helensbiggestfan

Good point re interest rates.  And of course, it all depends on the investment vehicle.  A bog standard savings account or ISA just wouldn't cut it for long term growth or wealth building.  As I mentioned earlier I have more or less everything I could need or want now and my primary goal is to build generational wealth as my legacy to my family.  And of course have some fun as well.  

In the past my best investments have been property, buying and renovating then selling at a good profit.  It's not for everyone but I enjoy it and my efforts have been well rewarded. On a smaller scale my sideline vintage clothing business gives similar results. I invest in stock, keep my overheads low and sell at a profit, often making 300 to 400%. A far better return than any savings account, lol. 

 I too am quite risk averse. I don't really know enough about the stock market so I am disinclined to chance my arm.  I leave that to my son.  I know and understand property renovation, vintage and antiques so that's where I concentrate my efforts.  I usually use standard savings accounts to hold an emergency fund and any working capital that requires easy access.  

I also think it's important to take inflation into account too. When inflation rates are running rampant then it can make sense to borrow rather than delay that large purchase.  

The rule of 72 is the easiest way of calculating an investments doubling time and/or working out the effects of inflation, just divide 72 by the interest rate and that will give you the timescales.  

I have just looked up current annual inflation rates.  It said 2.89%.  ha!!!  I don't believe a word of it. 

Organgrinder

Indeed. If you can afford to service the debt, then long term growth should see a healthy return.

However for me I'm just aiming for a reasonably comfortable retirement without having to penny pinch until I get there and of course after I get there.

So I'll continue to spend £5k a year or so on holidays for example even though I could retire a year earlier if I didn't. Same for changing my car every 4 years. I don't spend much on clothes, but I do spend on eating out, weekend breaks, my hobbies (cycling and cooking), going to the cinema etc

In total at the moment I have, in addition to DB pensions approx £120k invested across various accounts. DC pots, ISAs, savings accounts etc. I have debts (mortgage, credit cards) of about £70k but the debt is at an average of approx 1.2% whereas the savings are growing at an average 7.2%. So in a year I pay £840 to service the debt to gain £8640. After inflation of say 2.5% I've made over £4000 in real terms. Some I keep, some I spend. The same goes for bank switching. Some I keep, some I spend. I guess the point for me here is paying the debt off would leave me with say £50k. I'd find it difficult to get a real terms return of £4k on that. Hence the decision to not pay off the mortgage and the decision to stooze.

I never quite understand people who say they can't afford things but who refuse to take advantage of risk free money. I used to work with people who would say things like "you're always going on holiday, how do you afford that?". So I tell them that last year I made say £1,500 from bank switching and that it probably took me a max of 3 hours to do so. Inevitably they don't do the same. It's their choice of course which is fine. It's not for everyone. 

Anyway, I don't wish to hijack @[Deleted User] 's thread any more than I have done. The sun is shining so time to dust down my road bike. :-)