Son First Time Buyer. Mortgage Broker Suggests a 39 year mortgage? New Issue!

Iiyama

Hi all
My son is 29 joined the police a few months ago and is looking to buy his first property alone. He met with a mortgage advisor regarding the flat he is viewing. Asking price £100,000 and son has £20,000 deposit.

The advisor is suggesting he takes the mortgage over 39 years. Should I be as concerned about this as I am? In my day you didn’t take a mortgage term beyond your retirement age. In theory he would retire in 30 years and still have 9 years to pay.

As I’m out of touch with mortgages is this the norm now. With a view that as he progresses through the property ladder he reduces the length of time on future mortgages to take it below retirement age?

Thoughts appreciated as I’ve not had a mortgage for years so I could well be out of touch!

Thanks

housebuyer143

Iiyama said:

Hi all
My son is 29 joined the police a few months ago and is looking to buy his first property alone. He met with a mortgage advisor regarding the flat he is viewing. Asking price £100,000 and son has £20,000 deposit.

The advisor is suggesting he takes the mortgage over 39 years. Should I be as concerned about this as I am? In my day you didn’t take a mortgage term beyond your retirement age. In theory he would retire in 30 years and still have 9 years to pay.

As I’m out of touch with mortgages is this the norm now. With a view that as he progresses through the property ladder he reduces the length of time on future mortgages to take it below retirement age?

Thoughts appreciated as I’ve not had a mortgage for years so I could well be out of touch!

Thanks

Yes, it's normal to have the term as long as possible to keep the payments down. This means your son is only commited to a smaller payment if things go wrong. However it's not set in stone, he can overpay and when he remortgages if he's earning more he can change the term down. 
It just gives him more flexibility taking it over a longer term initially.

chanz4

At 100k, with 20k deposit, I would ask to lower the term

ACG

Whilst your son might retire from the police in 30 years, it does not mean he would retire - he can still remain with the police or get another job. What has he said is his retirement age? For most people it would be 68 now. 39 years years would take him to 68. 

However... For what is an £80k mortgage, 39 years does seem a bit strange. 
Is it affordable on a shorter term? Dont forget with flats there can be service charges to also pay for. 

I suppose the big question is what does your son want? He might want a longer term to give him more money to do what he wants to do in life - holidays, nights out, hobbies etc. 

Strummer22

When I took out my first mortgage in 2017 I had a 30 year term for an advance of less than £80,000. With low interest rates at the time the monthly repayment was something like £270. After spending on refurbs we have some spare income so overpaid by several hundred pounds per month until we moved. The flexibility of keeping the monthly contractual payment as low as possible was absolutely a plus for us, as if things had gotten tight we could just stop the overpayments.

TBH if your son wants to pay off his mortgage faster but is not particularly financially disciplined, a shorter term with higher contractual monthly payments will help him do this. However, if he's financially disciplined and wants the flexibility, he can go for the longer term and save/overpay the mortgage as he's able.

Newbie_John

We took our mortgage for 22 years - that's what I calculated was shortest manageable term for us.
I didn't understand how overpayments work neither expected significant future rate raises.

If I was to take a mortgage now I would go for longest possible term - possibly 39 years, every month I would save a specific amount and pay off the mortgage quicker - while having the worry-free safety money buffer.

Although saying that, with such low mortgage the monthly payments don't change much - at 6% rate, £80k mortgage you get:
39 years - £443 monthly - after 10 years £72970 left to pay **
30 years - £480 monthly - after 10 years £66952 left to pay
25 years - £516 monthly - after 10 years £61086 left to pay
20 years - £573 monthly - after 10 years £51629 left to pay

I don't know his salary neither his lifestyle but if he could save in the meantime for the next 10 years - let's say £500 a month then he could easily pay off the mortgage in full after 10 years - while having safety money available all the time.

**but in this example if you save £130 a month (compared to £573 payments a year with 20 years term) you end up with £15600 or even £21300 if saved at 6% saving account - which is the difference between remaining balances.

london21

Depends on what he can comfortably afford.

Can shorter the term now or later.

Also can overpay each month. 

Iiyama

Lots of very helpful advice and opinions that I will put to him. Its all appreciated. 

kingstreet

Does he meet affordability over a shorter term? I usually only suggest an off figure like 39 years if I need to because of affordability. Does he have a £300pm PCP or something as that will make a big hole in a junior copper's starting salary.

Iiyama

kingstreet said:

Does he meet affordability over a shorter term? I usually only suggest an off figure like 39 years if I need to because of affordability. Does he have a £300pm PCP or something as that will make a big hole in a junior copper's starting salary.

No. He has minimal outgoings but also has minimal evidence of saving while he has been back home for 10 months

Iiyama

Edit - New Issue 

The new issue related to my sons mortgage is this:

The surveyor has valued the flat at £15,000 below estate agents valuation. The seller won’t budge. The mortgage advisor has suggested they give him a 95% mortgage and the £18,000 he was going to use as a deposit £15,000 goes to the seller!

This sounds like very bad advice to my inexperienced mind!  Surely common sense would say that is not something you would do as you are paying £15,000 over what the flat is worth? 

Or am I missing something?