Over 50 first time buyer - is my plan feasible?

trust.no.1

Hi Everyone,

The bad news is that I'm the wrong side of 50, renting in Greater London having never owned a home. Yes..Yes..  really inexcusable at my age I know. It is what it is... as they say

The not so bad news is that I have around 140K savings available as a deposit . I would like to retire in around 3 years time - at which point the tax free lump sum from one of my pensions, combined with my savings would allow me to purchase a decent property (outside London) outright.

Now my job requires me to travel regularly into Central London (there is no flexibility on this) and so purchasing a property in my desired location is really not feasible at this time. This mainly due to the cost and hassle (sadly I'm no longer a spring chicken) of commuting regularly to Central London. A secondary consideration is that I would lose the Outer London weighting element of my salary. I'm thinking that I really need to get a place within the next year given that house prices will hopefully continue to drop. I really do not want to risk delaying purchase for 3 years.

So I am toying with the idea of getting mortgage with an option for early settlement where the resulting montly payments (along with my existing rent) would be manageable. I would rent the property out for the short term and then retire and move out of London at my chosen date in the future. I have been somewhat put off by horror stories of tenants from hell (I watch re-runs of Slum Landlords..Nightmare tenants ) and the stress, time and expense to evict them.  I'm hoping the chances of this can be reduced by using the services of a reputable lettings & management agency.

So this is my plan. Not sure whether it is a good or bad one - however I've heard the saying that a bad plan is better than no plan at all!   I do plan to seek a mortgage broker, however I would appreciate the thoughts of the forum as to whether my plan is feasible and what pitfalls I may face in general as an older FTB.

Emmia

You'll be buying with a buy to let mortgage, and then when you want to retire you need to evict the tenants (not necessarily guaranteed) and then pay off the BTL.

Personally I'd stop throwing money away on the current rental and buy somewhere now... Selling up in a few years when you want to buy the retirement spot.

MFWannabe

You don’t say how much your rent is? 

But if it were me I’d be inclined to carry on renting for the next 3 years; focus on saving then  when I retire buy a place outright in my chosen place to live 
I wouldn’t mess around with buying a rental, even using a letting agent doesn’t mean you won’t have issues and personally I think it could be a lot of hassle just for a short time period 

trust.no.1

Emmia said:

You'll be buying with a buy to let mortgage, and then when you want to retire you need to evict the tenants (not necessarily guaranteed) and then pay off the BTL.

Personally I'd stop throwing money away on the current rental and buy somewhere now... Selling up in a few years when you want to buy the retirement spot.

Hi Emmia,

Thank you for responding. Appreciated.

It never struck me that I would need a BTL mortgage!  I was thinking BTL mortgages applied to speculators/investors - usually with multiple properties and no intention of living in them. But you are right - I would be looking at buying the property and letting it - albeit for a relatively short period. Leaving the property empty runs the real risk of squatters,burglary, vandalism etc and I would be paying the full mortgage payments. My intention in short term renting is more to have the property occupied and to offset the mortage payments while I continue to rent. Profit is not my motivation.

For the work related reasons I mentioned, I cannot purchase outside London at this time. I'm reluctant to buy a property in London now given the "bonkers" status of the housing market. In general I can buy a detached freehold property outside London for the cost of a 2 bedroom "broom closet" flat or terraced house in London. Finally if I purchase in London now, I run the risk of losing out financially in 3 years time when it comes to sale should house prices significantly fall. Sadly no one can predict the housing market trends without the use of a crystal ball.

amnblog

If you are buying to let to a tenant most lenders will not consider you as a non homeowner.

Some will however and therefore you are right to decide to speak to a mortgage broker.

Your age will not be a concern.

Bigphil1474

Have you worked out your mortgage payments? - bear in mind most lenders will lend up to 70 years of age or your state retirement age, whichever is sooner, so your payments will be over however many years you have left not the traditional 25. 
My personal opinion - I think the smart money is on the housing market picking up again over the next year or so - I think Halifax said houses prices went up again by a small amount in November. If no other calamity befalls the world, interest rates should start to go down over the next 18 months which will increase demand in the housing market and push prices up. The current market is largely a buyers market, although there are some regional differences. With no property to sell, you are probably in the best position to buy a new property sooner rather than later. I doubt there has been a 3 year period where house prices have fallen overall.

gwynlas

If you buy a broom closet in London now and want to sell in 3 years there is a chance that you will make a capital gain. On the other hand if it sells for what you bought it for you would not have been paying somebody elses mortgage and already be on the housing ladder. You have not said how far out of London you wish to move but would it be feasible for you to buy there and have a Mon-Fri lodger so you had the place to yourself on weekends?

Andreg

Three years is a relatively short period of time.  I would buy the house when you retire and can move into it yourself rather than having the hassle of tenants and buy-to-let mortgage.  You will have to pay tax on rental income and will not be able to offset the mortgage interest against that.  Unless you've already seen your dream home and simply must buy it before someone else does...

Zoe02

I have a tenant in a similar situation. When he rented the 2 bedroom flat was thinking his income could easily afford to buy.
Renting gives some flexibility as can work around the UK and not stuck in one location.

Also with repairs and issues the landlord sorts out. 

When ready to retire might be a good time to buy then. Renting not as lucrative like before with increased costs and regulations. 

Exodi

MFWannabe said:

You don’t say how much your rent is? 

But if it were me I’d be inclined to carry on renting for the next 3 years; focus on saving then  when I retire buy a place outright in my chosen place to live 
I wouldn’t mess around with buying a rental, even using a letting agent doesn’t mean you won’t have issues and personally I think it could be a lot of hassle just for a short time period 

+1 to this.

@ OP Some of your post seems to be sage wisdom, but then your other comments contradict it. For example:

"Sadly no one can predict the housing market trends without the use of a crystal ball"

Agreed, but yet you also say:

"I'm thinking that I really need to get a place within the next year given that house prices will hopefully continue to drop"

"I really do not want to risk delaying purchase for 3 years."

"I'm reluctant to buy a property in London now given the "bonkers" status of the housing market."

"if I purchase in London now, I run the risk of losing out financially in 3 years time when it comes to sale should house prices significantly fall"

I think you should take your own advice, stop fortune-telling and buy when the time is right. If it it involves a knee-jerk short term BTL arrangement in which you count on tenant payments to off-set your mortgage, with ambitions to evict the tenant shortly after, I'd say the time is not right.

Presumably you have around 10 years till SP age? I'd imagine that would be how long they'd allow you to take a mortgage for - you could probably use some mortgage calculators on lenders websites to work out how much they'd lend you based on your income over this time frame (plus you'd have your TFLS on top).

MWT

Exodi said:

Presumably you have around 10 years till SP age? I'd imagine that would be how long they'd allow you to take a mortgage for

Dependent on retirement income levels of course, but it is not that hard to get standard mortgage terms to run past retirement age, or even RIO products with the option to make capital repayments...