Best way to buy a house

eskbanker

Mozza001 said:

eskbanker said:

Mozza001 said:

eskbanker said:

There isn't enough to go on there - you'd need to model in much more detail what your annual income and expenditure would be in both scenarios.

There are a lot of people on this site who work in the pension/financial sector, a lot who dont but who are savvy with money,

Most of us are not, havent had the education or life experience to aquire it hence asking for advice/ideas.

You cant judge everyone with your own high standards, my expenditure will, same as most of my life be modelled to what i have coming in at the end of the month, currently 42k a year, when i finish i will look at what i have and cut my cloth accordingly.

Not sure why you seem to be taking offence - I'm not judging anyone, just highlighting that your decision about whether to rent or buy really needs to recognise the financial impact of each option.  It's not a criticism if you haven't done that yet, but simply an observation that, without some meaningful figures, it isn't practical for anyone to offer sufficiently informed guidance, which could ultimately cost you hugely....

Hi, not taking offence and thanks for the reply.

I dont know what else i can give, i guess "the financial impact of each option" is what im trying to work out.

What annual post-retirement income would you expect from your SIPPs and the workplace scheme?

Have you established your state pension entitlement?

Adding all that up, is it likely to be adequate for your expected lifestyle in retirement?

If using some or all TFLS towards a property, would the reduction in rent expenses compensate for the drop in pension income?

Mozza001

eskbanker said:

Mozza001 said:

eskbanker said:

Mozza001 said:

eskbanker said:

There isn't enough to go on there - you'd need to model in much more detail what your annual income and expenditure would be in both scenarios.

There are a lot of people on this site who work in the pension/financial sector, a lot who dont but who are savvy with money,

Most of us are not, havent had the education or life experience to aquire it hence asking for advice/ideas.

You cant judge everyone with your own high standards, my expenditure will, same as most of my life be modelled to what i have coming in at the end of the month, currently 42k a year, when i finish i will look at what i have and cut my cloth accordingly.

Not sure why you seem to be taking offence - I'm not judging anyone, just highlighting that your decision about whether to rent or buy really needs to recognise the financial impact of each option.  It's not a criticism if you haven't done that yet, but simply an observation that, without some meaningful figures, it isn't practical for anyone to offer sufficiently informed guidance, which could ultimately cost you hugely....

Hi, not taking offence and thanks for the reply.

I dont know what else i can give, i guess "the financial impact of each option" is what im trying to work out.

What annual post-retirement income would you expect from your SIPPs and the workplace scheme?

No idea, ive allways been a "cut my cloth accordingly"  person and lived to what ive earnt.
I live quite comfortably on my current salary, but in earlier years managed on a lot less.
Im pretty sure with what i have i would do fine, unless there was a downturn, in which case as above i would manage. Plus im planning to work on as im adding to my pension as mentioned in origional post, so hopefully my fund will be increasing. In theory any mortgage payments will be covered by the ££ payed into my pension by employer, as long as i continue working.

Have you established your state pension entitlement?

Yes, entitled to full.

Adding all that up, is it likely to be adequate for your expected lifestyle in retirement?

I think so, but nothing is certain with investments, is it?

If using some or all TFLS towards a property, would the reduction in rent expenses compensate for the drop in pension income?

Probably not. It would not allow me to keep money" in reserve" if i put it all to a deposit, i like the idea of having a year or twos money at hand in case of the above mentioned downturn.

poseidon1

Mozza001 said:

poseidon1 said:

Points made in other posts certainly valid  ( especially  with regard to triggering the MPAA ) and you do have a difficult conundrum.

That said, I personally would find renting in the UK in retirement ( particularly in England ) hugely unappealing.

However, given the growing size of your Sipp  and its potential to fund a mortgage beyond  age 70  (which appears to be your target end age for mortgage purposes ) why not consider a mortgage to age 80 to limit the amount of TFLS needed for the house purchase?  An extra 10 years on a repayment mortgage should give rise to usefully lower monthly payments on a larger mortgage than you would normally consider.

Finding a mortgage provider that will permit an age 80 end term may take a little time, but at age 66 I recently concluded  a  14 year  repayment mortgage with Barclays Bank (5.24٪  5 year fixed). I originally was going for age 75, but they kindly offered the extra 5 years to reduce monthly payments so the possibility does exsist with at least one mainstream lender.

Another possibility is a new entrant to long term fixed rate mortgages called Perenna. Not the cheapest around ( 90% LTV 5.76% fixed in February)  but this is available on terms up 30 years!

You have already built a commendably large Sipp, it would be a shame to massively impact its ability to provide a comfortable level of retirement income, by an excessive TFLS withdrawal at this time.

 I would be more inclined to leverage your current salary earning status to fund as high a mortgage as you can afford.

I wasnt aware you could get up to 80 years, many thanks.

Worth consulting a mortgage broker for lenders that will lend beyond age 80 don't restrict yourself to just talking to your current bankers, also don't ignore Perenna a new option which I would certainly consider at your current age and circumstance. I spent 4 months exploring various later life mortgage options, before returning to my own lenders Barclays.

Hopefully you already have a decent credit rating, but it has been a scandal that rents paid by tenants were historically never recognised. This has changed recently  (see link below) so until you take the plunge with a purchase, no harm in potentially improving ratings with this type of service :

https://www.creditladder.co.uk/tenants

To reiterate, you have a good Sipp pot already . With modest growth of just 4% p.a and not including your ongoing contributions, you could see that grow to £740,000 in 10 years.  Add in your current annual contributions of £13,200 and you are exceeding £900,000 over the same period. This would (for me ), be good enough reason to explore maximum mortgage options, to preserve the integrity and potential of the sipp.

Incidentally don't bash yourself up too much about not being particularly financially savvy in the past. Trust me, whether by luck, design or a bit of both your Sipp would be a source of envy by the vast majority of people of your age ( and older). You now  just need to explore ( with the help of a mortgage broker) how you can leverage your salary to access the property market ideally without accessing your sipp at all.  

Albermarle

Regarding taking the taxable part of your pensions.
As said this would not seem a good idea at the present time due to triggering the MPAA , plus you would not have to take that much before you would be paying 40% tax on it, as it would be added to your current salary.

You say you have £500K in a few SIPP's and a workplace pension. You also have said you do not know much about money matters.
In this case I would be concerned that the pensions are not invested optimally, and that you may  be paying higher charges than necessary.
It would seem a good case for seeing an Independent Financial Advisor, as £500K + is a lot of money, and it is important that it is handled correctly to maximise the value for you. In case you are thinking I am an IFA, I definitely am not, but I am OK ( I think !) to manage my own finances, mainly from having spent many hours reading this forum.
However I think you might benefit from paying for some professional advice. Or alternatively become more money savvy, but I have the impression that you are not inclined that way.

It will be fine to ask questions on here about financial advice, or you can post details of your different pensions for some hopefully informed comments. Probably best to start another thread though if you want to do either.

bluenose1

Can totally understand why you want to buy, I would be buying in your situation for the security of having my own home.
We moved house in our early 50s and remortgaged for an increased amount to Barclays, could have got it to age 80 but think we did until 75, plus it was the most competitive rate in general at time so no disadvantage by age. 

We are lucky as able to pay it off next year 58 when our fixed rate ends, but we got it until 75 as wasn’t sure how things would pan out and wanted some disposable income if required.

I was advised to move whilst still working as although i had pension savings this wasn’t classed as income.

You would have to work out how much deposit you require to get best interest rates available and how much you could afford to pay a month to work out number of years you require. There are some good calculators on MSE.
I wouldn’t pay any more tax than necessary when withdrawing from my SIPPs and you always have the option normally to overpay your mortgage 10% each year, so might be able to whittle it down without  paying higher rate tax. As Albermarle has said if you do take any of the taxable part of your pension the MPAA kicks in which means future pension contributions are restricted to £10,000 per year. 

Though it looks like you have a significant amount of tax free cash currently available if your pension scheme allows it.
Hopefully your SIPPs should be at least matching your mortgage interest rate so I wouldn’t worry about paying your mortgage off to quickly. 

Mozza001

Albermarle said:

Regarding taking the taxable part of your pensions.
As said this would not seem a good idea at the present time due to triggering the MPAA , plus you would not have to take that much before you would be paying 40% tax on it, as it would be added to your current salary.

You say you have £500K in a few SIPP's and a workplace pension. You also have said you do not know much about money matters.
In this case I would be concerned that the pensions are not invested optimally, and that you may  be paying higher charges than necessary.
It would seem a good case for seeing an Independent Financial Advisor, as £500K + is a lot of money, and it is important that it is handled correctly to maximise the value for you. In case you are thinking I am an IFA, I definitely am not, but I am OK ( I think !) to manage my own finances, mainly from having spent many hours reading this forum.
However I think you might benefit from paying for some professional advice. Or alternatively become more money savvy, but I have the impression that you are not inclined that way.

It will be fine to ask questions on here about financial advice, or you can post details of your different pensions for some hopefully informed comments. Probably best to start another thread though if you want to do either.

I have an IFA, I moved a final salary pension  some years ago, at the optimal time with a very good conversion rate. I leave them to it RE investments, I'm savy enough to leave the professionals to it.

The workplace looks after itself, the only cash I control personally is around 80k, and I just bunged that in Vanguard life 80 and 100. 

Albermarle

Mozza001 said:

Albermarle said:

Regarding taking the taxable part of your pensions.
As said this would not seem a good idea at the present time due to triggering the MPAA , plus you would not have to take that much before you would be paying 40% tax on it, as it would be added to your current salary.

You say you have £500K in a few SIPP's and a workplace pension. You also have said you do not know much about money matters.
In this case I would be concerned that the pensions are not invested optimally, and that you may  be paying higher charges than necessary.
It would seem a good case for seeing an Independent Financial Advisor, as £500K + is a lot of money, and it is important that it is handled correctly to maximise the value for you. In case you are thinking I am an IFA, I definitely am not, but I am OK ( I think !) to manage my own finances, mainly from having spent many hours reading this forum.
However I think you might benefit from paying for some professional advice. Or alternatively become more money savvy, but I have the impression that you are not inclined that way.

It will be fine to ask questions on here about financial advice, or you can post details of your different pensions for some hopefully informed comments. Probably best to start another thread though if you want to do either.

I have an IFA, I moved a final salary pension  some years ago, at the optimal time with a very good conversion rate. I leave them to it RE investments, I'm savy enough to leave the professionals to it.

The workplace looks after itself, the only cash I control personally is around 80k, and I just bunged that in Vanguard life 80 and 100. 

Have you asked your IFA to have a look at how your workplace pension is invested ? It maybe looking after itself, but not necessarily in an ideal way for you.

Roger175

It's stating the obvious, but all you really need to be able to do, is fund the difference between the mortgage payments and your current rent. Given that you are looking at a relatively short mortgage term, the mortgage will undoubtedly be somewhat higher than the current rent, but I would suggest you find a good mortgage broker and get some ideas of the various scenario's. You could get comparisons involving different size deposits and terms of mortgage etc and try to find a happy compromise that suits your circumstances.

Obviously the mortgage is for a fixed term, thereafter you will have no monthly outgoing (either mortgage or rent) and bear in mind you will get your state pension in due course, so in the longer term, things should become a lot more comfortable.

Good luck with it.

Sarahspangles

This thread has prompted a question. When I took out my last mortgage the advisor at the building society mistyped the month/year I proposed as the end of the mortgage term. The date she used fell after my retirement age. Later on in the discussion she asked me to confirm how I would repay once in retirement, which led to us spotting the mistake.

My initial reaction was to ask her to correct the date, but she said as I expected a pension commencement lump sum (PCLS), she could put that down as my plan. I actually went with this option as it helped in the two-kids-at-Uni patch and then I overpaid to clear what remained.

Is it an unusual arrangement to use a PCLS in this way? Or a TFLS?

SkyeD

My other half and I became a couple thirteen years ago (after a previous long-term marriage each).  We started our life together with nothing other than full time jobs.  We rented for nine years, during which time we saved up as much as we could.  I took early retirement from teaching almost six years ago, at the age of 58.  My other half had four decent DC pension pots which he took over three years (all taxed at source then the tax was claimed back as appropriate).  We combined our pension lump sums and savings, and purchased a do-er upper (£140,000) five years ago (30th April), leaving a portion of cash aside to do the work that we wanted. We took out an eleven year mortgage for £30k - 5 years have been paid.  Our mortgage was based on pension income.

So far, we've lived off private pensions, done the house up, made some annual maximum overpayments on the mortgage - and next month we aim to pay off the balance, thanks to receiving an inheritance from my parents who both sadly died during the past 18 months.

We didn't want to rent into retirement and without the inheritance would have carried on paying the mortgage and saving to make savvy overpayments right until the end (just before I reach 70).  Our outlook is that our pension lump sums and savings are now invested in bricks and mortar, giving us security and comfort for when we get older.