Paying mortgage when retired OAP?

GibbsRule_No3.

There has been a lot of stories in the news recently about younger people getting mortgages that they will be paying as OAPs. 40 years. Also another story or two, about OAPs in Private rentals being asked to leave as the owners want to sell up. I never earned enough when younger to think about buying a property, I was lucky enough to inherit a HA rental, due to them taking money from just me, when my mother was hospitalised for many years and they made the mistake of telling me I would need to pay full rent, until then I was listed as Non-dependent.  When she did pass away and I informed them, they wanted to evict me, with the intervention of MP and Local Councillors I was allowed to remain, as I had been paying for 18 years and had queried at the time they said they were taking the rent money from just me. I’m sure if the same happened now I would have been evicted, no matter what due to the current housing stock. I will always be paying full rent (unless I’m put in a home) as I have Private Pensions, as well as my SP, so no benefits.  

What I’m wondering though, with these stories, is would my 28 year old if I knew I would still have a mortgage at my current age prefer that, knowing the property is mine and I might at sometime even pay off the mortgage? My answer is yes, so what is the downside? What am I missing?

maisie_cat

I guess it depends on the amount of mortgage payment, income level and the type of tenancy/landlord.
A tenant will have access to help with housing costs that a mortgage payer won't, although pension credit will allow access to SMI
I have 4 siblings in their late 50s, two have mortgages that they will have in retirement and two are council tenants.
The rent payments made by those two are more than the mortgage payments of the other two.
The tenants are unlikely to qualify for housing benefit because they will have private and state pensions, so they will be paying rent forever. The mortgages paid by other two will be finished before they reach 70, but even if they continued, they'd be less than the rent of the others.
On the upside for the tenants, they have no maintenance obligation and they do have secure tenancies. 
One of my sisters is terrified that she'll be in poverty in retirement because her one bed tower block rent/service charge is £750 a month and will only increase.
If she'd bought property when she could her mortgage would be much smaller regardless of capital appreciation.
I feel for those in retirement who are in private rentals without secure tenancies

Jami74

I plan to have my first mortgage before I'm 50. It will be cheaper than the private rent I am currently paying. I can only do this by relocating 200 miles. If I stay in my current employment, my works pension will take me over the threshold for benefits. It will be a twenty year mortgage and I plan to have it paid off within 15 years, maybe less. If I pull it off then I should have an okay retirement financially and secure housing.

ACG

Just to start this with that I do not do mortgages beyond age 70 (even though I could) - so when I say what I am about to say you can see it is not motivated by money. 

The state retirement age used to be 60-65, we are now at around 67-68 and that is expected to increase. 
In addition to that, house prices have gone up as not enough are being built. 

Is it really any surprise that people are opting to take mortgages over a longer term? Retirement ages are 3-7 years longer than they were a decade ago.  

When I bought the house I have now, I stretched myself. That is the same for most people and always has been, stretch yourself in the early years and it becomes easier in the later years due to your wage going up (in the main). All of these people taking their mortgages to 70-80 will likely end up overpaying or using a lump sum from their pension to pay off the remainder when they do retire, its not like they HAVE to work until 70-80, its just that they will need to overpay to ensure they have no mortgage left when they do retire. 

We need more homes to bring house prices down. 

fatbelly

The concept of OAP or state pension recipient is being diminished by a thousand cuts. My wife was lucky to receive hers at 62.5, I get mine at 66, my younger colleagues currently think they will qualify at 68 but are at the mercy of many future administrations.

The latest figures I saw show life expectancy, and particularly healthy life expectancy, decreasing.

Altior

My mortgage goes right out to age 75, however it's purely intentional and I aim to have stopped working at least 15 years before that age. I simply want to have the lowest repayment possible, so I can invest the difference and allow inflation to erode away the capital liability of the mortgage. 

I'm afraid to say many people don't understand the time value of money, including experts I've heard discussing this topic.

Obviously every case is specific to the individual, and they must have a plan/strategy if pushing a mortgage term past NRA (it may including working past their NRA, so different to mine).

GibbsRule_No3.

From the replies, it looks like most feel the beyond retirement age is not as bad as is being made out in the press. I do feel sorry for Pensioners who are in Private accommodation, not knowing when they will be asked to leave.  Mine is a secure HA tenancy, it is also only one bed, so I am not over/under occupying. I’m sure some HA properties are being lived in by OAPs who do not need two, three or four bedrooms but they cannot find properties to suit their current needs. The rent did rise by £70 a month this year and I’m sure it is a lot higher than a mortgage would be now, if I’d had one.

Altior

I applied direct and I know that the bank were very rigorous in my application, ensuring I was planning to work to 75. Of course I was fibbing, but it's not something that can be definitively proven either way. It had to be in employment where I could be reasonably expected to be able to work into older age. For example, I doubt a scaffolder would have passed the criteria.

ACG

GibbsRule_No3. said:

From the replies, it looks like most feel the beyond retirement age is not as bad as is being made out in the press. I do feel sorry for Pensioners who are in Private accommodation, not knowing when they will be asked to leave.  Mine is a secure HA tenancy, it is also only one bed, so I am not over/under occupying. I’m sure some HA properties are being lived in by OAPs who do not need two, three or four bedrooms but they cannot find properties to suit their current needs. The rent did rise by £70 a month this year and I’m sure it is a lot higher than a mortgage would be now, if I’d had one.

I think it is like antying. If you do a mortgage to age 80 and you do not have a way of clearing it before then or your plan goes to pot, this is going to come back to bite. The reality is that it will be a minority and they may well have to downsize their home when the time comes. 

Most people will have it paid off sooner and it wont be a problem. 

silvercar

I can think of 4 reasons:

1. Claiming / intending to work well past pension age means they can have a bigger house now and downsize when the offspring have left home. It could be the only way to afford to live as a family comfortably. 

2. They may want the option of using a pension lump sum to clear the mortgage.

3. Properties generally increase in value over the long term, so keeping a bigger house longer than necessary should yield returns.

4. unwilling to pay out a lot of money in stamp duty to downsize in an expensive area (and not wanting to move areas).

MWT

Altior said:

I simply want to have the lowest repayment possible, so I can invest the difference and allow inflation to erode away the capital liability of the mortgage. 

I'm afraid to say many people don't understand the time value of money, including experts I've heard discussing this topic.

This forum is also frequently visited by people who took interest-only mortgages with those same objectives, only to find that their investments didn't grow as they expected or their business failed and their great pension that was going to cover the mortgage went along with the business or their employer made them redundant etc....

As long as the mortgage is repayment not interest only, then the fall-back position of actually having to pay it out to the end of the term is still relatively secure as long as you genuinely can cover the payments into retirement.

Hope it all goes to plan, with no curve-balls along the way...