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£200k inheritance, property ladder or not?

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  • jem1276 said:
    Thanks everyone for your replies! The majority seem to say buy, which is what we expected. It was great to read the reasons too.

    We are currently paying £1400 a month to rent in Devon. We've looked at mortgage options with putting down a deposit of £150k, which leaves us with monthly mortgage repayments of between £1,800 and £2,200 a month, depending on the house price. So not cheaper than renting and quite a stretch each month, plus pressure to stay in the job that provides the salary this mortgage would be based on. If I had to take a drop in wages...scary.

    So I guess the options are to put in the whole £200k to bring down the mortgage repayments, or compromise on the house and go smaller/less desirable area. At 49, I doubt a mortgage lender would allow the length of the loan to increase to reduce payments that way.  

    Yes, you can leave a rental but you can`t leave a mortgage once you sign up for one. I would keep the 200k intact, property is the most illiquid asset there is and a market crash could see you losing a large chunk of money, 200k invested well will translate into financial freedom for life, as you say a mortgage is really just a ball and chain.
  • tealady said:
    As the quote goes " buy land, they have stopped making it"
    For me the security of a home of my own was paramount, not being at the mercy of the rental market meant a lot (but I am "risk averse"
    I think quite a few farmers used to believe that would pay off? Take a flight from London to Aberdeen, there is plenty of land, most of it is owned by a handful of families though, property "ownership" through mortgage debt is not designed to make ordinary people part of the land-owning class, it is designed to enrich bankers, the name of the game is building capital, 200k is a very good start.
  • Myci85
    Myci85 Posts: 394 Forumite
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    We have just bought our first house, and borrowed into retirement age to make the monthly payments more manageable due to also being older and needing a family home with 2 children. I was a bit worried about the longterm implications of doing so, but then figured that over the years that monthly amount will seem less due to inflation and earnings going up so can hopefully start to overpay, and the alternative was to keep renting. If we kept renting, that monthly rent would have increased steadily, we wouldn't have the security of our own home, and we'd be paying rent for life rather than maybe a few years into retirement. 
  • If you don’t know what to do with the money then buy a home. It’s that simple really.
  • FreeBear
    FreeBear Posts: 18,163 Forumite
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    Myci85 said:
    We have just bought our first house, and borrowed into retirement age to make the monthly payments more manageable due to also being older and needing a family home with 2 children. I was a bit worried about the longterm implications of doing so, but then figured that over the years that monthly amount will seem less due to inflation and earnings going up so can hopefully start to overpay
    Depending on your pension(s), a lump sum on retirement could go a long way to paying off any outstanding mortgage.

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  • Myci85 said:
    We have just bought our first house, and borrowed into retirement age to make the monthly payments more manageable due to also being older and needing a family home with 2 children. I was a bit worried about the longterm implications of doing so, but then figured that over the years that monthly amount will seem less due to inflation and earnings going up so can hopefully start to overpay, and the alternative was to keep renting. If we kept renting, that monthly rent would have increased steadily, we wouldn't have the security of our own home, and we'd be paying rent for life rather than maybe a few years into retirement. 
    The monthly amount isn`t fixed for the full term of the debt though, you can`t fix for 20 or 30 years in the UK, if interest rates go up in future your monthly payments will rise, this has happened to a lot of people recently, rents eventually hit the ceiling of wages, if there was a recession for example rents would fall but mortgage debt payments would still be governed by movements in the bond markets.
  • silvercar
    silvercar Posts: 49,504 Ambassador
    Part of the Furniture 10,000 Posts Academoney Grad Name Dropper
    Myci85 said:
    We have just bought our first house, and borrowed into retirement age to make the monthly payments more manageable due to also being older and needing a family home with 2 children. I was a bit worried about the longterm implications of doing so, but then figured that over the years that monthly amount will seem less due to inflation and earnings going up so can hopefully start to overpay, and the alternative was to keep renting. If we kept renting, that monthly rent would have increased steadily, we wouldn't have the security of our own home, and we'd be paying rent for life rather than maybe a few years into retirement. 
    The monthly amount isn`t fixed for the full term of the debt though, you can`t fix for 20 or 30 years in the UK, if interest rates go up in future your monthly payments will rise, this has happened to a lot of people recently, rents eventually hit the ceiling of wages, if there was a recession for example rents would fall but mortgage debt payments would still be governed by movements in the bond markets.
    The problem with renting is the need to move. You can fix a mortgage for 20 years, but you also can’t take a tenancy for 20 years. I wouldn’t want the hassle factor of frequently moving at inconvenient times or in old age.
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  • jimbog
    jimbog Posts: 2,253 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    Worth bearing in mind that even though your mortgage payments will fluctuate if you choose not to fix, rents will only ever go up. You really don't want to be hauling all your belongings between rentals as a pensioner 
    Gather ye rosebuds while ye may
  • ian1246
    ian1246 Posts: 385 Forumite
    Seventh Anniversary 100 Posts Name Dropper
    edited 4 December 2024 at 11:15AM
    Anything you invest runs the risk of devaluing if the markets go in the wrong direction.

    On top of that, any investment returns will have to outpace Property Price Inflation AND whatever your rent works out to in annual yield.

    I.e. £200,000 achieving an 8% return is £16,000 - if your rent is £900 a month, that's £10,800 in wastes cash, so your net gain is only £5200 - 2.6% - barely above normal Inflation, let alone Property Price increases.

    On the flip side - use £150,000 as a 50% deposit for a £300,000 house - Yorkshire Building Society, as an example, would do a 4.59% (fixed for 2 years) repayment mortgage over 25 years at  £841 a month, which i would bet is probably near to or less than your monthly rent!  On top of that - £573.75 of the £841 payment would be servicing the interest, whilst the rest would be increasing your equity (gradually increasing every month as more capital is paid off). £573 will almost certainly be far less than your rent!!

    Once your on the property ladder, any subsequent increase in house value likely also applies to your house - so if ever you plan to move/upgrade, that's at least half the battle!!
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