Is it wise to take out a mortgage with 40 year term?

Bunnies1

Thank you so much for all your replies. I guess if I needed to ask the question I knew it was a bit steep.

That amount is the very most we would have to borrow, if we paid the asking price. The financial adviser at the Estate agents quoted us a 34 year term on borrowing £140,000. Only £3000 difference borrowed, but a much shorter term.

Ian and Dunstonh, I think the financial adviser was assuming I would go back to work. At the moment I am at home with 3 small children. Previously I was a nurse, so the possibility is there to return to work. What I don't like though is assuming I will- anything could happen in the years to come.

Yes, Mr Nice Englishman, the house is bigger than we will need in 18-20 years time, so there is a very high likelihood we will downscale then.

Mr Safe Gaz, yes you are right the amount wasted to interest is scary. Our original plan was to save the equity and, as renting is cheaper here, we would also put in £150 a month into the savings. We figured if we did that for 25 years we would still have the same amount (given that you pay back a mortgage 2 1/2 times). However, the insecurity of renting is putting us off. Also I could always go back to work if things got really tight with money.

David, we were credit checked by the Mortgage company suggested by Mortgage Advice Bureau, and yes, we can borrow that amount, and more! Lucklily our credit check went through absolutely fine. Its there if we want it.

So thank you, it really helps to get a 'reality check' I may speak further with the Financiall adviser at the Estate Agents who offered us a 34 year term. I just thought that he would not be able to offer such good deals as Mortgage Advice Bureau.

Still though we can not decide whether to go for buying or renting. The way it feels at the miniute is we either rent off the Landlord, or the mortgage company.

Thank again, Marie.

beecher

I think this sounds like a disaster waiting to happen. The chances of overpaying or cutting the term in the future sound slight when so much of the household income comes from benefits and maintenance. Realistically I think you should be looking at a cheaper house, or renting.

Longer terms can obviously work for people - mine is 28 years as I took out a 20 year term 8 years in, but cutting the term isn't a big deal as the mortgage is less than 2x my wage. Yours is over 4x combined income, with a reliance on benefits - it just isn't feasible in my opinion.

edit: a 34 year mortgage still takes you past retirement - at 35 I wouldn't be taking one past 30 years, and that'd be a push to be honest.

What about renting for a year and seeing what happens with house prices? That £190,000 house could be far more affordable this time next year.

good luck with whatever you decide

dunstonh

I think the financial adviser was assuming I would go back to work. At the moment I am at home with 3 small children. Previously I was a nurse, so the possibility is there to return to work. What I don't like though is assuming I will- anything could happen in the years to come.

It may be a valid assumption. However, that doesnt change the fact that you are going 8 years into retirement. Thats when you could really struggle.

There is always something that eats your money. Currently you are not working because of the children. You dont say how old they are but lets say you cannot work full time for the next 18 years. That puts you in your 50s. At this point you realise your retirement planning is zero and dont fancy living on just over £9000 a year from the state. Plus, you have £775 to pay per month which is more than the state pension and pension credits you will get (in todays terms). So, you need to put large amounts aside each month to make up for the fact you didnt do your retirement planning earlier.

edit: a 34 year mortgage still takes you past retirement - at 35 I wouldn't be taking one past 30 years, and that'd be a push to be honest.

67 is their state retirement ages so that would be the eldest they would want to go. It is highly unlikely that early retirement is going to be possible so you could justify going to 67.

However, how it is being proposed at the moment is a mis-sale waiting to happen.

Bunnies1

Very valid, lots to think about. Of course the FA did not dwell upon retirement issues!

Just to qualify why it looks like we maybe being greedy....We have sold our 4 double bedroom semi for £138.000. Way below the average house prices. The reason for this is that we live on an ex RAF base, where prices are cheaper and we built a big extention ourselves. We are moving to an average house price area, the house we like is 3 bedroom with a garden a quarter of the size we have now. It is one of the smallest houses we could fit us all in.

It is going to be hard, because it looks like we are moving a long way up the ladder, when in fact we are paying alot more for smaller properties.

Anyway, thats off the subject, but I felt I needed to say that for my own piece of mind!:rolleyes:

Maybe renting is the only option.