Reply to: Oh Dear: Could a retirement mortgage help you stay in YOUR home

[NotAllThere]

For primary residence not BTL? I'm all ears..

All a matter of location. See here: https://www.contractoruk.com/forums/...ml#post2605865

[Hobosapien]

More tax efficient to have one.

For primary residence not BTL? I'm all ears.

I suppose if you need to withdraw a large dividend to avoid a mortgage it may work out cheaper by remaining under higher rate threshold over a number of years to still pay mortgage off early.

I know someone that every time he got drunk he'd ramble on about how he didn't want to pay off the mortgage as he could get investment interest (post tax) that outperformed his mortgage interest, but that was before 2008 when savings rates and low risk investments were worth looking at in terms of compounding over the typical lifetime of a mortgage. Not sure if the figures still add up without taking a gamble on investment performance and ending up with a shortfall like many with endowment mortgages of yesteryear.

[NotAllThere]

I thought you were contractors?

Who has any sort of mortgage?

More tax efficient to have one.

[Cirrus]

Will there still be city twinning after Brexit?

There will in Rutland.

Whitwell claims to be twinned with Paris, France. In 1980, regulars from the pub, the Noel Arms wrote to the then Mayor of Paris, Jacques Chirac proposing the link and with a tight deadline for a response. As no answer arrived from the Mayor's office by the set date, the village unilaterally declared itself to be twinned and erected road signs to that effect. Its population at the 2001 census was 41

[vetran]

I thought you were contractors?

Who has any sort of mortgage?


Permie off & on for decades but sod all mortgage in a couple of years it will be zero


We are lucky, this is what normal people live through.

[Paddy]

Hi NAT,

so what about the repayment of the capital ? |How does that work ?

Is the idea to put that amount into a higher earning vehicle and assuming the grand plan works enjoy the cream off the top at the end of the loan period ?

Bit risky for me.

Milan.

When equity in the property finishes, they boot out the OAP.

[SandyD]

Will there still be city twinning after Brexit?

Re the OP topic, I know two couples who are in their 60's and have no kids, no one to inherit them, they both own big houses in outer London ... can't see its a disadvantage for them to do such a mortgage or equity release.. who cares what happens after they die !

[Hobosapien]

Imagine, some beautiful old unesco town in Germany twinning with swindon, how unfortunate that would be

Milan.

Maybe the Germans shouldn't have bombed the tulip out of Swindon then.

Though going by those that live or have been there it's due for a renovation similar to what the IRA did for Manchester.

[milanbenes]

It's the Swiss way. If you own your own home, then a notional figure is added to your taxable income, as imputed rent. I.e. they tax you on the advantage of not paying rent. This is what the will of the people is when most people live in rented accommodation. However, interest payments are offset against tax, so most people never pay off their mortgage while they're alive.

You get the mortgage down to a low level (max 66%), and you can then seek agreement with the lender that there will be no further capital repayments. Mortgage contracts are for set periods, then you must renew - but there's no reassessment of eligibility (unless you move lender). You can have parallel mortgages with different periods, even across different lenders , for the total loan amount. I currently have 2 with the same bank, but one expires in 4 years, one in 6.

When you reach retirement age, there's a reassessment of your financial position, and the lender will insist that you make capital repayments to bring your interest payments to an affordable amount. They also take into account maintenance costs.

You then keep renewing your mortgages every now and then, until you die. At that point your beneficiaries inherit (no inheritance tax), and they also inherit the loan. Mostly what happens is that the beneficiaries pay the mortgage interest until they sell the house to a developer and then split the loot (after a tax deduction for any capital gains). But one beneficiary may pay of the others and take ownership - and the mortgage. Of course there is an assessment to make sure they can afford it.

In my case, we plan to sell the house and move into something smaller, but still with an interest only mortgage, before we retire. Probably in about ten years time.

wow

what a system

blimey

Milan.

[NotAllThere]

Hi NAT,

so what about the repayment of the capital ? |How does that work ?

Is the idea to put that amount into a higher earning vehicle and assuming the grand plan works enjoy the cream off the top at the end of the loan period ?

Bit risky for me.

Milan.

It's the Swiss way. If you own your own home, then a notional figure is added to your taxable income, as imputed rent. I.e. they tax you on the advantage of not paying rent. This is what the will of the people is when most people live in rented accommodation. However, interest payments are offset against tax, so most people never pay off their mortgage while they're alive.

You get the mortgage down to a low level (max 66%), and you can then seek agreement with the lender that there will be no further capital repayments. Mortgage contracts are for set periods, then you must renew - but there's no reassessment of eligibility (unless you move lender). You can have parallel mortgages with different periods, even across different lenders , for the total loan amount. I currently have 2 with the same bank, but one expires in 4 years, one in 6.

When you reach retirement age, there's a reassessment of your financial position, and the lender will insist that you make capital repayments to bring your interest payments to an affordable amount. They also take into account maintenance costs.

You then keep renewing your mortgages every now and then, until you die. At that point your beneficiaries inherit (no inheritance tax), and they also inherit the loan. Mostly what happens is that the beneficiaries pay the mortgage interest until they sell the house to a developer and then split the loot (after a tax deduction for any capital gains). But one beneficiary may pay of the others and take ownership - and the mortgage. Of course there is an assessment to make sure they can afford it.

In my case, we plan to sell the house and move into something smaller, but still with an interest only mortgage, before we retire. Probably in about ten years time.

[milanbenes]

regarding the twinning with cities in other countries, is there kind of a list of tulip holes, which tulip holes can proudly use to select which other tulip hole to twin with ?

Imagine, some beautiful old unesco town in Germany twinning with swindon, how unfortunate that would be

Milan.

[DimPrawn]

Of course if you dont mind living in just any tuliphole then you could make it work.

[Lockhouse]

Oh not that old one again! Downsizing only works and frees up enough capital if you live in a big, prosperous city and move out to the sticks. In probably 80% of people's circumstances around the country, it isnt viable.

The sums work in my case. That's why it's my plan. I understand that it's not an option for most people but I want to spend my retirement doing other stuff than looking after a big house and garden.

[doconline]

De rigueur where I live. But the loan can be multi-generational. I have a loan of about 25% of the value of the house. Interest only.



It'll be more expensive, since with equity release you don't make any repayments - the interest is added to the loan.

That's true for some but not all products. You can get equity release where you can also repay part / all of the payment you have received if you wish (so you have more equity for heirs etc). Also, if you want to move house this comes into play.

Also equity release % rates are generally higher compared to regular mortgage rates, and amount available is dependent on age when taking the equity. If you take equity at 60 for example, you will only get a small % value of your property and if you pop off at 85 most / all of your property equity will probably be gone. So it may not be more expensive.

[washed up contractor]

If your house is large enough then just downsize.

We plan to downsize (relocate and buy something that needs less upkeep) next year, then if we're still kicking around at 75ish, downsize again to a retirement property.

The fly in the ointment is stamp duty but it's only really a problem for the first move. Cheaper than the loan costs and we'll have something to leave the kids.

Oh not that old one again! Downsizing only works and frees up enough capital if you live in a big, prosperous city and move out to the sticks. In probably 80% of people's circumstances around the country, it isnt viable.

Most people would be fortunate to come out with 50 grand if that. Although not to be sneezed at, it only works out at an extra 10 grand a year for 5 years. Yeah you could eek it out further to a 100 quid a week for 10 years but that's hardly likely to make much of a difference once you sold on the familiy home, upped sticks, paid moving fees andspent an age trying to find this downsized gaff you do not want or need to spend money on, bring it up to your expectations.

Apart from that, you have to find a downsized property that is in a decent area, well served by local amenities, shops and broadband speeds. Of course if you dont mind living in just any tuliphole then you could make it work.