Getting Too Old To Buy

[greengreen]

A factor that is coming up for for a number of my friends is the fact that as they approach and go into their 40s, they realise that will have to take out shorter and shorter mortgages so that they dont have to pay their pension into their mortgage in 20 odd years time.

The difficulty this presents is the longer a crash is awaited, and I'm sure it will happen at some point, the shorter the opportunity is try and move up the ladder into the kind of property that they need.

I would imagine that if you are in your early 20s now, your timing is probably perfect, simply wait a few years, and then jump on the ladder once prices have corrected (obviously this doesnt take into account student debts and other factors). The problem is that for people that have to buy at an older age, time is really against them unless they work well into their 60s/70s or unfortunately they are put in a position where they may have to buy into a bubble now or into a slowly falling market when it does start happening.

[sossij]

A factor that is coming up for for a number of my friends is the fact that as they approach and go into their 40s, they realise that will have to take out shorter and shorter mortgages so that they dont have to pay their pension into their mortgage in 20 odd years time.

The difficulty this presents is the longer a crash is awaited, and I'm sure it will happen at some point, the shorter the opportunity is try and move up the ladder into the kind of property that they need.

I would imagine that if you are in your early 20s now, your timing is probably perfect, simply wait a few years, and then jump on the ladder once prices have corrected (obviously this doesnt take into account student debts and other factors). The problem is that for people that have to buy at an older age, time is really against them unless they work well into their 60s/70s or unfortunately they are put in a position where they may have to buy into a bubble now or into a slowly falling market when it does start happening.

Don't worry about it. The event horizon of oil depletion is getting ever closer... expect mortgage repayment periods to start decreasing accordingly. They'll make sure to get their pound of flesh before the oil's gone.

[Fudge]

A factor that is coming up for for a number of my friends is the fact that as they approach and go into their 40s, they realise that will have to take out shorter and shorter mortgages so that they dont have to pay their pension into their mortgage in 20 odd years time.

The difficulty this presents is the longer a crash is awaited, and I'm sure it will happen at some point, the shorter the opportunity is try and move up the ladder into the kind of property that they need.

I would imagine that if you are in your early 20s now, your timing is probably perfect, simply wait a few years, and then jump on the ladder once prices have corrected (obviously this doesnt take into account student debts and other factors). The problem is that for people that have to buy at an older age, time is really against them unless they work well into their 60s/70s or unfortunately they are put in a position where they may have to buy into a bubble now or into a slowly falling market when it does start happening.

Yes this worries me, I am 41 so time is against me.

Do I buy high now over 25 years or rent for 5 and buy low (hopefully) over 20 years, does it make any difference?

[Starcrossed]

I am 37 so am looking at a 25 year mortgage (if ever taken up) with increasing nervousness.

It has crossed my mind that with my existing good savings, hopefully an ability to continue to add to these savings and possible decent inheritance one day I might as well forget about getting a mortgage altogether and plan to have enough cash by the time I'm 50 to buy a house outright. Just bypass the banks and their interest payments altogether. OK, in the meantime I'm paying rent, but I get a flexibility of location and free use of plumbers etc thrown in.

Is anybody else coming to that conclusion?

[Alfie Moon]

A couple of days ago I replied to a thread (Title of thread = To Buy or Not to Buy, Is It Pure Madness to Buy Now) and raised the 40+ question:

"In regard to the question posed in the title of the thread - from a general perspective - I would say age could be a significant factor. if you are below 40 then it is probably wise to wait and get more for your money when prices fall. However, if you are over 40, for each year that you wait for prices to fall you will also have to shorten your mortgage term by a year. So, the weighing up of the advantages and disadvantages of waiting for price falls is a bit more complicated once you reach the age of cardigans, slippers and a pipe.

Obviously there are many other factors that impact on an individuals situation pre and post 40 years of age.

I mention the age factor because if the average age of FTB's is around 34 there must be significant numbers that are close to, or indeed over, the age of 40. Also, I suspect there will be significant numbers of people who are 40+ years of age who have had mortgages before but are currently renting due to marriages and relationships breaking down and therefore, like many of us here, are having to weigh up the wisdom of buying property now or at some later date in the hope of gaining a better bargain.

It seems to me that the under and over 40 years of age dimension does not receive much attention here on HPC - probably because the vast majority of us are below 40???"

[lets get it right]

I am 37 so am looking at a 25 year mortgage (if ever taken up) with increasing nervousness.

It has crossed my mind that with my existing good savings, hopefully an ability to continue to add to these savings and possible decent inheritance one day I might as well forget about getting a mortgage altogether and plan to have enough cash by the time I'm 50 to buy a house outright. Just bypass the banks and their interest payments altogether. OK, in the meantime I'm paying rent, but I get a flexibility of location and free use of plumbers etc thrown in.

Is anybody else coming to that conclusion?

If you can afford to pay rent and save up for a house in 13 years - sounds like you ought to be able to afford to buy a house with a mortgage.

How old are your parents. Mate of mine who is a single child has always lived life at a laid back pace - knowing he was going to inherit. He's nearly 60 now and Ma and Pa are still going strong.

[Starcrossed]

If you can afford to pay rent and save up for a house in 13 years - sounds like you ought to be able to afford to buy a house with a mortgage.

How old are your parents. Mate of mine who is a single child has always lived life at a laid back pace - knowing he was going to inherit. He's nearly 60 now and Ma and Pa are still going strong.

If prices drop by the time I'm 40 I will almost certainly buy anyway. But if they don't drop then that's where I need to look at it again. I don't mind renting and like the security of having cash in the bank rather than a mortgage. And not having the guarantee of a paid off mortgage by the time I'm 65 is not very pleasing.

I take your point on the parents thing. I obviously wish them a long life and don't want to depend on them for my future. They are 61 so will probably be around for quite a time to come.

[Fancypants]

Is anybody else coming to that conclusion?

Yes - although I have about 5 years on you, and access to a sub-market rate rent, so perhaps I can afford to be a little more sanguine. However, aside from the growing deposit + reducing house prices outcome, one should also consider various ways of dealing with retirement without one's own home (whether it is state or family assistance, and/or disguising your assets).

As has been pointed out before - the unsuccessful obey the rules, the successful interpret them.

[greengreen]

A couple of days ago I replied to a thread (Title of thread = To Buy or Not to Buy, Is It Pure Madness to Buy Now) and raised the 40+ question:

"In regard to the question posed in the title of the thread - from a general perspective - I would say age could be a significant factor. if you are below 40 then it is probably wise to wait and get more for your money when prices fall. However, if you are over 40, for each year that you wait for prices to fall you will also have to shorten your mortgage term by a year. So, the weighing up of the advantages and disadvantages of waiting for price falls is a bit more complicated once you reach the age of cardigans, slippers and a pipe.

It seems to me that the under and over 40 years of age dimension does not receive much attention here on HPC - probably because the vast majority of us are below 40???"

I think that you are absolutely right, the difficulty is establishing at what point, given what house price fall and the rate of fall in prices against your age gives the best time to purchase.

[JumboMills]

I think that you are absolutely right, the difficulty is establishing at what point, given what house price fall and the rate of fall in prices against your age gives the best time to purchase.

Crash or no crash, the best time to buy is as soon as possible. It always has been. Buy below your means and save what you can - slow and steady wins the race. It's idiots who try and purchase a 4 bed house and a french chateaux as their first home that end up coming unstuck. Keeping up with the Jones's is a surefire way to a life of waiting for payday and never ending credit bills. It really is a misconception that it's best to wait for a crash and buy on the cheap afterwards.

[Fancypants]

will our generation be serenaded by one of its biggest selling music artists in the years to come, reprising their famous 1990s hit "too young to die" as "too old to buy"...?

[nohpc]

Yes this worries me, I am 41 so time is against me.

Do I buy high now over 25 years or rent for 5 and buy low (hopefully) over 20 years, does it make any difference?

If you are 40 then you should have a very large amount of disposable cash lying around in investment vehicles by now. Unless you are planning on buying a 5 bedroom mansion in a desirable area as your first ever property (unlikely and unrealistic) then you should be able to lay down a whopping deposit for a property.

I understand that some 40 year olds will not be in this position due to circumstance or bad financial planning but for the ones that have never had a mortgage they should have been saving in another form.

[Fudge]

If I bought now I would really struggle and would not be able to save as well, it would probably be interest only, so when I retire I will still have to find the initial sum borrowed, how am I going to do that if I am retired?

Also if we have a low wage inflation period, the initial sum borrowed will still be relatively high when I come to retire.

However if I rent cheaply I can save and and add to my STR funds and especially if house prices fall, have enough money saved to buy a house outright when I retire.

A lot of ifs I know, but the principle is sound I think.

[nohpc]

. I don't mind renting and like the security of having cash in the bank rather than a mortgage.

Your money is just as secure in your mortgage as it is in your bank account. Plus the money it saves you every time you pay a chunk in is effectively tax free savings rate. I don't understand your comment at all. If you have a flexible mortgage you can take money in and out as you please (well anything over the interest only portion). I have a bank account and a mortgage and my bank account never has more than 1000 pounds in it. Every month I make overpayments and if I need the money out for a car/holiday whatever I just phone the mortgage company and they transfer it back to my bank account. Where's the loss of security in that?

[Rizo]

A factor that is coming up for for a number of my friends is the fact that as they approach and go into their 40s, they realise that will have to take out shorter and shorter mortgages so that they dont have to pay their pension into their mortgage in 20 odd years time.

The difficulty this presents is the longer a crash is awaited, and I'm sure it will happen at some point, the shorter the opportunity is try and move up the ladder into the kind of property that they need.

I would imagine that if you are in your early 20s now, your timing is probably perfect, simply wait a few years, and then jump on the ladder once prices have corrected (obviously this doesnt take into account student debts and other factors). The problem is that for people that have to buy at an older age, time is really against them unless they work well into their 60s/70s or unfortunately they are put in a position where they may have to buy into a bubble now or into a slowly falling market when it does start happening.

Got to ask the question why did you not buy earlier?

[Ethel]

Crash or no crash, the best time to buy is as soon as possible.

Read what you have said here.

So if I buy tomorrow and there is a crash and I am in negative equity, and have wasted £200k on a house that's only now worth £100k? And I have to spend the next 25 years paying interest to the bank on money I need never have borrowed?

How is this possibly best?

[Ignorant Steve]

If you are 40 then you should have a very large amount of disposable cash lying around in investment vehicles by now. Unless you are planning on buying a 5 bedroom mansion in a desirable area as your first ever property (unlikely and unrealistic) then you should be able to lay down a whopping deposit for a property.

I understand that some 40 year olds will not be in this position due to circumstance or bad financial planning but for the ones that have never had a mortgage they should have been saving in another form.

Exactly - anyone who is currently over 40 should have bought mid to late nineties.

However wasn't there a trend whereby many people decided that their twenties were for "living" and all of lifes boring bits (savings, mortgages, pensions etc ) could wait until their thirties? These are the ones with serious financial problems now. Insufficient savings and a smaller and smaller timeframe in which to build them. I seem to remember reading recently that many of todays twenty-somethings have reversed this profligacy having seen the effect on their earlier role models.

Another factor to take into consideration is the cost of the mortgage if you assume rates have been at a historical low and are likely to be higher over the next decade or so.

25 yr repayment at 5.5% = approx £1250 per month repayment for £200,000 mortgage

15 yr repayment at 6.5% = approx £1250 per month repayment for £141,000 mortgage.

So even if the deposit available was £200,000 the first £59,000 is needed to counter balance the effect of the slightly higher rates.

Personally I wouldn't like to have any mortgage hanging over me once I was 55. Too little energy to compete in the workplace if times get tough.

[Ethel]

25 yr repayment at 5.5% = approx £1250 per month repayment for £200,000 mortgage

15 yr repayment at 6.5% = approx £1250 per month repayment for £141,000 mortgage.

Sorry, I don't quite get what you are demonstrating with these two sets of figures?

[Fancypants]

I seem to remember reading recently that many of todays twenty-somethings have reversed this profligacy having seen the effect on their earlier role models.

sadly, not the case. Many seem to have given up altogether and are living the purest form of "screw tomorrow" existences imaginable.

[benj]

Your money is just as secure in your mortgage as it is in your bank account.

Good grief. A mortgage is a loan. A debt. A liability. A bank account is an asset.

I have a bank account and a mortgage and my bank account never has more than 1000 pounds in it. Every month I make overpayments and if I need the money out for a car/holiday whatever I just phone the mortgage company and they transfer it back to my bank account. Where's the loss of security in that?

Ever worried you might lose your job?

Your home may be at risk if you fail to keep up repayments on your mortgage or any other loan secured on your home.

Where's the security in that?

[Ignorant Steve]

Sorry, I don't quite get what you are demonstrating with these two sets of figures?

The size of the mortgage that a given amount per month will service.

[greengreen]

Got to ask the question why did you not buy earlier?

We were abroad in our 20s and we did buy in London when we returned using savings that we accrued abroad. We then sold in early 2006 while I developed my business. The issue of getting too old is also in relation to friends who returned from abroad around the same period.

[greengreen]

Crash or no crash, the best time to buy is as soon as possible. It always has been. Buy below your means and save what you can - slow and steady wins the race. It's idiots who try and purchase a 4 bed house and a french chateaux as their first home that end up coming unstuck. Keeping up with the Jones's is a surefire way to a life of waiting for payday and never ending credit bills. It really is a misconception that it's best to wait for a crash and buy on the cheap afterwards.

I agree in certain circumstances. If you are saving money at a better rate than you would if you had bought a place, taking into account HPI for your region, then in some areas of the country you are better to carry on renting and saving than buying. Another point is that if you are saving at a very good rate, you can potentially jump on the ladder furhter up and avoid significant transaction costs between each subsequent move.

[Orbital]

The difficulty this presents is the longer a crash is awaited, and I'm sure it will happen at some point, the shorter the opportunity is try and move up the ladder into the kind of property that they need.

I think the key point about time is actually inflation, the big attraction of buying that many around here are blind to is that you get to buy with expensive pounds and pay off with cheap ones in the future. For example, my gf's parents were telling me how there first house was £5000 how ever many years ago they bought. Now maybe if they had bought at a better time they the house would be 50% less at £2500, a worse time and it would be 100% more at £10000. Either way, they are now retired and mortgage free and here in 2007 would it really make a difference.

My pop bought a property at the top of the last boom, and of course the next boom went even higher and so he still made a fantastic return cf putting the investment in a bank. Yes we all understand that buying at the top is not as good as buying at the bottom. The reality is that that alone doesnt make it a terrible decision. UNfortuntely without the hindsight we dont really know where the top and bottom are - if you get lucky then good for you, but some of us just want to get on with our lives..

Don't worry about it. The event horizon of oil depletion is getting ever closer... expect mortgage repayment periods to start decreasing accordingly. They'll make sure to get their pound of flesh before the oil's gone.

Well as Sweden are about to prove, we dont need oil to survive. So you can relax there chap . Blimey that must be a weight off ya mind!

Your home may be at risk if you fail to keep up repayments on your mortgage or any other loan secured on your home.

Where's the security in that?

Its a risk that drops away quickly, as more time passes the £1000 or whatever one has to pay back each month becomes increasingly easy to find. To the point that even a McJob will pay out that kind of money sooner or later. And in 25 years time the risk drops away totally and the place is yours.

How is the alternative any more secure than that? If you lose your job when renting your home is also at risk - you do realise LLs dont like it when you dont pay them! Also, rents increase in line with property prices (in the longterm). With our high inflation you can be assured no one will be renting anywhere for £1000 a month in 25 years time!

Edited June 12, 2007 by Orbital

[benj]

How is the alternative any more secure than that? If you lose your job when renting your home is also at risk - you do realise LLs dont like it when you dont pay them! Also, rents increase in line with property prices (in the longterm). With our high inflation you can be assured no one will be renting anywhere for £1000 a month in 25 years time!

If you lose your job while renting, that money in your bank account that you didn't use to buy an overpriced house can be used to pay the rent while you look for a new job. If you've saved enough, then the interest on that money will be close to paying the rent for you. If you've gone and locked up the money in housing equity instead, then you can't get at it without being forced to sell your house. If the worst comes to the worst it's pretty easy to downsize to a cheaper rental, giving a month's notice or so, no estate agents' fees to pay, etc. etc.

Rents increase in line with property prices? Ha ha. Take a look at the historical trends presented in (for example) this report, and think again.