Living Aboard v. Living in a house

[comfortably numb]

Due to losing my job 9 years ago I turned my £50k repayment mortgage into and interest only and the payments are about £40 a month. I then decided not to seek a high paid high pressure job (which my previous one was) and opted instead for a lesser paid less stressful job but a more rewarding one. So I’ve never been able to afford to turn it back into a repayment mortgage especially as I’m now getting on for 60 with only a few employment years left.

 

We are about to give up our jobs and live aboard (offer accepted and waiting for survey), and rent our 4 bedroomed house out with the plan that we would pay off the £50k mortgage sometime in the future when we eventually decide to sell the house and just accept that we’d have to take it off whatever we got for the house.

 

Then came the bombshell. I looked at the small print and to my horror discovered that this interest only mortgage was only for 10 years and expires next August, and the mortgage company said that they don’t generally offer the interest only ones to people any longer. All out boat buying/living plans were shattered as we’d have to use our boat buying funds to pay off the mortgage.

 

Thankfully the happy ending is that my mum has just sold her house and given us the £50k to pay it off. She’s 93 and I’m pleased to say remarkably healthy, but said we are going to get it when she ‘goes’ anyway so we might as well have it now.

 

Phew!!!

[bottle]

I am not a financial advisor or anything similar.

 

but

 

be careful, mortgage companie etc. can be very 'funny' about renting out a house with a mortgage on it, especially as it is your 'main residence'.

 

Then there are tax rules about giving and receiving 'gifts'

[Leni]

I am not a financial advisor or anything similar.

 

but

 

be careful, mortgage companie etc. can be very 'funny' about renting out a house with a mortgage on it, especially as it is your 'main residence'.

 

Then there are tax rules about giving and receiving 'gifts'

 

But if mum's £50k is paying off the mortgage, the house won't have a mortgage on it when it's rented out, will it?

 

The only tax issue I can see is if mum 'pops her clogs' in the next 7 years that £50k gift will be included in her estate, and if it pushes the total value over the exempt limit - currently £350k - the excess will be taxable at 40%. Is that the sort of thing you meant, bottle?

[Laurie Booth]

But if mum's £50k is paying off the mortgage, the house won't have a mortgage on it when it's rented out, will it?

 

The only tax issue I can see is if mum 'pops her clogs' in the next 7 years that £50k gift will be included in her estate, and if it pushes the total value over the exempt limit - currently £350k - the excess will be taxable at 40%. Is that the sort of thing you meant, bottle?

I thought your mum lost the £50k in a poker game no gift involved.

Edited November 18, 2012 by Laurie.Booth

[jimbo747]

Agreed Luc, I also don't believe understand how anybody could get a mortgage any where near that cheap -

 

Ours was taken out in 1994 at £60K and cost us on average £400 - £450 pcm

 

It's an interest only mortgage. If the poster has a fixed term interest only then he is in for a big shock when the term ends because banks don't sell them anymore. Unfortunately I don't consider this poster to be at all "fortunate" since, at a time when e as opportunity to pay down equity, he has nt done so. With house prices falling, that could catch him out.

The banks are very worried about interest only mortgage products since, in a static or falling market, their risk increases over time.

 

Jimbo.

[Laurie Booth]

It's an interest only mortgage. If the poster has a fixed term interest only then he is in for a big shock when the term ends because banks don't sell them anymore. Unfortunately I don't consider this poster to be at all "fortunate" since, at a time when e as opportunity to pay down equity, he has nt done so. With house prices falling, that could catch him out.

The banks are very worried about interest only mortgage products since, in a static or falling market, their risk increases over time.

 

Jimbo.

I don't think banks worry about any product they have sold.

[boathunter]

It's an interest only mortgage. If the poster has a fixed term interest only then he is in for a big shock when the term ends because banks don't sell them anymore. Unfortunately I don't consider this poster to be at all "fortunate" since, at a time when e as opportunity to pay down equity, he has nt done so. With house prices falling, that could catch him out.

The banks are very worried about interest only mortgage products since, in a static or falling market, their risk increases over time.

 

Jimbo.

He took it out in 1994. I don't know about his particular house, but I happened to buy in the same year. Since then our own house has gone up in value 4 fold even accounting for the slump we're in. I doubt he'll be in negative equity.

[Guest]

He took it out in 1994. I don't know about his particular house, but I happened to buy in the same year. Since then our own house has gone up in value 4 fold even accounting for the slump we're in. I doubt he'll be in negative equity.

 

I think Jimbo's post was in response to Laurie not me (Laurie didn't mention 1994 as being when he took out his mortgage).

 

We have neither negative equity nor a mortgage any longer as I was lucky enough to be able to pay it off. Our house increased in value three fold of the value of the mortgage on it over the that time - others have been much less fortunate of course.

Edited November 18, 2012 by The Dog House

[mrsmelly]

we are also looking forward to being debt free for the first time since we got together 20 years ago.

 

 

You have hit the nail on the head. Owing no money to anyone is theeeeeeee most important thing in life. Houses, new cars etc are just material non events. We have not owed any money at all to any poxy banking establishment for some time now, even our two telefones are on monthly contracts as is our mooring, this means we are completely free to decide when and if and where we live or go to work without having to think about the consequences of having to stay at a particular place. If you end up living in a PAID for skip it is way a better lifestyle than a mortgaged palace

 

Tim

[Leni]

If you end up living in a PAID for skip it is way a better lifestyle than a mortgaged palace

 

Tim

 

Sadly, a paid for anything or a mortgaged anything is out of the reach of many young people these days! Our generation was very lucky, but as we (and our parents!) live longer, or have to sell their (our?) homes to pay for care, there's not likely to be any way my kids can save up the deposit to buy a property! They are destined to be paying rent forever

[David Mack]

He took it out in 1994. I don't know about his particular house, but I happened to buy in the same year. Since then our own house has gone up in value 4 fold even accounting for the slump we're in. I doubt he'll be in negative equity.

He might not be in negative equity, but if he can't sell it at the end of the term what will the lender do? If they won't extend the interest only mortgage he will find his payments increasing substantially if they put him on repayment - assuming he meets the eligibility criteria.

[mrsmelly]

Sadly, a paid for anything or a mortgaged anything is out of the reach of many young people these days! Our generation was very lucky, but as we (and our parents!) live longer, or have to sell their (our?) homes to pay for care, there's not likely to be any way my kids can save up the deposit to buy a property! They are destined to be paying rent forever

 

Unfortunately you are of course right. Luckily our youngest child who is 27 has managed to obtain a mortgage and has being paying it for the last five years so looking on the bright side if she lives long enough she may some day in the very distant future own the property. Still though she has absolutely no lifestyle choices whilst ever tied in to the loan she must tow the line

 

Tim

[boathunter]

He might not be in negative equity, but if he can't sell it at the end of the term what will the lender do? If they won't extend the interest only mortgage he will find his payments increasing substantially if they put him on repayment - assuming he meets the eligibility criteria.

I'd contend that as he's had the mortgage since 1994 it's a life of mortgage deal. My repayment "1% above base rate" mortgage is. As long as I don't move, the deal remains. There were plenty of deals like this back in the day.

[Tuscan]

I'd contend that as he's had the mortgage since 1994 it's a life of mortgage deal. My repayment "1% above base rate" mortgage is. As long as I don't move, the deal remains. There were plenty of deals like this back in the day.

 

 

 

All mortgages have a fixed term as far as I am aware. we bought a holiday home on a 15 year interest only mortgage 6 years ago fortunately I have been able to pay down half of it. But the banks have started to write asking me to prove that i have the abililty to repay the balance or they would convert to a repayment, so far we have resisted this change but beware. The interest is so low that its not worth paying off until we have/are able to.

[Scooby]

All mortgages have a fixed term as far as I am aware. we bought a holiday home on a 15 year interest only mortgage 6 years ago fortunately I have been able to pay down half of it. But the banks have started to write asking me to prove that i have the abililty to repay the balance or they would convert to a repayment, so far we have resisted this change but beware. The interest is so low that its not worth paying off until we have/are able to.

 

We went to the bank and told em we wanted to rent the house out, they said for how long well we would like to take 12 months off travelling we said, that was 3 years ago, house still rented and not heard a think, they get paid end of matter, plus the mortgage of 0.69% above boe rate was not on any agreed term just the length of the mortgage, these were basically no deal mortgages which allowed you to make overpayments so werent very attractive when we first took it out paid off now though hope it stays down, why pay overpayments to a mortgage if your rate is 1.19% it better off in the bank till its higher than 3%.

[boathunter]

Agreed, mine being repayment would finish when it's paid off so no problem there. An interest only not sure about that. You're probably right as they don't like to give mortgage that continues after retirement, but I was offered 35 years on that basis - the longer you have it, the more money they make. I resisted endowment after prising out of them that 100% of the first two years payments went as commission with not a penny invested for me!

[FadeToScarlet]

Sadly, a paid for anything or a mortgaged anything is out of the reach of many young people these days! Our generation was very lucky, but as we (and our parents!) live longer, or have to sell their (our?) homes to pay for care, there's not likely to be any way my kids can save up the deposit to buy a property! They are destined to be paying rent forever

 

There is a way!

 

1. Buy narrowboat with marine mortgage.

 

2. Live on boat paying off cheap mortgage.

 

3. Sell boat.

 

4. There you go, house deposit.

 

It's difficult to save up when paying rent anywhere but at least paying off a marine mortgage means you get more and more ownership of the boat and hopefully more and more money when you sell it.

[boathunter]

The obvious problem is that here in Angleterre house prices bear no resemblance to common sense. My house is apparently worth 4x what is was 18 years ago. I do not earn 4x as much. I'm going to buy a couple of houses in France and encourge my kids to learn French...

[comfortably numb]

But if mum's £50k is paying off the mortgage, the house won't have a mortgage on it when it's rented out, will it?

 

The only tax issue I can see is if mum 'pops her clogs' in the next 7 years that £50k gift will be included in her estate, and if it pushes the total value over the exempt limit - currently £350k - the excess will be taxable at 40%. Is that the sort of thing you meant, bottle?

 

My mum's estate is well under the £350k threshold so there wouldn't be any inhetitence tax. Also, about 7 years ago she signed over half of her house to my brother and I just in case.

 

Regarding the mortgage lender frowning upon us renting out a property with a mortgage I doubt they'd worry because there's still plenty of equity left, and especially as it expires next August, but hopefully the money will be through around Christmas or just after in which case I will pay off the mortgage in full then.

[Dave_P]

Really? Even without any interest it will take you nearly 110 years to pay it off at that rate!

 

That's what I was going to say. Something tells me that these figures are highly suspect. Even for an interest only morgage I struggle to believe that figure.

 

And on the general point, comparing boat v house is pretty futile because living costs for either are as high as you want them to be or as low as you can put up with.

 

If I really had to choose, I would say that, if your circumstances allow it, at the bottom end of the scale, you can live more comfortably on a very low income on a boat.

[Scooby]

That's what I was going to say. Something tells me that these figures are highly suspect. Even for an interest only morgage I struggle to believe that figure.

 

And on the general point, comparing boat v house is pretty futile because living costs for either are as high as you want them to be or as low as you can put up with.

 

If I really had to choose, I would say that, if your circumstances allow it, at the bottom end of the scale, you can live more comfortably on a very low income on a boat.

 

There is nothing suspect of that kind of rate at all its simple, everyone took a mortgage either fixed or tracker or endowment(in his case interest only rather than repayment), others did pretty much nothing like us, we took out variable mortgage which tracks boe 0.69& above, if you asked if it was a good rate 4 years ago it was terrible but allows overpayments which is the reason for it, your not fixed in for a term and its for full length of mortgage and you can change whenever, now cos of the crash its bloody awesome. Simples...Had mortgage of 130k paying £840 a month, since then paid 30k off and now have mortgage at £390 a month.

[Dave_P]

There is nothing suspect of that kind of rate at all its simple, everyone took a mortgage either fixed or tracker or endowment(in his case interest only rather than repayment), others did pretty much nothing like us, we took out variable mortgage which tracks boe 0.69& above, if you asked if it was a good rate 4 years ago it was terrible but allows overpayments which is the reason for it, your not fixed in for a term and its for full length of mortgage and you can change whenever, now cos of the crash its bloody awesome. Simples...Had mortgage of 130k paying £840 a month, since then paid 30k off and now have mortgage at £390 a month.

 

If it's interest only then that's different, I must have missied where he said that. Of course, interest rates rise as well as fall.