So much to write on this, so I’m just going to talk about the money side of buying my house first.
Bloody ‘ell, BTL
The plan had originally been to sell my buy-to-let (BTL) flat to fund my house purchase. However, my flat is caught up in the cladding polava and unless I wanted to make a massive loss by selling it to a cash buyer, that route was closed to me.
So plan B was to attempt to remortgage, to release some equity.
Alas, the lender valued my flat at a big fat ZERO as it did not conform to the new fire safety regulations.
To pile on more financial stress, the service maintenance charges on my BTL for the past year have trebled, to pay for a Waking Watch. Although I believe a new fire alarm system has now been installed resulting in the WW no longer being employed, I have yet to see what the final bill will be to ensure that my flat will fully comply with regulations and secure the coveted EWSI certificate which will allow me to sell the property. I have already been advised that us leaseholders will not qualify for full government rebate, so await with dread on how much more I will have to pay.
Since I couldn’t release any equity, I had no alternative but to accept the loan from my parents and dip into my Future Fund.
The BTL has been a good investment but I will very likely be selling it – receiving rental income isn’t part of my FIRE plan. Assuming prices haven’t plummeted for such properties in the area, the equity I get from the eventual sale should repay the family loan in full and might even fill the hole that has been made in my Future Fund.
As per a comment I made on Monevator’s recent post which suggested that making payments on a mortgage was a form of saving, it was with some trepidation that I took on board the biggest debt of my life (on my own) at an age when many are (or close to being) mortgage-free.
At my age (the wrong side of 50), the length of the mortgage term was restricted – I certainly wasn’t offered 30-year deals!
As I went through the application with the mortgage advisor (which was all done online and over the phone, versus the face-to-face interview at the building society which I had for my first mortgage, armed with paper copies of my bank statements and payslips!), I was surprised at how much I could borrow on my own.
Some would say ‘get the biggest house/mortgage you can afford’ with these (current) low interest rates, but since I’m still aiming for FIRE, I was mindful of the size of the mortgage payments. I didn’t want to feel like the mortgage was a noose around my neck, it needed to be affordable and I needed to be comfortable with it.
So in the end, my budget didn’t cater for the biggest house I could get and I ended up with a mortgage with a LTV (loan to value) of 64%, which gave me affordable repayments and a bit of spare which I will need to split between saving for FIRE and a fund for future ‘house renovations’.
There will be some who will think that the deposit I made should have been smaller, that I could have invested the extra cash and made the most of investment returns. I did consider that but knowing me, it would have just caused me both investment stress and stress over higher mortgage payments so I did what I did for better peace of mind.
Anyway, I’m on a 2-year fixed repayment mortgage, 1.25% interest. It makes my mind boggle that the interest rate for my first mortgage over 20 years ago was 8% – let’s hope we never see those kinds of numbers again!
My mortgage term is 22 years so I’ll be in my early 70s when it’s paid off (earlier of course if I make overpayments).
How do I feel about carrying such debt into my old age?
I didn’t feel comfortable with it at first but it’s likely that when my DB pension kicks in at age 65, the 25% lump sum can more or less clear the balance of the mortgage, so I will have options when the time comes.
My mortgage payments will be more than what I am paying my parents for living in their house but at least my utility bills will be lower, which will provide some offset. However, until my parents sell their house, I will be paying 2 lots of bills but I chose to do this rather than be caught in a chain.
My savings rate will unlikely to ever reach its previous dizzy heights but I’m resigned to this – I think if I can achieve a savings rate of around 10%, I will be happy with that until things settle down cost-wise. Need to be smarter with some of my expenses and hope that the stock markets continue to do their thing for my portfolio.
Other House-Buying Costs
I wasn’t planning to get my property during the stamp duty tax holiday so I didn’t join the frantic and desperate race to try to complete before the end of July, although there had been a chance to complete before the end of September to pay a reduced amount. Sadly, this didn’t happen (the seller and then my solicitor were on holiday so three weeks were lost) so it was with a grimace that I paid out over £7k in stamp duty – ouch!
With some time on my hands before I move in, I decided to get all the rooms redecorated/painted, new carpet, floor tiles and fitted wardrobes.
Getting people in to do all the work during such a busy period has been a right pain and the labour costs have not been cheap – I feel like I’m just bleeding cash and will be so glad when it’s all done.
I do have an actual moving in date set but still so much to do (and pay for) before that happens but at least things are moving forwards.