A risk too far?

[Amarillo]

You lived for a year in a Cali with young children. Is a large house with the associated maintenance, really your dream retirement home?
We plan to downsize for retirement and spare cash will most likely assist our children with deposits for their homes.

Also, don’t forget to factor in any possible unforeseen health issues in to your calculations.

We are both currently 54, 58 at the time of our proposed move and then our boys will be 10 and 11. The houses we have our eyes on are broadly a similar size to our current home, but front Chichester Harbour, an area we know well and love. The move is not about upsizing or downsizing, but about having exceptional outdoor leisure activities for us and our boys literally on our doorstep. A place where we can live, assuming good health, for the next 30+ years.

Stage 2 of our retirement plan comes 8 years after that, after our youngest leaves school. But this house forms part of our stage 2 plan.

The question is really about how to fund the move. Borrow to buy or sell to buy. But the decision about when and where to move to has been made - subject, of course, to one of the four houses coming up for sale, and an offer being accepted.

 

[NessL]

We are both currently 54, 58 at the time of our proposed move and then our boys will be 10 and 11. The houses we have our eyes on are broadly a similar size to our current home, but front Chichester Harbour, an area we know well and love. The move is not about upsizing or downsizing, but about having exceptional outdoor leisure activities for us and our boys literally on our doorstep. A place where we can live, assuming good health, for the next 30+ years.

Stage 2 of our retirement plan comes 8 years after that, after our youngest leaves school. But this house forms part of our stage 2 plan.

The question is really about how to fund the move. Borrow to buy or sell to buy. But the decision about when and where to move to has been made - subject, of course, to one of the four houses coming up for sale, and an offer being accepted.

Good time to plan a move based on your sons ages.

I’m a bit biased, whilst I’m a bit younger than both of you and have previously had good health, this year has not been good. It sounds like a great plan, but please consider the possibility of health issues and don’t over extend yourselves.

 

[GrumpyGranddad]

Hello Amarillo,

In an advanced age (62) I took the advantage of an arrangement with my employer and left work (still a member of staff, though). The financial hit was big (about 65%), but my wife is a bit younger and therefore still working. That leaves us enough income to keep the wolves from the door.

We could do this because we have a house in the countryside with no mortgage and the car bank loan (for my wife's Toyota Corolla and my VW California) paid off.

Of course it is me, but in these times I am so glad that we have no financial responsibilities. We are happy in the house and with the cars.

My father-in-law past away in 2019. To deal with the estate and see how much goes away in tax, fees and other cost is frightening. The poor man was working his whole life and the only people who benefit is the Taoiseach, other institutions and the solicitor. Learning out of this is we leave the children the house and enough money for our funeral. That's it.

I think it was mentioned before, time is precious. If one loves their job and gives them fulfillment in live ok continue work. But if it is a normal job, I believe the sooner one retires the better. I have now a luxury that is very valuable - I am the master of my time (well, my wife is the master of my time, but you get my train of thoughts).

Happy time available California,
Eberhard

Nobody on their death bed has ever uttered the words:
I wish i’d spent more time in the office

 

[2into1]

I think we already have huge inflation. We've noticed it on Cali's*, houses are flying up in value. It's not so easy to see on my (Aldi) cornflakes but I'm sure it's happening there too.
So holding cash is a disaster. Borrowing at 2% is likely to be cheaper than 'free'.
This is as much a reminder to myself!

* all car prices are up (new and 2nd hand)

 

[Swiss Cheese]

Interesting thread and thoughts.
I'm selling a UK property and found out I'm subject to CGT which is annoying as this was not the case when we bought it. Oh well.

Not to put a downer on things, and it will be after you're gone, but make sure you check/plan for the IHT situation. If you are asset rich/cash poor then your estate will have to liquidate items unless there is cash to cover the dues.

 

[Velma's Dad]

Looking into the crystal-ball-rear-view-mirror for a minute.

Within our lifetime the government has had to deal with big debts - the hangover from the war, right into the 1980s (however the post-covid debts are nothing like those levels). The standard remedy for government debt is to let inflation erode it - you can always do that if you have a fiat currency. Inflation will then trigger interest rate rises.


Hopefully those interest rate shifts will be progressive and gradual. Sudden rises though are bound to have a depressive effect on house prices, so Amarillo's double-whammy risk scenario isn't far fetched. Most of us are old enough to remember the years of negative equity in the early 1990s when confidence in the housing market was knocked by Britain's sudden exit from the ERM and interest rates spiking, albeit briefly, to 14 percent.

Just saying.

 

[The Merle]

We are both currently 54, 58 at the time of our proposed move and then our boys will be 10 and 11. The houses we have our eyes on are broadly a similar size to our current home, but front Chichester Harbour, an area we know well and love. The move is not about upsizing or downsizing, but about having exceptional outdoor leisure activities for us and our boys literally on our doorstep. A place where we can live, assuming good health, for the next 30+ years.

Stage 2 of our retirement plan comes 8 years after that, after our youngest leaves school. But this house forms part of our stage 2 plan.

The question is really about how to fund the move. Borrow to buy or sell to buy. But the decision about when and where to move to has been made - subject, of course, to one of the four houses coming up for sale, and an offer being accepted.

Probably best to weigh up the costs of selling (estate agent fees etc), and compare it to the let to buy fees (arrangement fees, extra stamp duty of 3% on the first 125/250k not sure after that.
Would you get the new property cheaper not being in a chain? (Would of said yes but market is crazy at mo!).
Only a small amount compared to the costs of property.
Long term then you will not lose if you can ride out any increases, interest rates can only go one way now.
Like I said if it’s something that will make you and the family more happy then go for it.
Good luck

 

[Amarillo]

Interesting thread and thoughts.
I'm selling a UK property and found out I'm subject to CGT which is annoying as this was not the case when we bought it. Oh well.

Not to put a downer on things, and it will be after you're gone, but make sure you check/plan for the IHT situation. If you are asset rich/cash poor then your estate will have to liquidate items unless there is cash to cover the dues.

Interesting thread and thoughts.
I'm selling a UK property and found out I'm subject to CGT which is annoying as this was not the case when we bought it. Oh well.

Not to put a downer on things, and it will be after you're gone, but make sure you check/plan for the IHT situation. If you are asset rich/cash poor then your estate will have to liquidate items unless there is cash to cover the dues.

CGT is often a lot lower than people expect - see my calculations above:
1.4% of a £385,000 property for a lower rate taxpayer; 3.9% for a higher rate taxpayer.

 

[soulstyledevon]

Amarillo
Why not sell the existing houses, make the move to the coast and deal with a smaller mortgage, less headache, less risk and a degree of manageable stability...?

Im one of those unusual people who have strong views on multiple home ownership. I would be happy to see bigger tax punishments for those with multiple residences within the UK.

 

[BeagleMum]

That’s exactly my point, you’ve been barely touched and now they with need to raise a lot more cash.
I’m great believer in if you want something and can afford it then go for it, the one life live it mantra!
I also believe in working less and enjoying life more (my daughter is all grown up).
Only you and Claire knows what’s best for the family.

That is also our philosophy, we take the view that if something doesn’t work out there are always options. We believe that if you don’t do something you really want for fear of it not working you will regret it. It is often glibly said that life is to short, it is to short, none of us know when our last goodbye will be.

 

[Amarillo]

Looking into the crystal-ball-rear-view-mirror for a minute.

Within our lifetime the government has had to deal with big debts - the hangover from the war, right into the 1980s (however the post-covid debts are nothing like those levels). The standard remedy for government debt is to let inflation erode it - you can always do that if you have a fiat currency. Inflation will then trigger interest rate rises.

View attachment 78595
Hopefully those interest rate shifts will be progressive and gradual. Sudden rises though are bound to have a depressive effect on house prices, so Amarillo's double-whammy risk scenario isn't far fetched. Most of us are old enough to remember the years of negative equity in the early 1990s when confidence in the housing market was knocked by Britain's sudden exit from the ERM and interest rates spiking, albeit briefly, to 14 percent.

Just saying.

I think you’ve got it spot on.

I was delighted to be able to take that risk ten years ago during the early years of the financial crisis, and after house prices had fallen considerably, and early years of low interest rates.

But this is a different time. House prices have risen dramatically, especially in the last year, making it look very much like a bubble, exacerbated by the stamp duty holiday. I still recall the bubble caused by the end of dual income mortgage tax relief. My cousin bought just before the relief ended, and lost thousands. I bought in the collapse afterwards, and gained.

But I’m not buying yet, just contemplating a planned purchase in 3 or 4 years. Perhaps by then we will have seen a 10-20% correction in house prices. Who knows?

 

[Amarillo]

Probably best to weigh up the costs of selling (estate agent fees etc), and compare it to the let to buy fees (arrangement fees, extra stamp duty of 3% on the first 125/250k not sure after that.
Would you get the new property cheaper not being in a chain? (Would of said yes but market is crazy at mo!).
Only a small amount compared to the costs of property.
Long term then you will not lose if you can ride out any increases, interest rates can only go one way now.
Like I said if it’s something that will make you and the family more happy then go for it.
Good luck

The question is not really about if we move, but how we finance the move.

We can start selling assets now to be cash buyers in 2025, or we could take out two new mortgages in 2025, or something in between.

Is taking on a vast amount of debt at our stage of life too risky?

Perhaps it would be a risk worth taking if it was the only way to get our dream home for retirement, but we do have choices because we already have five rental properties and our current home, and have ~85% equity in them.

 

[Velma's Dad]

I think you’ve got it spot on.

I was delighted to be able to take that risk ten years ago during the early years of the financial crisis, and after house prices had fallen considerably, and early years of low interest rates.

But this is a different time. House prices have risen dramatically, especially in the last year, making it look very much like a bubble, exacerbated by the stamp duty holiday. I still recall the bubble caused by the end of dual income mortgage tax relief. My cousin bought just before the relief ended, and lost thousands. I bought in the collapse afterwards, and gained.

But I’m not buying yet, just contemplating a planned purchase in 3 or 4 years. Perhaps by then we will have seen a 10-20% correction in house prices. Who knows?

Yes I think it's wise to assume that your risk appetite changes over various stages of your life. So also so does your want for ready cash. It's easy to assume that when you retire you're just going to sit twiddling thumbs at home (coastal or otherwise). But on the contrary, early retirement is when you might well want to have access to some readies, to take up a new hobby, go travelling or whatever. Personally it's not a time in my life when I'd want to be short of funds.

Swapping your £700k main house for a rural dwelling of same value (although not of course falling into the trap of assuming a London semi will buy you a mansion in Yorkshire) would mean you could then hold onto or sell off the other properties at your leisure: maybe to raise funds to extend your new rural dwelling as your 'retirement' interests evolve (art studio, large garage for classic motorbikes, deluxe garden office to run a small business from, whatever).

 

[WelshGas]

The question is not really about if we move, but how we finance the move.

We can start selling assets now to be cash buyers in 2025, or we could take out two new mortgages in 2025, or something in between.

Is taking on a vast amount of debt at our stage of life too risky?

Perhaps it would be a risk worth taking if it was the only way to get our dream home for retirement, but we do have choices because we already have five rental properties and our current home, and have ~85% equity in them.

Well they do say house prices are rising faster and higher outside London. What they define as London I'm not sure. Also rental costs are falling in London, but once again, Central or outer London. So selling now could be a good move but interest rates are lower than inflation so any cash realised would fail to keep pace with inflationary pressures.
As regards timing, waiting until one child is due to move school, what about the second one?
We moved 10 times before this house because of the nature of my profession. Our children changed schools between 10 and 4 times and it hasn't done them any harm. All in professions they like, all in senior positions, home owners etc.
Children are very adjustable with the right home/parental support.
Also if you wait whose to say a house would be available to suit your time schedule.
You know where you want to go so start planning so you can put an offer in when a property comes on the market..

A little story. My Sister in law spotted a house she wanted. It wasn't on the market. Owned by a middle aged couple. They did research on the area and had an idea of the likely price etc. After 18 mths waiting they wrote a letter to the couple asking if they could be considered as potential buyers if they ever considered selling. 3 months later they got a reply with a price. 4 months later they moved in. No estate agent fees and a nice letter thanking them. It was the push the former owners needed.

 

[Lancia037]

Interesting thread and thoughts.
I'm selling a UK property and found out I'm subject to CGT which is annoying as this was not the case when we bought it. Oh well.

Not to put a downer on things, and it will be after you're gone, but make sure you check/plan for the IHT situation. If you are asset rich/cash poor then your estate will have to liquidate items unless there is cash to cover the dues.

It bites people in the **** when they're gone, usually with crazy house values down south.

With decent planning, IHT is fairly easily avoidable. Either by taking out whole of life insurance, with the sum assured being the liability, gifting and placing assets into trust.

 

[Amarillo]

Yes I think it's wise to assume that your risk appetite changes over various stages of your life. So also so does your want for ready cash. It's easy to assume that when you retire you're just going to sit twiddling thumbs at home (coastal or otherwise). But on the contrary, early retirement is when you might well want to have access to some readies, to take up a new hobby, go travelling or whatever. Personally it's not a time in my life when I'd want to be short of funds.

Swapping your £700k main house for a rural dwelling of same value (although not of course falling into the trap of assuming a London semi will buy you a mansion in Yorkshire) would mean you could then hold onto or sell off the other properties at your leisure: maybe to raise funds to extend your new rural dwelling as your 'retirement' interests evolve (art studio, large garage for classic motorbikes, deluxe garden office to run a small business from, whatever).

Our planned move is even more advanced that that. We know the house we want to buy - one of four (maybe five) each of which seems to be on the market every 20 years; we even know each the owners slightly.

One of the four sold in the summer 2020 for £930,000. So we need ~£250,000 plus our current home to buy outright at today’s values.

If need be, we can move anytime between now and September 2025. An early move would introduce complications for Clare’s work, but she now only works 3 days a week, and could stay with family 2 nights a week or spend 3 hours daily commuting.

If we can’t buy by then we have an alternative plan, which is to rent close by and sit and wait until one of the four houses becomes available.

The retirement activity is dinghy sailing, possibly morphing into yachting, while the boys can bodyboard, paddle board, kitesurf, windsurf, dinghy race or just slob on the beach with the radio on far too loud.

 

[Ch1pbutty]

Our planned move is even more advanced that that. We know the house we want to buy - one of four (maybe five) each of which seems to be on the market every 20 years; we even know each the owners slightly.

One of the four sold in the summer 2020 for £930,000. So we need ~£250,000 plus our current home to buy outright at today’s values.

If need be, we can move anytime between now and September 2025. An early move would introduce complications for Clare’s work, but she now only works 3 days a week, and could stay with family 2 nights a week or spend 3 hours daily commuting.

If we can’t buy by then we have an alternative plan, which is to rent close by and sit and wait until one of the four houses becomes available.

The retirement activity is dinghy sailing, possibly morphing into yachting, while the boys can bodyboard, paddle board, kitesurf, windsurf, dinghy race or just slob on the beach with the radio on far too loud.

West Wittering by any chance?

 

[Amarillo]

Well they do say house prices are rising faster and higher outside London. What they define as London I'm not sure. Also rental costs are falling in London, but once again, Central or outer London. So selling now could be a good move but interest rates are lower than inflation so any cash realised would fail to keep pace with inflationary pressures.
As regards timing, waiting until one child is due to move school, what about the second one?
We moved 10 times before this house because of the nature of my profession. Our children changed schools between 10 and 4 times and it hasn't done them any harm. All in professions they like, all in senior positions, home owners etc.
Children are very adjustable with the right home/parental support.
Also if you wait whose to say a house would be available to suit your time schedule.
You know where you want to go so start planning so you can put an offer in when a property comes on the market..

A little story. My Sister in law spotted a house she wanted. It wasn't on the market. Owned by a middle aged couple. They did research on the area and had an idea of the likely price etc. After 18 mths waiting they wrote a letter to the couple asking if they could be considered as potential buyers if they ever considered selling. 3 months later they got a reply with a price. 4 months later they moved in. No estate agent fees and a nice letter thanking them. It was the push the former owners needed.

Thanks for the anecdote about your sister-in-law. Advice we may well follow, and the means by which one of the four houses we are watching was sold last summer.

Given the choice, I would prefer to move before both boys make the transition to secondary school. I’m not really concerned if either move primary schools before then. There is a very good primary school just up the road from where we’d like to live. The secondary school is a bus (or cycle) ride away.

 

[Amarillo]

West Wittering by any chance?

No - out of our price range. Emsworth, where my dad already has a second home, and which we could rent from him if we can’t buy.

We looked at other places, including bohemian Totnes, cheaper Bideford and the Shropshire Hills. But Emsworth works best for us.

 

[Velma's Dad]

No - out of our price range. Emsworth, where my dad already has a second home, and which we could rent from him if we can’t buy.

We looked at other places, including bohemian Totnes, cheaper Bideford and the Shropshire Hills. But Emsworth works best for us.

The yachting and surfing not so good in Shropshire, I'm told.

But seriously, they all seem very nice.

 

[willwander]

Be good to go now. If your heart’s set on one of five, maybe bigger risk is they don’t come up, or do, but you miss out. If one does becomes available, you may have to pounce. Near us, good ones are currently selling within days of coming on market.

 

[Borris]

The question is not really about if we move, but how we finance the move.

We can start selling assets now to be cash buyers in 2025, or we could take out two new mortgages in 2025, or something in between.

Is taking on a vast amount of debt at our stage of life too risky?

Perhaps it would be a risk worth taking if it was the only way to get our dream home for retirement, but we do have choices because we already have five rental properties and our current home, and have ~85% equity in them.

I dislike the term "dream home".

Any "dream home" will come with a whole new set of issues of it's own. So whilst you may see your current home as a compromise stop gap residence, moving will not necessarily increase your happiness. However, it will increase your debt thus creating a degree of worry and future uncertainty at a time in your life when consolodation might be a far better option.

I'm certainly no property expert but if it were my decision, I'd flog off all those rentals pronto and then re-assess. With the many hundreds of thousands of houses being built just about everywhere these days along with other current factors including the urgent need to raise tax revenue to cover the covid debt, things may change very quickly. I'd be very surprised if the current house price bubble doesn't burst soon.

In the end it's your decision and no amount of opinion will make it any easier.


Like Soulstyledevon I too have strong views about multiple house ownership. We've lived in the same "stop gap" house since 1984. Whilst I have seen very many properties that could have been described as "dream homes", we've stayed put whilst our kids grew up. Whilst it is nothing that special, they see it as home and not just another property. It has been a great stabilising factor in their lives and that in my view, is most important. They still return home with their families at every opportunity.

"You can't always get what you want
But if you try sometime you find
You get what you need"

P.s Are you likely to get the mortages you require at 62 years old?

 

[The Merle]

The question is not really about if we move, but how we finance the move.

We can start selling assets now to be cash buyers in 2025, or we could take out two new mortgages in 2025, or something in between.

Is taking on a vast amount of debt at our stage of life too risky?

Perhaps it would be a risk worth taking if it was the only way to get our dream home for retirement, but we do have choices because we already have five rental properties and our current home, and have ~85% equity in them.

There’s no risk involved if you have that much equity as the gains don’t count until you cash in.
So even if the market drops you will never be in negative equity, and wouldn’t of lost money as you never had that amount.
It’s only the costs of original investment that count until you cash in.

Sounds like you will have to act quick if one ever comes up, so I would say let to buy or home to get it then review your options once in.

 

[Amarillo]

I dislike the term "dream home".

Any "dream home" will come with a whole new set of issues of it's own. So whilst you may see your current home as a compromise stop gap residence, moving will not necessarily increase your happiness. However, it will increase your debt thus creating a degree of worry and future uncertainty at a time in your life when consolodation might be a far better option.

I'm certainly no property expert but if it were my decision, I'd flog off all those rentals pronto and then re-assess. With the many hundreds of thousands of houses being built just about everywhere these days along with other current factors including the urgent need to raise tax revenue to cover the covid debt, things may change very quickly. I'd be very surprised if the current house price bubble doesn't burst soon.

In the end it's your decision and no amount of opinion will make it any easier.


Like Soulstyledevon I too have strong views about multiple house ownership. We've lived in the same "stop gap" house since 1984. Whilst I have seen very many properties that could have been described as "dream homes", we've stayed put whilst our kids grew up. Whilst it is nothing that special, they see it as home and not just another property. It has been a great stabilising factor in their lives and that in my view, is most important. They still return home with their families at every opportunity.

"You can't always get what you want
But if you try sometime you find
You get what you need"

P.s Are you likely to get the mortages you require at 62 years old?

“The art of taxation consists in so plucking the goose as to procure the largest quantity of feathers with the least possible amount of hissing.”
Finance Minister to King Louis XIV

The buy to let goose has already been well and truly plucked. It might be that Rishi Sunak will want to stuff that particular goose before roasting it, but I think it unlikely; he’ll move onto a different goose to pluck instead.

Rental income is our main source of income, and there’s no likelihood we will be selling all anytime soon. However, I could sell one and avoid a new residential mortgage when we move by also selling our current home. In fact that is a very real possibility.

 

[Borris]

“The art of taxation consists in so plucking the goose as to procure the largest quantity of feathers with the least possible amount of hissing.”
Finance Minister to King Louis XIV

The buy to let goose has already been well and truly plucked. It might be that Rishi Sunak will want to stuff that particular goose before roasting it, but I think it unlikely; he’ll move onto a different goose to pluck instead.

Rental income is our main source of income, and there’s no likelihood we will be selling all anytime soon. However, I could sell one and avoid a new residential mortgage when we move by also selling our current home. In fact that is a very real possibility.

That sounds like a good plan. Debt free retirement cannot be underestimated.