# What is wrong with rescheduling a mortgage past age 70?



## Bronte (24 Aug 2019)

Extracted from another thread to highlight this important issue. 









						'Justice is blind' to star power as celebrities fight for their homes
					

We've had a summer of celebrity down at the repossession courts as one society couple after another appears before judges in attempts to hold on to various luxury high-brow residences in the face of lenders and funds attempting to make good on massive outstanding arrears.




					www.independent.ie
				




I don’t believe it’s credible that they can work into their seventies to service such a large mortgage.

We will see these cases back in court an a few years is my opinion.


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## demoivre (25 Aug 2019)

gnf_ireland said:


> There is one thing being in a position or interest to do it, but there is a completely different matter of HAVING to do it to keep a roof over your families head. The reality is this is beyond average life expectancy and effectively banking on no health issues arising
> I like the idea of 'working' ad-hoc for years, but this is totally different to having to work each and every month to make a mortgage commitment into my 80's !



How do life long renters manage ?


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## gnf_ireland (25 Aug 2019)

demoivre said:


> How do life long renters manage ?


I assume they put private pensions in place to cover the cost in old age, or they rely on the state to take care of them.
This souple have surrendered their private pension (I understand) and I doubt the state will pay to keep them in their 5500 square foot home - but then again you never know ! Nothing seems to amaze me at this stage


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## Brendan Burgess (26 Aug 2019)

demoivre said:


> How do life long renters manage ?



This really is the key point. 

There is absolutely no reason why a mortgage holder should not switch to interest only at the market rate on their retirement.  

Take a couple who retire at 65 today with €100k left on their mortgage and a house worth €300k 

At current market rates, the interest would be €3,000 a year.  Paying that is far better than selling the house and renting back an equivalent one. It is also probably better than trading down to a €200k house as that involves a lot of transaction costs and risks. 

As demoivre points out - we don't say that paying rent at aged 65 is unsustainable. So why should renting money be unsustainable.

Of course, the Central Banks and the banks themselves deem such a mortgage as unsustainable. 

Although this attitude is completely at odds with the fact that there are no objections to a 70 year old who owns their house outright, taking out a life loan mortgage where they make no payments at all. 

Brendan


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## gnf_ireland (26 Aug 2019)

Brendan Burgess said:


> Take a couple who retire at 65 today with €100k left on their mortgage and a house worth €300k


Taking into account that the average life expectancy in Ireland is 79.7 (male) and 83.4 (female), this puts the person on 15 years of an interest only mortgage. While in principle, there is nothing wrong with it - I do think it is a different product, and different risk category, than someone who pays interest and capital for a sustained period.
https://www.worldlifeexpectancy.com/ireland-life-expectancy

If you consider a mortgage to be a loan, guaranteed on a physical building, and paid back over 25-35 years, then what is proposed above is not a mortgage. It is a mortgage up to retirement, and then it is an interest only loan which is only redeemable on the death of the owners (or potentially once they go into long term care). The banks have to wait longer for their money back, and therefore are carrying additional risk in my view.

But yes in principle, it makes sense for someone who is retired, or sees a major drop in salary, to pay interest only to death and let the balance be paid at that point when the asset is sold. This would have to come with a number of assumptions of course, including say a 50% LTV on the mortgage etc.


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## Brendan Burgess (26 Aug 2019)

To be absolutely clear...

It is a good idea to live mortgage and rent free in retirement, to have a big pension and plenty of investments and when you die to leave your children a house and lots of money. 

But if one can't achieve that, there is nothing wrong with renting money indefinitely. 

From the lender's point of view, a 50 year interest only mortgage at a low LTV and at market rates is the most profitable loan and lowest risk loan.

Brendan


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## gnf_ireland (26 Aug 2019)

Brendan Burgess said:


> From the lender's point of view, a 50 year interest only mortgage at a low LTV and at market rates is the most profitable loan and lowest risk loan.


The key there is low LTV !!


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## Bronte (26 Aug 2019)

But no bank would allow you to switch to interest only.  

Is the comparison valid as regards renters.  Who rents a 5000 sq foot house for 2K a month.  I don't know anybody living in a very very large house renting.  I know families who rent modest (3 bed type) houses.  But not older couples. Younger couples rent small one beds.


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## Bronte (26 Aug 2019)

Brendan Burgess said:


> It is a good idea to live mortgage and rent free in retirement, to have a big pension and plenty of investments and when you die to leave your children a house and lots of money.



Why is it a good idea to leave your children a house and lots of money. I've no intention of doing that.  Children should earn their own money surely.


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## gnf_ireland (26 Aug 2019)

Bronte said:


> Why is it a good idea to leave your children a house and lots of money. I've no intention of doing that. Children should earn their own money surely


If people are now living until their 80's, its likely their children are in their 50's or even 60's. Surely children would more benefit from the 'leg-up' in their 30's when starting out in life.
One of the best approaches I have seen is from someone I know (albeit they were very wealthy) - they offered to double the deposit the children saved on their own to buy their first house. A great incentive for them to save as much as they could !


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## Bronte (26 Aug 2019)

gnf_ireland said:


> If people are now living until their 80's, its likely their children are in their 50's or even 60's. Surely children would more benefit from the 'leg-up' in their 30's when starting out in life.
> One of the best approaches I have seen is from someone I know (albeit they were very wealthy) - they offered to double the deposit the children saved on their own to buy their first house. A great incentive for them to save as much as they could !


That's a splendid idea.  That would be more my thinking on the matter. I've no issue with helping them buy a house, as long as they demonstrate a work and savings ethic.  Rewarding that is the right way to go instead of adult children thinking they are 'entitled' to an inheritance.

And certainly in life one needs a leg up when young.  In general.


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## gnf_ireland (26 Aug 2019)

Bronte said:


> That's a splendid idea. That would be more my thinking on the matter.


I will send you the bill for the advice


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## Brendan Burgess (26 Aug 2019)

Bronte said:


> Why is it a good idea to leave your children a house and lots of money.



Hi Bronte

I was exaggerating to make the point. 

Most people want to leave behind a mortgage-free house and money ...

But I am saying that if someone can't afford to do that and leaves behind a €300k house with a €100k mortgage, that is fine.

Brendan


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