Viable alternative for mortgage refuseniks

A lot of posters are confused about this. It may help to google “home reversion” before you read on.

There’s been an energetic debate on here about the objective merits of
mortgaged home ownership, even at the elevated and scarcely sustainable prices of February 2014.

The strongest point the pro side have relates to the post-retirement stage of life. Today, life is definitely better for retirees who own a home than for those who must rent without state assistance. Assuming the same regime continues until 2045, which is a huge stretch, they argue that owning your house upon retirement is the only rational choice.

Now I’ll argue that owning a house upon retirement is actually possible for a normal middle class person without mortgaging, and renting for the duration of your working life.

Take a random girl who’s 33 now, and doesn’t want to deprive her family by anchoring them with deep debt for the rest of her working life. She wants to raise her family in rented accommodation, taking advantage of her flexibility to move when it’s right for her career, and giving her kids the benefit of the top class education she can afford for them. Part of her career will be spent in Paris or LA. But she’ll come back to Dublin.

At age 55, she’ll want to make sure she’s got a PPR lined up to take advantage of the unfair benefits afforded to owner-occupiers in Ireland (we’re still assuming these haven’t been repealed).

So she finds a home-owner aged about 72 who’s got serious need for cash, and buys big equity in his home. She has saved up 80k in today’s money for this purpose, and buys a 60% share in it. She does all the necessary legal work to be 100% sure it’s legit, then goes about her life.

When retirement age comes around, she’s 68 (that’ll definitely be the normal age by then) and the guy she bought equity off will be 85. Most likely he will be dead, but there’s a fair chance she’ll need to wait another 3-6 years before his house is 60% hers. If she’s saved prudently in the interim, the 40% extra should be easily within her means to take full ownership.

Then she’ll have her own place, be eligible for a state pension and have an asset that’ll pay for nursing home care. All with no mortgage or assuming that house prices fall in real terms.

I’d like you to point out any holes in that plan, so I can revise it.

I presume you’re aware of the ‘viager’ system in France? … ticle.html

It’s certainly interesting, though somewhat risky.

Summary: rent throughout your working life then save up in your fifties and sixties to buy a retirement home.

I’m not sure the precise mechanisms matter, although there are MASSIVE tax and welfare incentives to NOT do this (PPRs are exempt from CGT unlike other forms of savings and investments, and PPR wealth is not means tested in retirement).

The problem is that this period is when people (particularly those working in the private sector) are traditionally saving for living expenses in retirement (via a pension).

If they spend their pension contributions on a house, they’ll have no pension. And so they’ll need to immediately sell the equity in their home to fund their retirement living expenses.

One way or another we end up with a cycle of intergenerational wealth transfer via bricks and mortar. Brickcoins?

the stock of unfurnished family homes to rent in Ireland is very poor and the rents (currently at least) are very high. You’d be hard pressed to save much money at current rent levels.

Sounds interesting, how would you go about finding the 72 year old willing to sell 60% of his home? What about his family members, would they have something to say about it? It sounds as though it could only work ideally where the old guy has no family to interfere with his wishes. I am interested in finding alternatives to life long debt, but I think people themselves need to get more pro-active, other countries seem to be more successful at establishing alternatives to home ownership, with housing associations, co-ops etc. Why can’t we do it? Having said that, most Europeans I know whose families have rented for life say that they would still have preferred to own a property.

FWIW, life expectancies:

Age 55: +24.8 years (79.8 )
Age 68: +14.4 years (82.4)
Age 72: +11.6 years (83.6)
Age 85: +5.1 years (86.1)

I can’t remember if these were male or female. Probably male.

They won’t be thin on the ground 22 years from now. Incomes are stagnant, and very likely to remain so. There are tens of thousands of adults in Dublin alone who are 50 today and will never work again. By 2034 there will be plenty of them desperate to raise cash.

In many cases, the family will give them the bailout they need. But there will be plenty of families that are far too cash-strapped to do so.

Sounds great for the ladies career, not so good for her kids who get uprooted on a regular basis.

Why are you assuming she has a stick up her a55 about unfurnished?

Right now you can rent a 3 bed in Navan for €800/m.

She has the flexibility to spend 3 years there, save a significant amount, then go back to Dublin for more modest savings. Her kids will still be able to maintain contact with their friends: the commute isn’t a back breaker.

They’re not being sent to Alaska, they’re moving, for the most part, to different spots in the Greater Dublin commuting zone. Meaning no serious breaking of friendships.

As for the purported international sojourn, the kids will be very, very glad they got to live in a different culture for a couple of years. The benefits of introducing kids to a new culture massively outweigh the cost of breaking their social habits.

Unless they are of the car going age I disagree. Try telling your 8/12/15 year old boy/girl they won’t see their best friend who lives next door on a daily basis. You can play it down but fact is they’ll constantly be breaking and trying to re-make friends, changing schools, sports clubs etc.

Your theory is great - why do you think people don’t do it in practice? Because they value a settled, happy family life more than money?

Pretty much see above. Glad when they are old enough to realise the benefits - not so glad for the months leading up to the move and few months after.

Anyway you are free to put it all into practice. Or what is the purpose of this - to try convince others to do it? Good luck with that.

Not really. You seem not to be aware that in Ireland it is very normal for kids to maintain friendships with other kids who live 30km away. A good parent will make the time a couple of times a month to arrange for her kid to spend time with another, even if it involves a 40 minute drive, until the kid is old enough to bus. That happens hundreds of times a day in Dublin. What country are you from?

Also, every year, hundreds of Irish employees of multinationals pack up their kids to temporarily move to their employers’ HQs. This is happening right now, and it’s a good thing by and large.

Less good is the forced, multi-decade emigration that kids suffer as a result of Ireland’s broken property system.

Did I hit a nerve or what’s with the condescending nature of your post? Live in Ireland, Dublin to be precise. And yes I’m Irish if that makes any difference to you. I merely pointed out that I don’t see it as a substitute when a kid has to give up their best friend (on a daily basis) and switch school. Do you think the kid would be happy to be told it’s okay you’ll still see ‘Janey/Billy’ twice a month? I’d be looking at it from the kids perspective and what’s really best for them not the ladies - I think i’d prefer that type of good parent compared to the one who’s prepared to do chauffeur. If it’s once and they can resettle, maybe fine, if it’s more that’s a lot of upheavel.

Would you prefer I tell your there is no holes in your plan? It’s great, the lucky lady and lucky kids?

I questioned the point of the thread as this is pretty much a repeat of the other thread.

I suspect Joe may be an active 72 year old home owner who’s a bit short of cash :laughing:

Let’s just take a breath and generate a bit more light and save the heat for warming up the sitting room.

I am, in fact, a 105-year-old lesbian GAA referee with a limp and a lazy eye, which tells you a great deal about the objective merits of the idea.

The problem is it’s too complicated and undiversified as a proposal. There are all sorts of odd things that could go wrong, like people dying or not dying or going senile or whatever.

As a society we have to find a way to manage the economic fluctuations across the three phases of life: childhood, working independent adulthood and retirement. If we’re not going to handle those stresses/dependencies within a family unit, then it makes sense to spread them systematically, e.g. by taxing people when then they work to pay for the pensions (and possibly housing needs) of previous generation of workers now in retirement.

Complicated one-to-one disintermediated arrangements between strangers isn’t an improvement on the status quo.

Anyway, it’s not even relevant: if the lady buys into the parenting philosophy that considers moving house with a child under 15 to be tantamount to murder, that still isn’t an argument for a mortgage. It’s an argument for getting a 13-year lease when the kid turns two.

Then, when the fragile, precious jewel is old enough to make his own way to his friends, she can consider moving somewhere in the general interests of the family as a whole.

(presumably parents like this are wiping their kids for them until they start secondary school)

how about just designing your life so you can live where property is cheap?
If you are living around expensive property then you should be on a very good wage to afford it
if not, why not just move somewhere property is much cheaper?
And especially when you retire you dont need to be near work anyway, so why not just buy a cheap retirement pad somewhere with cash now, and preferably live there too in the meantime
In the digital age telecommuting is a possibility for anyone who really wants to do it. You just need to build up the freelancing skills you need. However the problem with working in large companies, is you may not be building useful skills outside of the corporate world - thats a real problem
being stuck to having a car - which has a lifetime cost of more than a mortgage - is also another big drain on finances. Fix both of those things and another word of opportunities arises

I’m going to ignore the rubbish you’re spouting (one min it’s calm down - next it’s ‘tantamount to murder, fragile precious jewel and wiping behinds’ :unamused: ) and say it sounds like a more reasonable proposition in that case, and I think you’d find a lot more families renting long term if they could get such a lease.

There’s some risk that the guy could be immortal, or uncannily well-able to live alone in the house, sure. But no more than the risks one takes with a mortgage.

Taking on a mortgage is also a non-diversified risk. It adds risk, in fact, due to the very elevated danger of being trapped in a house when you have strong reasons to move.

You’ll have to expand a little on why exactly “disintermediated arrangements” are the devil’s work.