Ask Annie: After living on a boat, are we out of our depth buying a flat?
Sunday 16 March 2008
Q. My wife and I and have lived on a canal boat for many years and are now considering "moving ashore". I have heard of mortgages that continue well into retirement. Would it be possible for us to get one of, say, £75,000 to cover half the cost of a small flat? have a local government pension of £1,000 a month which will reduce to half if I die first, plus the state pension in two years. My wife has an NHS pension of £350 a month plus the state pension. We would prefer to keep the boat for summer cruising, which would cost £250 a month in overheads. If this was not feasible, we could sell the boat (it is worth around £40,000) so as to raise a smaller mortgage and have more monthly income.
A. According to the Residential Boat Owners' Association, around 15,000 people live on boats in Britain and you can see why. You have the freedom of the waterways, and if you manage to obtain a boat with a residential city mooring, you can enjoy metropolitan life for a fraction of the cost of buying a land-based home.
However, if you don't have a residential mooring, the need to keep moving on can make you feel very insecure, particularly in your later years. So it is no surprise you are thinking of moving in your retirement.
The problem is that although living on the water can be cheap, a boat does not provide the capital appreciation you would need to switch seamlessly back to land.
You could try mortgaging the boat, if you are intent on keeping it, to raise extra funds for your house purchase. But in reality this will not help you much, and marine finance, as it is called, is very expensive relative to taking out a standard mortgage on a house. This is highlighted by the fact that 90 per cent of boat purchasers pay in cash.
Andrew Montlake, director at mortgage broker Cobalt Capital, says: "A big issue for you both in becoming 'land lubbers' is being able to raise the amount that would be required without selling the boat. If your pension is your only source of income then you will find it difficult – especially in the midst of the current credit crunch – to raise £75,000 on your combined incomes.
"There is also an age consideration. Most lenders expect that the mortgage is paid off by the age of 65 unless the borrower can show a good retirement income is set to kick in," he continues. "Now, you can show that you have retirement income, so you may qualify for a mortgage beyond 65. But the lender will expect you to pay off the mortgage a few years later – say by the age of 75."
But as Mr Montlake adds, you also need to find a lender that works on an "affordability" basis rather than traditional income multiples, in order for you to obtain the £75,000. He has one suggestion: "The Mortgage Works has an excellent scheme based purely on your disposable income, which may get you closer to the amount you need than other lenders' offers. Additionally, it will allow the loan to continue to 75.
"Otherwise, it does look as if you may be forced to sell the boat, in order to keep the new loan amount down to a more reasonable level."
As for the type of mortgage you need, Mr Montlake says: "As you have a set budget, it would be best to look at a fixed rate rather than a variable one. If you did sell the boat and looked at borrowing a smaller amount, you might be able to get access to some good fixed rates. First Direct has a product at 4.75 per cent for two years, and West Bromwich building society has a 10-year fixed-rate deal at 5.39 per cent."
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