STUCK WITH AN INTEREST-ONLY MORTGAGE

There are still many people who have an interest-only mortgage which is coming to the end of its term. For whatever reason, the original strategy for repaying it is often no longer an option, and for many moving down market is not desirable. Many lenders are now willing to consider extending
a term even if it goes into the 70s and 80s – particularly if part of the new arrangement will include some repayment of capital. A recent example we know of involved a man aged over 80 being given an extension of 10 years for the mortgage on the basis that half of it would be on a repayment basis. It is worth talking to your lender. If you are paying the lender’s Standard Variable Rate (4.5% or more), you should also ask for a better interest rate, e.g. a two year fixed rate. We had one client recently who we advised to do this. With just a telephone call she was able to reduce her mortgage by 2.5% for two years – saving her £400.00 per month. If talking to your existing lender does not work, then you can look at one of the new Lifetime Mortgage options if you have enough value in the property.

75 IS THE NEW 65 IN THE MORTGAGE MARKET

The mortgage market for older people is improving remarkably. At the insistence of the Financial

Conduct Authority (FCA), lenders have been encouraged to extend their maximum ages for standard

mortgages. Whereas age 65 some years ago remained a cut-off point, now it is quite common to

find mortgages available to age 70 and 75 and even 80 and 85 in some cases. After 70, however, it

is still likely to be only pension income, or other similar guaranteed income, that will be taken into

account when they look at affordability and how much they will lend.

A MORTGAGE WITH NO PROOF OF INCOME REQUIRED AND ON AN INTEREST-ONLY BASIS! TOO GOOD TO BE TRUE?

Who would have thought that it would be the older people now who would enjoy the ability to take out a mortgage without proof of income and on an interest-only basis for an unlimited term of years! This is the latest refinement of the Lifetime Mortgage. The limit of borrowing in these cases is based

on age and property value.

Here is a sample of the maximum borrowing possible:

AGE      LOAN TO VALUE        MORTGAGE EXAMPLE (VALUE OF £200,000)

55                  21.0%                                £42,000

60                  26.0%                                £52,000

65                  31.0%                                £62,000

70                  36.0%                                £72,000

75                  41.0%                                £82,000

80                  46.0%                                £92,000

Note: Borrowing is based on age and percentage of value of the property with the youngest age being 55 and the property must be the person’s main residence. Where there is a couple, the calculations are done on the age of the youngest. This borrowing is for a first mortgage only and second mortgages are not permitted. It can be for a remortgage or a purchase.

The new developments for Lifetime Mortgages includes the option to make repayments of interest
up to 10% of the original amount borrowed without penalty. For some there are also now fixed early
redemption penalties, and no penalties at all after 10 years. Some Lifetime Mortgages also allow a
person to start with, or switch to, making no payments and letting the interest build up – to be repaid
on the eventual sale of the property.