MORTGAGE PRISONER?

There are a number of property owners who find themselves unable to obtain a new mortgage due to the new mortgage requirements for proving income and affordability.

In some cases that has left borrowers either unable to move, or stuck with their lender’s Standard Variable Rate when new fixed rates are 1% or 2% better. Just a 1% reduction on a £150,000 mortgage would save £1500 in interest each year (assuming a 20 year repayment mortgage). Here are a few examples of this “mortgage prisoner” problem along with possible solutions:

Problem: Some older people cannot get a new mortgage with a long term because of the new attitude of most lenders to maximum mortgage ages.

Solution: Try your present lender to see if they can provide some flexibility or contact us as there are a number of niche lenders who can take a more enlightened view about maximum mortgage ages — where the deal makes sense.

Problem: Some people were able to take a mortgage out in the past when it was possible to self-certify the level of their income. In virtually all cases now income must be proven and the self-employed will be assessed on their net income as shown by the Tax Office.

Solution: Some lenders are more generous in their income calculations than others and some lenders require only one year’s completed accounts. For those over 55, Equity Release solutions may be of help as these are based on age and property value only. We can make enquiries for you.

Problem: Some people took out interest-only mortgages with a plan of how to repay them, but that original plan is no longer possible.

Solution: For some simply downsizing will be a solution. For others who want to stay where they are, however, there are other options. There are still some interest-only mortgage options available if one is simply looking to extend the time he can continue to stay in the property. It is also possible for those aged 55 or older to use an Equity Release lifetime mortgage or similar solution. We can make enquiries for you.

Note: Lending restrictions are expected to tighten even further by the end of March 2016.