BUY NOW?

The property market is generally stable with properties holding their value, and interest rates remain attractive but changes in the economy caused by possible results of Brexit actions could affect these. If a Lifetime Mortgage is something you are considering, you might wish to do it sooner rather than later.

HOW MUCH MONEY CAN YOU RELEASE

Here are some examples of the maximum amounts that could be borrowed using a Lifetime Mortgage. The examples are based on a property worth £300,000 but the scale remains the same for a property worth more and for one worth less. Just give us a ring if you want to know how much you could borrow on your property.

Note: Interest rates have generally been good in the recent past. Any

changes that might come with Brexit could change that so, if a Lifetime Mortgage is something you want to do, it may be best to do it now.

Age     Loan to Value    Maximum Borrowing on Property Worth £300,000

___________________________________________________________________

55        25.6%                £77,000

60        34.0%                £102,000 (Note: These are examples only but do

65        39.0%                £117,000 represent a reasonable estimate of the

70        44.0%                £132,000 maximum borrowing at the ages shown.)

75        47.0%                £141,000

(The illustrated borrowing amounts above assume a property value of £300,000 and, if the property is jointly owned, that the age is based on that of the younger partner/spouse. For maximum borrowing interest rates vary from about 6.0% to 7.0%. Lower percentages of borrowing give rates as low as 3.30%. Also, if there is a serious medical condition, a higher level of borrowing may be possible).

SOME OPTIONS WORTH KNOWING ABOUT

The increasing flexibility of Lifetime Mortgages includes the following facilities

1. Monthly fixed interest-only payments;

2. Ad hoc payments of up to 10% of the amount borrowed each year;

3. Borrowing is available even where there has been adverse credit, even a discharged bankruptcy;

4. Borrowing is available even where there are up to 2 lodgers or a self contained rental part of the house;

5. Money raised can be used for virtually any purpose. In our experience the money is raised mainly for the following reasons: to clear existing debt, for works to the property, to help out a family member and enjoying life a bit better.

6. Borrowing can be done either without having to make any payments with the borrowing and interest to be paid by the eventual sale of the property; or by paying interest monthly or occasionally.

SOME SAVINGS AND INVESTMENT OPTIONS

With interest rates at low levels it is a struggle to get much of a return on your cash savings. It is very sensible to keep a reasonable amount of money in cash for emergencies and for anything you will need to pay for in the near future. However, in the longer term you may wish to take a risk with some of your savings by investing them in stocks and shares. One easy way to do this is to use a Stocks and Shares ISA into which you pay monthly. By saving on a monthly basis the risk is less as sometimes you are buying when the market is high and sometimes you are buying when the market is low.


For those with a lump sum they are willing to invest for 5 years or longer, it may be worth looking at an Investment Bond. The money you put in is invested in a range of stocks and shares. You can decide at the start what level of risk you are willing to take, and you can change that whenever you wish. The Investment Bond has a useful feature. Each year you can withdraw up to 5% of the amount originally invested without paying tax. This would give you an annual amount of 5% net each year. This compares well with the 1% to 2% you might get from cash savings options, although you do need to take into account that the value of your investment overall will be going up and down in line with the Stockmarket. We would be happy to discuss this option with you in more detail. Just give us a ring.

MORTGAGE STRATEGIES

If you have a mortgage, or need one, you will find that the mortgage market

currently is more flexible than it probably has ever been. The interest rates are

also very competitive.

First: If you have a mortgage, make sure that you have the best interest rate you can achieve. Unfortunately it is a general failing that most people are inclined not to search out a change unless something really does motivate them. The least one can do is to speak to their existing lender and see if they have an option to switch to a better rate for little or no cost. And once you have done that it is not too much more trouble to speak with a mortgage broker to see how that compares with what is available on the mortgage market. A saving thus achieved could amount to hundreds of pounds a year.

Second: If you feel you are disadvantaged by your age, think again. Lenders generally are now much

more flexible in lending to those in their 60s and 70s and even 80s. And there are also now RIOs

(Retirement Interest Only mortgages) as well as Lifetime Mortgages with various options.

Third: While generally we strive to have our mortgage paid off as soon as we can, it is worth  thinking outside the box as well to see how you might be able to utilise the value you have built up in the property. This might be to act as “Bank of Mum and Dad” to help children get on the property ladder. It also might be a way of making later life more enjoyable.

Fourth: You may feel trapped in your present mortgage arrangements, perhaps an interest-only

mortgage where the original plan to pay it off has not come off as expected.

Give us a ring.

We would be happy to work out your options.

NO INCOME REQUIREMENTS!

Where the problem is insufficient income to meet the lenders’ requirements there are now a

number of Lifetime Mortgage options where the borrowing is dependent on age and property value only.

The minimum age is 55 but where one spouse or partner is over 55 but the other is not, there still can be options. Many Lifetime Mortgage providers also can ignore credit problems such as arrears or defaults and even sometimes CCJs or even a historical bankruptcy. A survey carried out at the end of 2018 saw people using Lifetime Mortgages to raise funds for many different purposes including the following: 66% - home improvements; 34% - to go on holiday; 30% - to pay off debts; 27% -gifting to family or friends; 21% to clear an outstanding mortgage; 12% to help with regular bills.


Lifetime Mortgages now also allow monthly interest payments for some or all of the interest being charged so the interest does not have to be left to build up. The other alternative is to be able to make lump sum payments during the year without penalty – usually up to about 10% of the amount borrowed. The interest rates vary from provider to provider but generally depend on how much is being borrowed and the loan to value ratio. The best rates start at about 3.2% going up to about 6.0% for maximum borrowing. Here are some examples of how much could be borrowed:

(Note: These are approximate figures and assume a property value of £300,000)


Age 75 - £141,000 (47% of property value)
Age 70 - £135,000 (45% of property value)
Age 65 - £120,000 (40% of property value)
Age 60 - £98,800 (33% of property value)
Age 55 - £73,500 (25% of property value)

Taking all of these points into account, the bottom line is that if you are over 55, you may be able to borrow for any legal reason on an interest-only basis without having to meet any affordability requirements and regardless of credit difficulties. If you would like to find out what your options might be, just give us a ring.

MORTGAGE STRATEGIES

First: Ensure you have the best rate you can achieve with your mortgage. In some cases the existing rates are variable but very attractive so changing them may not be a good idea. But generally you should make sure you are not just staying with your lender’s SVR (Standard Variable Rate) for lack

of a bit of initiative and asking for better.

Second: If you have an interest-only mortgage, you should review your plan for paying it off by

the end of the mortgage term, and make sure that plan is still workable. For some that may meandown-sizing, but where down-sizing may have looked attractive many years ago, when one is older it can look less attractive to have to move out of a place you still enjoy living in and moving away from an area you know and where you have friends and activities you enjoy. If you are in that situation, you may wish to move over to a repayment mortgage to get it paid off, or look at a Lifetime Mortgage to buy yourself more time. Lifetime Mortgages have become more and more flexible. Avoid the Interest-Only Mortgage Trap!

A NEW TAX YEAR!

As we thaw out from a remarkable period of cold weather, we move into the new

Tax Year with some uncertainties. Interest rates have started an upward move although

the Chairman of the Bank of England has promised that these would be small and far apart.

Brexit still is the focus of most of the Government’s attention when there are a number

of other areas that should be dealt with. Nevertheless, personal financial matters to be

addressed are pretty much the same as they have been for quite a while, i.e. getting the

best possible mortgage rate, while also making savings – using pensions or ISAs and

ensuring those savings make as good a return as possible.

Looking Inside a Lifetime Mortgage

A Lifetime Mortgage is a mortgage like any other mortgage. You borrow money against the security of the property. You remain the owner of the property and benefit from any increases in the property value. You also remain responsible for keeping the property in a good condition. Usually the interest rate is fixed for the term of the mortgage which can be as long as you live or until you go into care.

You can pay off the mortgage at any time, although in the initial years there may well be early

repayment penalties – just as there are with most fixed rates with the usual residential mortgages. With a Lifetime Mortgage you can either choose to repay the interest being charged, or make no payments of interest – letting the interest build up and be repaid by the eventual sale of the property.

GETTING OUT OF THE MORTGAGE TRAP!

One problem that a number of older people face currently is how to pay off their interest only mortgage when it reaches the end of the mortgage term.

The Lifetime Mortgage is helping many in such a situation. The borrowing is based on age and property value only so it avoids many of the obstacles that the majority of lenders throw up. For those 55 and older it is possible to have an interest-only lifetime mortgage which can go on as long as they live. Besides repayment of interest, it is also possible to repay capital – although there may be early repayment penalties. Since this borrowing is based only on age and property value, it can help those who might not otherwise be able to borrow money. It can also provide a potential solution for those who have had an interest-only mortgage which is coming to the end of the mortgage term. Note: A Lifetime Mortgage cannot be arranged in addition to an existing mortgage. Any existing mortgage must be repaid. Lifetime Mortgages range from about 20% of property value for those aged 55 to about 50% for those aged 80. Here is a sample table of the maximum borrowing that may be available (note: in the case of a couple the providers will work on the age of the younger):

Age           % of             Age               % of
                 Property                             Property
                 Value                                  Value

55                20%            70                   40%

60                30%            75                   45%

65                35%            80                   50%

We can provide estimates for you to help with your planning if you feel this approach may suit your circumstances.

GETTING OLDER – WHAT ABOUT THE LIFETIME MORTGAGE?

The Lifetime Mortgage is not a completely new arrangement but over the last few years their flexibility and interest rates have improved. Borrowing is based on age and percentage of value of the property. There are no income requirements to be met. The youngest age allowed is 55 and in the case of a married couple or partners, the youngest of the two must be 55 or older. It must be your main residence. The level of borrowing starts at about 21% of property value at age 55 and goes up to about 46% at age 80. So on a property worth £200,000, that would be £42,000 borrowing at age 55 and £92,000 borrowing at age 80.

You can have the option of paying the interest so that the borrowing does not increase or allowing the interest to be added to the amount borrowed. In either case the mortgage and any interest owing is paid off on the eventual sale of the property. The Lifetime Mortgage can also be moved to a new property (subject to property value).

MORTGAGE PRISONER? THE CHAINS GROW LOOSER!

Mortgage lenders are becoming more flexible in dealing with borrowers who are locked into their present mortgage arrangement for one reason or another.

 

 There are those who were self-employed and found that the self-certification of income enabled them to raise the level of the mortgage they needed. Others will have taken out a mortgage in the past where they paid only interest, and now are approaching the end of the agreed mortgage term and their strategy to repay the mortgage may not now be workable. Still others have reached an age where they can get only a very short-term mortgage or even no mortgage at all.

Problem: Age

Solution: Try your present lender to see if they can provide some flexibility or contact us as there are a number of small lenders who will take a more enlightened view about maximum mortgage ages.

Problem: Providing adequate income

Solution: Again, first try your present lender to see how they may be able to help. Then try us to see what can be achieved on the income that you can prove. There is a wide variation in the way different lenders calculate the maximum lending they will permit. And if you and your spouse are both aged over 55, it is worth seeing if a Lifetime Mortgage would provide a solution. A Lifetime Mortgage is based on your age and property value and can run indefinitely. There are no maximum age restrictions and there are no income requirements. (But do remember that a Lifetime Mortgage is only going to work where the mortgage is relatively low in comparison to the property value.) Give us a ring and we can let you know what can be done.

Problem: An interest-only mortgage reaching the end of the mortgage term

Solution: The first thing to do is to work out what you want to do. It may be that you can deal with the problem by simply selling your property and downsizing. It is also possible to speak with your present lender and get them to extend the term of the mortgage if that is going to enable you to repay it in the reasonably near future – say, up to 5 years. There are also still lenders who will do interest-only mortgages and it may be worth talking with us about those options. And there is also the Lifetime Mortgage option mentioned above where the mortgage owed is relatively small when measured against the property value.

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.

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.

UTILISING THE VALUE IN YOUR HOUSE – EQUITY RELEASE!

For those aged 55 and over it is possible to access some of the value in your property. There are no income requirements and the older you are, the more you can take out. The funds taken can be used for any purpose. There are three general approaches to Equity Release:

1) making interest-only payments indefinitely (Interest Only);

2) borrowing without having to make any repayments at all until the property is sold (Lifetime Mortgage);

3) trading ownership of the property for a lump sum and the right to life-long tenancy of the property (Home Reversion Plan).

TAX MATTERS – AFTER APRIL 2016!

1. The Personal Tax Allowance (what you can earn before you pay any tax) goes up from £10,600 to £11,000.

2. The Basic Rate Tax Band goes up from £31,785 to £32,000. This means that from the 6th of April, with the first £11,000 earned being subject to no tax, you will not start paying £40,000 tax on earnings until they exceed £43,000. This is marginally better than the previous year.

3. We understand that the annual ISA allowance will remain the same at £15,240. The new Help to Buy ISA will become available from the 6th of April. This is for First Time Buyers only. For full details search “Help To Buy ISA” at www.gov.uk.

4. From 6 April 2016 the Rent-A-Room relief rises from £4,250 per annum to £7,500. That is a very attractive tax-free source of income for those with spare rooms they can let.

5. If you have saved in a deposit account which is not an ISA, you will be familiar with the fact that the Bank or Building Society would automatically deduct 20% of the interest as tax (unless you were a non-taxpayer and filled out the appropriate form). This will change from next April. Deductions will no longer be made. And, in fact, there is a new Personal Savings Tax Allowance which will mean that for a basic rate taxpayer, the first £1000 he earns in savings interest will be tax-free. For higher-rate taxpayers this allowance reduces to £500 per annum.

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.

REMORTGAGE RATE WAR

Lenders are still fighting for market share which means that interest rates are at their lowest levels ever. If you are on your lender’s standard variable rate, it is worth finding out what your options are. It could save you hundreds of pounds and, in some cases, even thousands of pounds. We would be happy to provide quotations without cost or obligation.

INTEREST-ONLY MORTGAGES AND EQUITY RELEASE

Interest-only mortgages were popular in past years as the monthly payments for such were extremely low.

However, in many cases the means for eventual repayment of the amount borrowed was not dealt with properly – leaving many with money still owing on their mortgage and a relatively short number of years in which to repay it.

For those over 55 there is now an option to secure an indefinite interest-only mortgage arrangement at a fixed rate for the life of the borrowing. This is a new development in the Equity Release marketplace. Previously the only option one had with a Life-Time Mortgage was to allow the interest to accumulate. The repayment of the interest and original amount borrowed would take place on the eventual sale of the property. Now, however, many providers are offering an option which allows those taking out a Life-Time Mortgage arrangement to make voluntary payments of interest, and even capital. Since these payments are voluntary, you can miss payments without penalty or even stop payments altogether. There are also no affordability requirements as the borrowing is based on age and not on income.

Note: this type of equity release is only available from age 55. At age 55 you can only take about 25% of property value. This rises to about 48% of property value for those in their 80s.

Contact us with any questions you have or for quotations.

STUCK WITH AN INTEREST ONLY MORTGAGE?

More and more people are having to come to terms with an interest-only mortgage they have which does not have a repayment strategy. There are various solutions available. More and more lenders are willing to negotiate an extended term to enable a solution to be found – whether that be switching to a repayment-type of mortgage over a longer term, or perhaps an equity release type of solution with interest-only payments being continued definitely, or a lifetime mortgage arrangement whereby no payments are made and the mortgage and interest are paid from the eventual sale of the property.