BORROWING LIMITED BY AGE

In working out what they think a borrower can afford, lenders will consider the borrowers’ ages, since, at some future point, their income may be reduced or stopped altogether. 10 years ago most lenders set a limit of age 65 as the maximum age to which they would lend. This made it difficult for older people to get a long enough mortgage term to make the payments affordable. In recent years, however, this maximum age has moved to 70 for most lenders and even 75 and above for others – depending on the nature of the income the borrowers have.

There is an exception where age can be, in fact, an advantage in borrowing. What are called “Lifetime Mortgages” rely only on the ages of the borrowers and the value of the property. It is only
available for those aged 55 or older and who have considerable value in the property as the level of
borrowing even for the oldest borrowers is capped at about 50% of the property value. For those
stuck with an Interest-Only mortgage coming to an end, a Lifetime Mortgage can provide a useful
exit strategy. For example, a person aged 60 with a property worth £200,000 could get a Lifetime
Mortgage of up to about 34%, i.e. £68,000. One aged 65 could get up to about 38% of the property
value, i.e. £76,000 and a person aged 75 could get up to about 49% of the value, i.e. £98,000 on a
property valued at £200,000. Do contact us if you would like to discuss the options available to you.

BORROWING OPTIONS

A home is also an investment which historically as proven to be one of the best investments one can make. As the mortgage reduces as you pay it off, the share of the property you own (your “equity”) increases. It means that it can also be used as security to raise funds to achieve other objectives you might have in your life.
Your mortgage provider will, of course, want to be satisfied that you can afford to pay back what you are borrowing and will want proof of your income(s). While different lenders calculate affordability in different ways, a good rule of thumb is borrowing being limited to 4.5 times one’s salary or other guaranteed income. So, if your salary was £25,000, most lenders would consider giving you a mortgage of 4.5 x £25,000, i.e. £112,500 (subject to credit status).

THE HOME

Having and protecting a home is a financial priority for most of us. This ensures that we cannot be moved on by a landlord and gives us the freedom to decorate it or change it as we want. As the majority of us do not have the funds to buy a house outright, it means that getting (and paying!) a mortgage is an essential requirement. Currently the property market is pretty static – another result of the political uncertainty. On the plus side, however, this has meant that mortgage interest rates have remained at record low levels. This makes it a good time to take out, or change to, an interest rate fixed for a reasonable term. We consider the five year fixed rates to look pretty attractive. If you have a mortgage, it would be a good time to ring up your lender and find out what they can offer. You can then make other enquiries to other lenders (or using the services of an independent mortgage broker such as ourselves) and decide the best route for you to take.

KEEPING YOUR RESIDENTIAL MORTGAGE RATE COMPETITIVE

Do review your mortgage rate regularly. If you are on the SVR (Standard Variable Rate), a simple telephone call to your lender might get you a considerably better deal and save you hundreds of pounds.

FLEXIBLE MORTGAGE OPTIONS FOR LATER LIFE

Later life mortgage options are increasing. The increasing flexibility of Lifetime Mortgages are making these more and more popular. Here are some examples of cases we have dealt with recently:

- An older couple with an interest-only mortgage reaching its end and with a historical bankruptcy and CCJs were able to clear all they owed and also finance an extension to their property.

- Another couple had moved into what they were sure would be their last move and wanted to enjoy their life with a great deal of travelling while they could. They had already markedly assisted their grown-up children with their own properties and good incomes. There were some medical issues so they wanted to spend money now rather than later. They also wanted to maximise what they could get at the present fixed rates so as to avoid any possible interest rate increase in the future.

- Another couple in a Grade II listed building were reaching the end of their interest-only residential mortgage and did not want to have to move to a repayment mortgage. They wanted to stay where they were and continue with a similar interest-only type of arrangement but without a fixed term which could cause worries in the future.

- A widowed mother of two was still working but needed to extend the house so as to provide accommodation for an imminent grandchild. She wanted to pay interest monthly so the amount owed would not increase.

- Another family living in a large house wanted to keep the house for themselves and their daughters but were not able to access normal mortgage facilities due to the pensions they would receive being insufficient to fund the needed borrowing.

LIFETIME MORTGAGES – INCREASING NUMBER OF OPTIONS

The number of options available for Lifetime Mortgages continues to increase. The money withdrawn can be taken as a single lump sum, as an initial lump sum with the option to take further drawings later, or as an income over an agreed number of years.

And you can choose to allow the interest to roll up without making a payment, or to pay the interest monthly as with a standard interest-only option, or to make lump payments annually for up to 10% of the amount owed. The interest rates have also moved downward over the last year or two. If you are over 55, these options will be open to you. Do feel free to ring us to discuss what may be possible.

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.

OPENING THE CAGE!

The last several years has seen the arrival of many new options for those who had not been able to obtain a mortgage due to their age. Standard residential mortgage lenders generally now allow borrowing up to age 70 for those who are relying on earned income – whether employed or self-employed. For those who have guaranteed income into retirement such as pensions and investment or rental income, it is possible to borrow up to age 85 or even 90.

EXPERIENCE AND EXPERTISE DO MAKE A DIFFERENCE!

We do seek to use our experience and expertise to help our clients achieve their objectives and enjoy financial security. Here are what a few clients have written to us recently regarding their experiences with us: “I must place on record my sincere appreciation of the kindness and the thoroughness of your preparation of the proposed mortgage.” — Mr RJ of Burgess Hill

MORTGAGE SOLUTIONS FOR OLDER GENERATIONS

There are many more options now for those who are 60 or older. Where the incomes are guaranteed, such as income from pensions or investment income, more lenders will now offer normal residential interest rates and terms. Where the incomes are not guaranteed or not at a high-enough level, there are the Lifetime Mortgage options. These are not based on income. They are calculated on age and property value only. The money raised can be for any purpose. You have the option of making payments or simply letting the interest be added to the original borrowing – to be paid from the eventual sale of the property. The interest rate is fixed for the life of the mortgage. Do contact us if you would like to know what options might be available to you.

SOME LIFETIME MORTGAGE EXAMPLES

One couple faced repossession of their property as they had had an interest-only mortgage and their plan for repaying it had not worked out.

They also had other debts secured on the property. They did not have adequate income to afford a standard residential remortgage and the wife was quite a bit younger than the husband which meant that they could not get a big enough lifetime mortgage to pay off all the debts with charges on the property. We were able to source a Lifetime Mortgage provider who would work on the age of the husband only and all was sorted out just in time. Another man was single and owned his property outright. His income was pretty much enough to pay the expenses as they came due, but he had no children or close family and wanted to have access to funds to be able to enjoy life a bit more. It was possible to arrange a facility with a small initial borrowing and a considerable reserve which he could call on when needed. A recent survey was done to find out for what reasons people take out Lifetime Mortgages. The major reasons were as follows: 63% used it to pay for home improvements or renovations; 57% did it to meet a shortfall in income; and 55% did it to help their family in one way or another.

LIFETIME MORTGAGES

For those over 55, Lifetime Mortgages offer what is probably the greatest level of flexibility, including:

• Option to make no payments at all

• Option to make payments of interest regularly, or when you choose to do so

• Almost any past adverse credit can be considered

• There is no fixed term for the mortgage. It can last for life (or until the owner goes into care).

• There is a guarantee of no Negative Equity. So even if you choose to make no payments, the amount that has to be repaid at the end can never exceed the sale price of the property on the open market, regardless of how many years you have had the mortgage.

• You can take the maximum amount from the mortgage at the start, or take some to start with and have a reserve facility for drawing more when needed.

• You can use a Lifetime Mortgage to re-mortgage an existing property or to buy a new one.

• No income requirements or affordability calculations at all – the borrowing is based solely on the property value and the age of the borrower (note: where there are two borrowers on the mortgage, the lenders will use the age of the younger).

Here are examples of what the maximum borrowing could be currently (assuming a property value of £300,000):

Age 55       25% of value £76,000

Age 60       32% of value £97,000

Age 65       37% of value £112,000

Age 70       42% of value £127,000

Age 75       48% of value £144,000

Age 80       52% of value £156,000

(Note: there cannot be another mortgage on the property along with a Lifetime Mortgage so any existing mortgage must be paid off.)

Note: There are also options to have a Lifetime Mortgage on a rental property and on properties of unusual construction. However, the percentage of borrowing for a Lifetime Mortgage on a rental property is much less than that shown above.

BUY-TO-LET MORTGAGES

Generally Buy-To-Let (BTL) mortgages have already allowed lending well into retirement as the income to support the mortgage usually comes from the rental income only.

This age tolerance has become even more flexible with some lenders having no maximum age on when the mortgage has to be repaid. Do remember though that many BTL lenders have minimum initial income requirements. Contact us and we can make enquiries for you.

Do remember that most lenders also provide options to switch your mortgage product to a lower rate.

THE STANDARD RESIDENTIAL MORTGAGE

A number of lenders will now lend beyond the age of 70, some up to a maximum age of 89. A small number of lenders have also brought out a Retirement Interest Only Mortgage (RIO) which is an interest only mortgage with no fixed term. However, those lending beyond the age of 70 will normally only taken into account guaranteed income from pensions, investments or rental properties. The longer mortgage terms made possible by these older ages make a repayment mortgage much more affordable.

And to make it even more affordable, some lenders will allow interest-only payments either for all or a part of the mortgage. And some will allow down-sizing to be the means of repaying the mortgage. If you have guaranteed pension income or investment income or rental property income, there should be some options available for you. Contact us and we can find out what could be achieved. Generally this type of solution, i.e. standard residential mortgage, will have the best rates, and mortgage rates are still very competitive as the lenders seek to attract as large a share of the market as possible.

EXAMPLE: A long-standing client of ours had remarried and wanted to build a home of his (and her) dreams. He had a successful business but was in his 60s and the mortgage term offered made the borrowing unaffordable. We found a small Building Society who would do a longer term and also let him do half of it on an interest-only basis as he had a personal pension which he could access if needed.

ESCAPING THE MORTGAGE TRAPS

There has been a considerable increase in the number of options for mortgages for those aged 55 and older.

This represents a swing of the pendulum. Up to now lenders had been making it more difficult for older borrowers by restricting the maximum age they would lend to and tightening their calculations on how much they would lend. However this situation has been changing slowly, and these new options now give a number of ways for those in a mortgage trap to escape.

Changes have occurred in all three types of mortgages – standard residential mortgage and re-mortgages, buy-to-let mortgages and lifetime mortgages.

ASSISTING OUR CLIENTS ACHIEVE THEIR OBJECTIVES

Here are some comments from clients we have helped recently:

“Once again thank you for your excellent service.”

Mr RJ of Burgess Hill

“Once again thank you for all of your assistance with the mortgage, we can’t thank you enough.”

Mr JF of London

MORTGAGE MARKETPLACE

The Bank of England still intends to start raising interest rates at some point in the near future although the recent reduction in UK economic growth may cause some delays.

Generally residential rates are gradually increasing but still remain very competitive. If you are in a position to take advantage of the low rates, we would recommend you do so now rather than later.

And even those mature in years are being wooed by lenders offering extended terms and competitive rates. So do make enquiries if you are in this worthwhile category! We would be happy to assist in providing quotes. With the Lifetime Mortgages available as well there are fewer and fewer who are Mortgage Prisoners!

More Magic!

A Mortgage Which Requires No Payments; With No Income Requirements; For Any Purpose!

Another Financial Tool Starting at Age 55

I am talking about the Lifetime Mortgage where the borrowing is based only on age and property value. These have become more and more flexible so you can either opt to make no payments with the mortgage repaid on sale of the property, or you can choose to make interest payments so the amount you owe stays the same. With Lifetime Mortgages the older you are the more you can borrow! As there is no fixed term to the mortgage, you do not have to worry about having to move out or come up with a large lump sum in your future years.

Here are some examples of what the maximum borrowing might be on a property with a value

of £300,000:

Age 55 £76,000 (25% of value)

Age 60 £97,000 (32% of value)

Age 65 £112,000 (37% of value)

Age 70 £127,500 (42% of value)

Age 75 £144,000 (48% of value)

Age 80 £156,000 (52% of value)

MORE FIRST-TIME BUYERS

While the amount of Buy-To-Let buying has gone down, there has been a definite increase in first-time buyers looking to get onto the property ladder. Lenders are looking to keep interest rates as

low as possible to continue to attract these new buyers, and are trying to be as flexible as they can in finding solutions such as involving parents in the transactions in one way or another. This can be by means of providing a deposit or acting as guarantor or even going onto the mortgage itself.

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!