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.

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.

STRICTER RULES FOR BUY-TO-LET BORROWING

New regulations have just come into force which require lenders to deal differently with those owning 4 or more residential rental properties. This level of landlord will now have to submit full details of their portfolio including values and rental incomes for all of the properties owned, and these must fit into the new affordability calculations.

Those who own fewer than 4 residential rental properties will be able to remortgage properties and increase their portfolio up to the level of 4 much more simply. This does look to be yet a further effort by the Government to disadvantage those seeking to build a large property portfolio.

The Inertia Tax!

Those with residential mortgages that stay on their lenders’ Standard Variable Rate are effectively suffering a voluntary tax by not taking advantage of their lender’s special deals. Shifting over to the lender’s special deals, such as a fixed rate for two or three years, can save hundreds or even thousands of pounds over those couple of years. Simply contact your lender and ask them what is

available. This same principle applies for those who have buy-to-let mortgages on investment properties.

MORTGAGES AND REMORTGAGES – LOOKING GOOD!

Residential mortgage rates remain very low although the most recent hike in inflation can be taken as a reminder that rates can go up.

It is probably a very good time to lock into a fixed interest rate for 5 years or so which can be as low as 2.0%. Many lenders are also working on making borrowing easier for older borrowers. We can provide rapid assessments of what rates may be available for your circumstances.

The market in purchasing buy-to-let properties has slowed following the hefty increases in Stamp Duty when you buy a second/investment property, and also due to the reduction in tax relief on mortgage interest for higher rate taxpayers. However, rates are also good in this sector for those reaching the end of a mortgage term on their rental property and looking to replace the existing mortgage.

MORTGAGE OPTIONS FOR THE MORE MATURE OF US!

There are more and more mortgage options for those of us getting older.

These include normal residential mortgage options as well as the useful Lifetime Mortgage options. These can open doors to many who otherwise have felt caught in a mortgage trap which they could not escape from due to age or income limitations. Do contact us if you would like to find out what might be available for you.

ATTACKS ON THE BUY-TO-LET MARKET!

Over the past 12 months there has been a deliberate effort by the Government to make buying properties to let less attractive.

First, there was the announcement that the Stamp Duty payable on second properties would be 3.0% more than that payable on residential properties. That is a very significant amount of money. Then there is the progressive reducing of tax advantages on the interest on mortgages on let properties – ultimately dropping from as much as 45% for Additional Rate Taxpayers down to a level of 20% for all. This effectively raises the costs for many landlords who are higher rate taxpayers.

There are further changes. In 2017 we will see the affordability calculations for Buy-To-Let mortgages significantly increased – the bottom line being that the amount of mortgage available based on the monthly rental, will go down from the levels they have been. This could make buying and remortgaging more difficult. Do contact us if you need any remortgage calculations. All in all the

Government may be shooting itself in the foot with these actions as the result could be a stagnant housing market with reduced levels of house building and sales.

Sovereign Finance

Sovereign Finance enters its 36th year of trading in 2017. We look forward to a busy year helping our clients achieve their objectives and enjoy financial security.

It will be an interesting year. We still have to see how BREXIT will progress and affect the economy, and we have a new US president who, for better or for worse, is not an experienced politician. While these matters are not within our control, we can continue to work hard and flourish and prosper on our own and together with others in companies or groups in which we are involved.

The basics of a successful and happy life remain the same.

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).

News

It is still early days but there is a surprising resilience in the property and financial markets

following the BREXIT vote. Residential property prices have remained reasonably stable

and mortgage rates remain at the lowest levels on record.

Pensions and taking the benefits from them, however, remain a complicated area. To help understand

the options here follows: A New Retirement Menu for Personal Pensions. We know that the subject

of pensions is confusing to most people, so do feel free to contact us with your questions. Do note

that the “Retirement Menu”  relates to Personal Pensions only. The regulations for Final

Salary Pensions where the benefit is linked to years of service and salary are different.


Menu to follow ......

STRIVING TO MEET EXPECTATIONS

By survey what our clients value, and why they continue to come back to us, is our independent and unbiased advice on financial matters and mortgages, utilising our extensive knowledge and know-how gained over the last 35 plus years.

Here are a few recent client comments:

“Thank you so much for being super quick and efficient and guiding us through this. I have already recommended your services to 2 of my friends and am sure we will have some more work coming your way in the near future.”  – Mr RW and Ms NF of Kent

“Many thanks for all your patience, guidance and expertise in arranging this for us, your help is much appreciated.”  – Mr & Mrs PL of Redhill, Surrey

“Usual thanks and best wishes for excellent service.” – Mr IB of Leeds

“As ever your advice is clear and constructive; we will certainly come back to you as and when we decide to take the next step.”   – Mr & Mrs AM of Uckfield, East Sussex

 

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.

WHY USE US?

We have over 30 years of experience with financial matters which has given us a great deal of expertise and know-how.

We seek to provide an efficient, professional and friendly service to all our clients.

Here are a few recent client comments:

“You are trustworthy and professional with clear explanations given. Thanks for your patience.”

– Mr JG of East Grinstead

“Thank you for your help and attention, excellent as always.”

– Mrs CC of Leicestershire

“Ever grateful for your prompt and helpful advice.”

 – Professor BHW of Oxford

“I needed someone I could trust.”
– Mr GN of Turners Hill,West Sussex


“That’s brilliant. Can’t believe how quick you got this (mortgage offer) through.”
– TM and DW of Crawley, West Sussex

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.

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.

OTHER NEWS: MORTGAGE RATE WAR

There is still fierce competition as regards mortgage interest rates. While the Bank of England seems minded to move slower rather than faster in raising interest rates, we still believe it is an excellent time to take advantage of the current fixed interest rates – with 5 year fixed rates under 3.0%. We would be pleased to provide you with quotations so you can see what savings you can achieve. This can be done very speedily.

MORTGAGES – TIMES ARE CHANGING

The mortgage market is still struggling to adapt to the new MMR (Mortgage Market Review) requirements. There is a much more detailed focus on affordability which has, in our experience, made quite a dramatic difference for those who need to push the boundaries such as borrowing past age 65 or needing to stretch their income as far as possible. We have also seen that virtually any past or present credit difficulty makes it very difficult to obtain borrowing from High Street lenders. There are still possible lending solutions for all of these hurdles but be prepared for the process to take longer and be more difficult than before.

Having said all of that, it is a very good time to move to a fixed interest rate for 3 to 5 years in order to avoid the effects of the coming rate rises. With the average Standard Variable Rate averaging about 4.4%, and 5 year fixed rates available for 1% or more below that, a re-mortgage could allow you to both reduce your outgoings now and avoid the nasty upward movements in interest rates that will almost inevitably start in 2015. We would be happy to make enquiries to see what could be available for you.

Will Interest Rates Increase?

Think Ahead ! Improvements in the UK economy are good news but are also warning lights for an increase in interest rates. The Governor of the Bank of England's target for unemployment is getting close. It is a good time to lock into fixed rates with your residential mortgage to avoid hikes in your monthly outgoings. We recommend looking at five year deals.

Could Mortgage Interest Rates Go Up Soon? Can You Save Money Immediately?

With the economy starting to improve a rise in mortgage interest rates starts to look more likely. Fixed interest rates are at historically very low levels and it is worth taking advantage of this opportunity. Check your mortgage now! If you are on your lender’s normal variable rate, contact us to discuss your options.

BUY NOW!

It is probably the best time to set up a new mortgage whether by purchasing or remortgaging. The rates are at historical lows and there are changes in mortgage regulation being introduced by the Regulators in April next year which could make obtaining mortgages more difficult than it is now. Lenders and mortgage brokers will have more hoops they have to jump through, and lenders are likely to have to keep higher reserves to support their lending. If you are not locked into a mortgage, we would recommend that you look at your options now. Just give us a ring and we can tell you what may be available for you.