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!

UNDERSTANDING ANNUITIES

Another benefit of being older!)

The older you are, the higher the lifetime income you can buy with your pension fund!

In the past when you reached “pension age” – usually 60 for women and 65 for men, you could take your tax-free cash but then the only option you had for the rest of the money was to purchase an “annuity”. An annuity is an income guaranteed for life.

The annuity rates have generally gone down in the past decade or two and the new pension freedoms have led many people to taking other options. However, it is still worth knowing what your options are as regards annuities as they can provide a guaranteed level of income for as long as you live.

Annuity providers work out what they can offer based on how long a person can be expected to live. Detailed records are kept as regards how long people live and what they die of. This allows the providers to work out pretty precisely a person’s life expectancy. Generally people are living longer due to better diets and the medical treatments available. While that is good for us, it is not good news for the annuity providers as that means they will have to pay out the income they have undertaken to provide for a longer time. Do remember that annuity providers are businesses so there needs to be an element of profit for them.

If you have a sum of money in your private pension, you can find out what sort of return you are likely to get by just asking for quotes. Quite a bit of information is needed for precise annuity quotes including:

1) your date of birth

2) details of any medical conditions and treatment you have (or have had in the past)

3) information about serious medical conditions your immediate family may have suffered or died from before age 60

4) whether you are a smoker or have been in the past, and the level of smoking

In asking for an annuity quote you will also need to specify whether you want the income that is paid

remain the same, or increase over the years; to continue to be paid to a spouse if you die before them; and how frequently you want the income paid, e.g. monthly, quarterly or annually. The more “bells and whistles” you want, the lower the starting level of the income will be. While normally an annuity stops on the death of the person concerned, it is possible to arrange an option whereby it will be paid out for a specified number of years whether or not the person concerned is alive or not. As a rough guideline, for someone in good health here are some approximate levels of income that can be bought with money from your pension (shown per £10,000 of purchase price for a male and with no spouse’s income). You can compare the return on your annuity investment against other investment options. Do remember that annuity income is taxed in the same way as earned income.

Age                 Level Annuity                Annuity Increasing by 3% p.a. (Starting Level)

55                   £434 per annum (4.3%)          £259 per annum (2.5%)

60                   £473 per annum (4.7%)          £300 per annum (3.0%)

65                   £534 per annum (5.3%)          £358 per annum (3.5%)

70                   £610 per annum (6.1%)          £430 per annum (4.3%)