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.

WORKPLACE PENSIONS – PAYMENTS TO INCREASE

If you are employed and paying into a Workplace Pension, you should be advised by the

provider or your employer that the minimum payments will increase from 6 April 2018.

Currently the minimum payments have been 1% of salary by the employee and 1% by the

employer. These will increase to 3% by the employee and 2% by the employer. A person earning

£20,000 per annum (and with a scheme where the full pay is used to calculate the payment) would

see an increase in their deduction from about £14.00 per month to about £40.00 per month. While

that is a large increase, if you take into account what the Government adds and what the employer

adds, that £40.00 paid in would mean a total of about £84.00 going into the pension – a return of

210%! It is something to be aware of and budget for.

WHY DO PEOPLE TAKE OUT A LIFETIME MORTGAGE?

A recent survey was done for those taking out Lifetime Mortgages as to how they used the monies raised:

55% to help their family

63% to pay for home improvements or renovations

17% to take a holiday

19% for getting care provided at home

57% to meet a shortfall in income

We have also seen a number of people taking out a Lifetime Mortgage to clear an existing mortgage – particularly an interest-only one which is reaching the end of its term and where the money is not available to pay it off, and where the people do not want to have to sell their property.

MORTGAGES WITH NO MINIMUM INCOME

The Lifetime Mortgage provides a facility for borrowing based solely on your age and the value of the property. The older you are, the more you can borrow and you have the options of either paying just the interest for as long as you wish; making payments now and then; making regular payments so as to reduce the amount borrowed (as with a standard repayment mortgage); or letting the interest build up and be paid from the eventual sale of the property. Here is a sample of the maximum borrowing possible at various ages on a property with a value of £200,000:

Age 55       21% of value £42,000

Age 60       26% of value £52,000

Age 65       31% of value £62,000

Age 70       36% of value £72,000

Age 75       41% of value £82,000

Age 80       46% of value £92,000

Note: These are not guaranteed levels of borrowing. In some cases it may be possible to borrow

somewhat more than shown above, and in other cases, the borrowing may be less.

MORTGAGES FOR THE OVER 55s

There is more flexibility now for those over 55 to be able to take out a mortgage. You still need to meet the lender’s income requirements but earned income in many cases can be accepted up to age 70. Beyond age 70 the income the lenders will take into account usually needs to be pension income or income from property rental or investments.

AUTUMN BUDGET

There was not much excitement in the Chancellor’s Autumn Budget but the removal of Stamp Duty for First Time Buyers on purchases of up to £300,000 (£500,000 in the London area) should help boost the property market. Many tax matters were not changed.

For example, the total that can be put in ISAs (Individual Savings Accounts) each year was not changed. There were some other tweaks in the Budget and here is a brief summary:

The Personal Tax Allowance is increasing from the 6th of April 2018 from £11,500 to £11,850. This

is the amount you can earn before you have to pay any tax. You will pay tax at 20% on earnings

you make above this £11,850 up to a further £34,500. This means that in the tax year 6 April

2018 to 5 April 2019 you would not start paying higher rate tax (40%) until your total earnings

exceeded £46,350 (£11,850 plus £33,500). Those with earnings in excess of £100,000 still face the

progressive loss of their Personal Tax Allowance and those earning over £150,000 will pay the

Additional Rate (45%) on any income they have in excess of £150,000.

Some additional changes were:

• Pension Lifetime Allowance increasing from £1,000,000 to £1,030,000;

• Capital Gains Tax Annual exemption increasing from £11,300 to £11,700;

• The Inheritance Tax nil-rate band will stay at £325,000 but the Residence Nil-Rate Band (the rather complicated allowance for those who, when they die, pass their private residence on to family members) was increased to £125,000. So a couple who die and pass the property they have lived in to their family would not have to pay any Inheritance Tax unless the value of their joint estate exceeded £900,000;

• Those receiving the State Pension will be pleased at the 3% increase in their pension payments. If they also have savings, the Bank Base Rate increase could mean that they also might receive a bit more income from their savings;

One useful allowance that has been continued is the Rent-A-Room scheme whereby you can rent out furnished rooms in the home you live in and make up to £7,500 free of tax. You can let as much of the house as you wish as long as you live there as your residence.