We don’t want to downsize
Unfortunately, once you get close to retirement age, your mortgage options reduce significantly. As a result of the new rules that came into force in April 2014, lenders have decided to close the shop on lending to older borrowers. It’s all about affordability!
It’s very easy to jump on the media band wagon and accuse lenders of adopting an ageist policy to anyone over the age of 35, but let’s not forget where we are coming from. Before 2008, as long as you had a passport and a pulse, you could get a mortgage. Then we had the global financial meltdown followed by the bank bailout by tax payers. Now, the regulators and the banks are making it more difficult for you to borrow. The lending pendulum has swung the other way.
Nonetheless, it’s clear banks are focusing on the younger crowd and we need financial creativity to develop products for the silver pound; after all, if we have the collective wisdom to send a fridge to land on a comet, six billion miles away, then someone has to be able to develop a mortgage product suitable for older borrowers. It’s a fact that we are all living longer. Older borrowers are asset rich with decent savings and investment portfolios coupled with pension income, which in reality is more guaranteed and secure in comparison to a 35 year old working in a 9 to 5 job.
In the mean time, the moral of the story for those with mortgages who have not quite reached pension age: Aim to pay off your mortgage asap because once you get to 50, you’ll be treated with disdain by the banks. The cost of borrowing has never been this cheap, with lenders offering fixed rates as low at 1.18%. How long this will last is anyone’s guess.
For those over 60s —– these are the typical financing options:
Downsize: Sell and buy a cheaper property for cash and live mortgage free. It’s not what you want to hear but this might be your only option.
Mortgages from a small/niche lender: There are banks that do not have upper age limits per se and will consider lending purely on the merits of a case. These are primarily small building societies e.g., Market Harborough Building Society, National Counties, Harpenden Building Society and Buckingham Building Society. Their unique selling proposition (USP) is that you are dealing with an experienced underwriter as opposed to a computer that has been programmed to only approve a certain type of borrower. These lenders look for reasons to lend as opposed to just declining the case.
Unfortunately, there is a downside: Niche lenders have a finite amount of funds available, which tends to gets utilised pretty quickly, and when they do announce they’ve got new funding (which is typically to the larger mortgage networks and more established firms), the money goes in no time. Therefore, you need to make sure you’re working with an experienced broker that has relationships with the large mortgage clubs and, most importantly, access to the niche lenders. Once your broker gets wind of new funding, they will be able to get your application in, pronto.
Equity Release: This allows you to borrow money against the value of your property or sell all or part of your home. As a result of lenders tightening their criteria, older borrowers are increasingly going down the equity release route.
Independent Financial Adviser (IFA): Seek the advice of an IFA to explore the best finance option available.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
The Financial Conduct Authority does not regulate most types of buy to let mortgages, bridging loans, development loans and commercial loans.
