Old and need a small mortgage

Bromley86

My parents have found a retirement property that suits them and they want to buy it. They've got most of the cash, but they're short a bit. So they're thinking of getting a small mortgage (either on their current home, that they fully own, or on the retirement property). They'd repay it when they sell their current home.

Dad went to see a mortgage broker who said (a) they were now too old and (b) lenders have tightened up their rules and are pretty-much only lending to existing customers and first time buyers.

Really? How is a first time buyer with 20-40% deposit a better risk than someone who has an 75% deposit (or 85% if the mortgage is taken out on their current property)? Have others experienced this? Any ideas how to get around it?

Obviously, there's no harm in him going to see his bank (that he's been with for donkey's years) to see what they say. And presumably he'll be wanting a SVR mortgage rather than a fixed/tracker, as he won't want to be tied in.

Thrugelmir

[QUOTE=Bromley86;51680679
Really? How is a first time buyer with 20-40% deposit a better risk than someone who has an 75% deposit (or 85% if the mortgage is taken out on their current property)? [/QUOTE]

They have a job , a stable income to repay the debt with.

Sell their current property to buy the new one.

Dave_Ham

This should be straight-forward.

If not selling their existing property, I assume they would be letting it out?

Therefore raise the necessary amount from capital raising on that property and job done!

Am I missing something?

Itismehonest

They may not be able or willing, for various reasons, to let out their current home. Being any sort of a decent landlord incurs expenses as well as income.

Unfortunately, OP, it is true that older people are not going to get mortgages easily because they have no working (income) future. While this is absolutely logical & sensible as far as lenders are concerned it means many are now stuck in larger homes which they would quite happily free up.

I hope they find a solution.

theoretica

They may find that what they want is called a bridging loan - or maybe simply a secured loan on their current property. As they will only have it for a relatively short time the lender will want to charge higher interest than a normal mortgage.

Thrugelmir

Itismehonest wrote: »

Unfortunately, OP, it is true that older people are not going to get mortgages easily because they have no working (income) future. While this is absolutely logical & sensible as far as lenders are concerned it means many are now stuck in larger homes which they would quite happily free up.

They are not stuck. They just need to sell it. Then downsize.

Not a complex solution.

Bromley86

Just a follow-up. He went to see the bank (HSBC, been with them for 55+ years) and they said no. Definitely weird way to run a lending business. I understand that stable income is a good thing and, because of my parents' unusual pension situation, they don't have a stable pension in the same way that most do. I just fail to see the risk when their bank can see their full financial history and they have an 85% deposit.

They intend to buy, get it decorated, move and then sell their current one, so renting out their current property isn't an option. A bridging load would presumably be available, but we could be talking a year and I assume the rates are pretty punitive, so not what they'd prefer.

There is Thrugelmir's soluton, but it's not one they'd choose given an option. Luckily, they have another option in that I can loan them the money, so problem solved.

Thrugelmir

Bromley86 wrote: »

Definitely weird way to run a lending business.

Why? Banks have been hammered for taking risk. Now normal service is resumed. Its weird.

The lender would wonder a retired couple would waste money unnecessarily on interest . Doesn't add up. Unless of course there's more to be told.

Bromley86

Banks have been hammered for taking risk.

Sure, but as I said there's zero risk to the bank on a 15% mortgage. If property values fall that far then we're all screwed.

No more to be told and the bank will be fully acquainted with their situation.

Thrugelmir

Bromley86 wrote: »

Sure, but as I said there's zero risk to the bank on a 15% mortgage.

Risk is only one part of the calculation.

No profit either if the mortgage is to be repaid in a short space of time.

Itismehonest

Thrugelmir wrote: »

They are not stuck. They just need to sell it. Then downsize.

Not a complex solution.

Click their fingers & sell it, eh? Ah, if life were only that easy.

Glad to hear you have sorted something out, OP. All the best to your parents in their new home.