Mortgage for over 70's

taper

Hi

I am posting this on behalf of my parents who are both in their 70's. They currently own a property outright valued at £182k. They are looking to move to a bungalow but would need to borrow an additional £40-50k. They have their pensions as income and could afford repayments of up to £500 per month.

I have spoken to a few high street banks but none are prepared to consider them for a mortgage because of their age.

Is anybody aware of a bank that would lend to them? Would they be able to get an interest only mortgage? What other options would they have?

Thanks

Crashandburn

Can't think of anyone now they are in their 70s.

Are you able to buy the property for them ie dependants mortgage etc. Nat West might be able to look at this aspect for you but not so much the interest only part.

peanutbuttercups

I don't know how to post links but there are 2 posts on this board which will give you info. One is called OAP mortgages posted by peggyann and last reply is yesterday. Not to be confused with the one titled bridging loan for OAP. The other is called interest only mortgages which I've made a lot of posts on in the last few days and which holly hobby and kingstreet have provided excellent info about age limits. No doubt holly and kingstreet will be along at some point. They do work hard as I can see this isn't an unusual question and yet they still take timeto repeat themselves. when I first posted I thought it was only me who wanted to know about Mortgages in retirement lol

sugarlily

Surely if you bought the property for them - perhaps using a buy to let mortgage, or something, you would then ultimately avoid IHT...?

Wh05apk

sugarlily wrote: »

Surely if you bought the property for them - perhaps using a buy to let mortgage, or something, you would then ultimately avoid IHT...?

Unless they are wealthy enough to incur IHT, which would appear unlikely, otherwise they would not need a mortgage, this wouldn't be a concern, also OP would/could incur CGT on the profits on the sale.

There are lenders who theoretically have no age limits, but in practice you would probably be looking at 90, also they will probably only do on a repayment basis, making repayments quite pricey.

A possibility could be an equity release mortgage, given their ages they could quite easily get the 25-30% deposit they need, they would then not have any repayments (although one lender allows repayments which would prevent the debt from increasing)

holly_hobby

HI,

OP - if you purchased for your parents to live in, under either a regulated buy to let arrangement or a property for dependants, the affordability will normally be assessed under 2nd property regs, meaning that it will generally be assessed on your income, alongside your other existing commitments and generally a 25% deposit is reqd.

In this case, the fly in the ointment is that Mum & Dad can not provide the deposit, as it raises possenionary issues (even if given as a gift - as its donation is in direct exchange for Mum & Dad's residency), meaning it can not be classed as an unconditional gift by the lender - which they won't accept due to the implication it would have on any future posssession order they may seek. So the way to manage this would be for you to provide the deposit from your own funds (if poss), and if reqd come to an alternative personal arrangement for its repayment.

If you did buy the house for M&D under either of the above arrangements, there is no exposure to IHT on selling the property on their death, as although resident - the property doesn't belong to them, but there may be exposure to CGT for you on any gain at disposal, if upon sale the property isn't your proven primary residence, mitigagted of course by applicable reliefs and personal allowances that may be applied to any gain realised.

Mges into retirement.

Yes, there is at least one provider I can think of off the of my head, whom have no upper age ceiling, but of course any arrangement will be assessed on the applicants status and income, and although they consider interest only with a suitable repayment vehicle, with a low ltv they may choose to accept sale of the property as the repayment method - but thats not gted of course !

They also accept intermediary business and lend nationally, so I would expect you broker to be aware of them.

Lifetime Mge arrangment

2 options

All (but 1) provider write the mge with the rollup of interest onto the debt, which will obviously erode the free equity over the mge term (which when coupled with any+ market drops) may well completely eradicate any legacy for surviving family or issue (although it may be that this aspect may not be of a concern to you/them).

The alternative provider I mention, do allow partial or full repayment each month of accrued interest, effectively enabling the mortgagor to ringfence both the debt and free equity from interest erosion, with interest payable either for a scheduled period, or for the lifetime of the arrangement - so there is some flexability there and this may suit.

The current reqd LTV would fit either scheme, but be warned the interest rates are not equivilient to standard residential mges, and are typically in excess of 6% - additionally ANY such arrangement should be facilitated by a provider whom offer a no-negative equity gurantee, and through a suitably quailifed and authorised equity release adviser (which as a niche area of advice, is a route not all mge advisers have chosen to pursue - so you may have to hunt a little ....

SOLLA - http://societyoflaterlifeadvisers.co.uk/
and
unbiased http://www.unbiased.co.uk/advisers/financial-adviser )

... will help you to source a locally suitably qualified and authorised practitioner.

Second life time mge arrangement - is a home reversion scheme, where the loan is effectively provided in exchange for a % share in the property ownershp, as opposed to an interest roll up arrangement.

Obviously if the property value falls so does their share, but importantly, if the propety rises in value, the lenders % capital share of the property will also naturally benefit from the rise.

So there a couple of options there, what suits (if any) will be determined by your parents income, requirements and aspirations regarding beneficiaries - Mum/Dads broker will assist in the evaluation and provide suitable recommendations given their circs.

Also, ensure all wills are updated to reflect any change in circumstances (esp if you provide any monies for deposit as discussed above) and bequest requirements.

Hope this helps

Holly

Bobthebank

there are now 3 Equity Release Lenders offering regular interest payments. Also, if your parents financial situation worsens, they have no risk of repossesion as they could revert to roll up interest.

taper

Thanks for your replies. I have made an appointment to see an independent advisor with them.

IHT is not a concern as they have minimal other assets.

A mortgage repayable on the sale of property would be the ideal option if we can get it.

Fingers crossed!