Mortgage lending is certainly becoming interesting again! During the last week Santander reduced the maximum loan they will accept on an Interest Only basis to just 50% of the property value (down from 75%). I expect that this, partly at least, is in direct response to the growing concern that many borrowers with this type of mortgage (nationally) are predicted to come to the end of their 25 – 30 year mortgage term with the mortgage debt still at its original level and no
repayment vehicle in place. In past times, many borrowers relied upon the seemingly continual growth in property values delivering to them a large equity value. This could then be used to
allow them to trade down and still have a reasonable standard of property to look forward to. Others may have long term endowments in place, savings via ISAs, or be in a profession which pays out a nice lump sum after a specific period of service, which would redeem the interest only element.
Some lenders are starting to insist on repayment of their mortgage around age 70 regardless of the clients circumstances and others will no longer allow 'sale of property' to be an acceptable repayment option at the end of the term. If you are on an interest only scheme, perhaps it is a good time to arrange a review and see if there is a better option for you with a lender offering a cheaper rate and where you can start reducing the capital?
Lending in retirement is also a ‘hot potato’ issue for lenders and one which needs careful consideration. Often, retired people have managed their finances successfully over the years and enter retirement mortgage free. At the same time, many, whilst having no mortgage, also suffer from reduced income and there is a saying in our profession that it is not always wise to have everything tied up in bricks and mortar and yet have nothing to spend. There are schemes where equity can be turned into a mortgage (not equity release) and where off-spring may be able to assist with the repayments in order to secure and protect their inheritance whilst also ensuring a comfortable retirement for their parents. This is not right for everyone but it is certainly worth talking to a qualified advisor to review all possibilities.
repayment vehicle in place. In past times, many borrowers relied upon the seemingly continual growth in property values delivering to them a large equity value. This could then be used to
allow them to trade down and still have a reasonable standard of property to look forward to. Others may have long term endowments in place, savings via ISAs, or be in a profession which pays out a nice lump sum after a specific period of service, which would redeem the interest only element.
Some lenders are starting to insist on repayment of their mortgage around age 70 regardless of the clients circumstances and others will no longer allow 'sale of property' to be an acceptable repayment option at the end of the term. If you are on an interest only scheme, perhaps it is a good time to arrange a review and see if there is a better option for you with a lender offering a cheaper rate and where you can start reducing the capital?
Lending in retirement is also a ‘hot potato’ issue for lenders and one which needs careful consideration. Often, retired people have managed their finances successfully over the years and enter retirement mortgage free. At the same time, many, whilst having no mortgage, also suffer from reduced income and there is a saying in our profession that it is not always wise to have everything tied up in bricks and mortar and yet have nothing to spend. There are schemes where equity can be turned into a mortgage (not equity release) and where off-spring may be able to assist with the repayments in order to secure and protect their inheritance whilst also ensuring a comfortable retirement for their parents. This is not right for everyone but it is certainly worth talking to a qualified advisor to review all possibilities.
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