Lending in to later life - age 65+, no problem!

We all know life doesn't end at age 65-70 and neither should it on the high street!  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.  Others may wish to continue their mortgage past normal lender retirement age, whilst they may still be working.  There are schemes where equity can be turned into a mortgage (not necessarily 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 adviser to review all possibilities.

According to some lenders reports, there are an estimated 600,000 people due to come to maturity on their interest only mortgage by 2020, aged over 60.  Many will probably have no way of repaying their interest only mortgage.  Some will have endowments that didn’t meet expectations, or maybe the house has not increased in price as much as hoped.  Stricter mortgage rules and lending criteria has made it harder for those over 55 wanting to re-mortgage.  However, despite the high street being almost a closed entity, there are plenty of other options (not that your current lender is likely to advise them - they just want their money back!).

The lender has the right to request repayment of their loan at end of the mortgage term.  If the customer has no way of repaying this and has just continued to pay the interest over the last twenty-five years or so, they face the possibility of having their home repossessed or being forced to move out.  On the high street, the end of the loan term will normally hit those aged between 65 to 70.  This is not new news but does highlight that many people are still burying their head in the sand and hoping this will go away or the lender may be lenient..

There are a number of lenders that recognise that 'normal retirement' age is no longer set in stone and people continue to work long in to later life. These are not high street names and as such, rates may be slightly higher than the big super tanker, large volume producing household names that we are used to.  But at least they will consider helping out and could keep you in your family home!

The mortgage process is pretty straight forward, whatever your scenario.

Arranging a mortgage can take time.  But actually, the process, regardless of whether you are a first time buyer, home mover or simply re-mortgaging, will be roughly the same.  On any new purchase, the selling agent will seek to agree a number of deadlines with you, including the arrangement of mortgage finance. At this point you can shop around and should make sure that you speak to an independent mortgage brokerage who will assess your overall financial position and discuss your mortgage requirements with you.  Advisers are required to provide you with an Initial Disclosure Document detailing who they are; who regulates them; their scope of permissions; whether they are restricted to a small lender panel or ‘whole of market’; any fees and costs involved including any charged for advice or consultation.

A good advisor will complete a financial fact find ensuring that they fully ‘know and understand their client’s financial position and requirements.’  This is necessary before any ‘advice or recommendation’ can be provided.  Be patient as this process can be lengthy.  It is in your best interests however, ensuring that you receive the best possible advice designed to meet your personal mortgage needs and requirements. Once you’ve agreed the best mortgage for you, a decision in principle (DIP) will be completed, usually online with the chosen lender. This involves brief personal details, income disclosure and a credit search. Be wary here as too many credit searches will have a negative effect on your credit score.

DIP decisions are normally instantaneous.  Assuming success, it is then up-graded to a full application. Payment for survey is made (sometimes free) and the valuer confirms to the lender if, in their opinion, the property is suitable security for mortgage purposes. A more detailed in-depth survey (homebuyers report) can be arranged at the same time, but for a slightly higher cost. That said, for older properties it should be considered a worthwhile investment as it could save you thousands in the long run.

The chosen lender will require information on income, identity, proof of residency as part of their due diligence requirements.  Assuming no issues arise, a mortgage offer should be issued. Then, subject to the solicitor’s conveyancing process, you are now on the road to completing your mortgage process.And finally this week, if you want to find out more about Buy to Let mortgages, the Property Investor and Homebuyer show is taking place at the ExCel exhibition centre in London on 20^th/21^st April.  Well worth a visit and AToM will also be exhibiting.

In January, the average mortgage interest rate was 2.53%. How does that compare to yours?

Some eye watering statistics from The Money Charity this week.  The Charity has reported that total mortgage lending stood at £1.37 trillion at the end of January.  This is up from £1.32 trillion in 2017.  Averaged over the 11.1m households with a mortgage, this equates to £123k per home in January.

The average interest rate was 2.53% at the end of January.  Product offerings now exceed 11,000 across the market and rates start from circa 1%.

There were 24,840 loans approved for house purchase in January, according to UK Finance, 5% lower than a year earlier.  The average loan approved was circa £189k.

This decrease is interesting as it is a common knowledge that owning a home can be cheaper than renting.  The report goes on to suggest that inclusive of all benefits, private renters spent an average of 34% of their income on rental payments.  In comparison, people who owned their home only spent on average 18% of income.

The Ministry of Justice reported that 47 mortgage possession claims were issued every day, throughout quarter four 2017.  31 mortgage possession orders were made every day.  18 properties were repossessed every day.

And just because this caught my eye - Child Poverty Action Groups ‘The Cost of a Child in 2017’ report estimates that couple families now spend £155,142 on raising a child to their 18th birthday - £23.61 a day!  This is up 2.4% compared to last year.

This will go some way towards why the report suggests that around 9.45m (35%) households have no savings, while a further 2.97m (11%) have under £1,500. 

I know, stark figures indeed.  But sometimes we do just need to review what we have, where we are at and how can we change things.   It always surprises me how few people know what rate they are on, the type of mortgage, i.e., fixed rate, tracker rate, etc, and whether they are paying interest only, or capital repayment.  Unsurprisingly, almost everyone knows what it costs per month to the nearest penny! They will haggle for a £10 discount on a new washing machine, or sky TV,  but will stay with the current lender when their ‘promotional rate’ period comes to an end, ‘brush it under the carpet’, and deal with it ‘tomorrow’. But, we all know tomorrow never comes.  A review of what’s on offer from other Lenders could give you a nice surprise and probably a few extra pounds in your pocket!  

Piazza Italia was superb! Lenders launch in to Near Prime for those with small deposits

This column is always a difficult one to write in the middle of the Easter holidays and whilst a lot of people are away, including myself!  So, whilst writing this from our ski chalet, I do look around the surroundings and weigh up the local house prices and compare to those back home.  We are most definitely an expensive comparison.  With this in mind, I wonder how first time buyers manage to save alone, without the help from the bank of mum and dad or grandparents, in the current climates, most probably still whilst paying to rent a property?  Which incidentally, will be a significant amount more expensive on the monthly payments than a mortgage probably would be!  This is of course on the basis that the clients have no issues, which, as more and more people apply for a mortgage, more and more fall out of the ‘high street’ model.  Some give up, whilst others look for the alternative mediums out there, such as ‘whole of market’ mortgage brokers, who have access to lenders who want to help. 

Lenders recognise that they should be helping those who may have had a blip in the past.  Just last week, our good friends at Kent Reliance (part of the One Savings Bank group), launched a mortgage for those with a 10% deposit, that may have had a default or CCJ over two years ago, or a missed mortgage payment over one year ago, with rates starting from just 3.19%.   Terms and conditions obviously apply, and these deals are only available through a limited few. 

They join another lender, Kensington Mortgages, who also offer a similar offering for those with just a 10% deposit.   However, that means that only two lenders in the whole market will consider someone with a historic blip and just a 10% deposit.   These two lenders must be applauded for leading the way.  But overall, this needs to change and more lenders need to follow suit and offer assistance. 

Finally, hats off to the organisers of the Easter weekends Piazza Italia.  Despite the weather, the crowd turnout was fantastic, as was the entertainment, and it looked like everyone enjoyed themselves.  AToM was delighted to be a sponsor and well done to all involved.

Lenders will look at your bank statements.

When applying for a mortgage, there’s no shying away from the fact that lenders look at bank statements!  Whether it be paper based or via the new ‘open banking’ technology, your private transactions will come under scrutiny.

I’ve mentioned it many times over the years in my columns and highlighted that whatever is in your last three months bank statements, lenders have to take it into account when deciding whether to lend to you, or not.

Sadly, in the last two weeks alone, we have had to turn away 18 cases, yes 18 cases, due to the customers bank statements (even though we can do All Types of Mortgages!).

So, why would this happen?  It could be that the client forgot to disclose they had a payday loan (short term funding until payday arrives).  These types of loans work for some people, but most of the lenders treat them as an adverse entry.  Despite what the ‘bar room adviser’ says, they don’t help towards your credit score!

Or it could be that the client forgot they exceeded their overdraft limit last month.  Just a little bit, only for one day, but it’s registered.  And that can mean disaster for the mortgage enquiry as it’s perceived you can’t manage your monthly finances.

What about transferring money from accounts resulting in a direct debit bouncing and being paid late?   Unfortunately, this is also looked upon negatively.

And there are numerous others, which include forgetting to disclose the student loan, or a 0% interest car loan, or even the monthly payment out to your pension.   Whether via bank statements, or via a credit search, the lender sees all debts and any monthly payments must be taken into account when it comes to affordability.

So, plan ahead.  Work out your budgets, what your monthly payments are and anything else that you need to disclose, before you go and see your local and independent mortgage adviser.  It’s time well spent and will stop any unnecessary delays, or possible declines, later on.

Self Build, refurbishment or development? There are plenty of options..

As the local area continues to become a virtual ‘new homes exhibition’, there are a number of lenders also assisting customers with more private projects such as development, self-build, or if you just want to upgrade your existing property by way of refurbishment. 

On a self-build, the customer normally buys the land and the lender will issue the funds to build, on a stage basis. Normally once the foundations have been laid, property built to eaves level, made watertight and so on.  At each stage a valuer will review and advise the lender of progress and to enable the release of payments.  You will tend to find the lender will lend on the Gross Development Value (the end value).

On a full refurbishment, again, the lender will want to know the plans and may lend in stage payments against the end value of the property, depending on the extent of the works involved. They will almost always require a schedule of works – extension plans, kitchen, bathroom, etc. 

The lender will require sight of all planning permissions and estimates of costs involved before lending any funds.  Seek out a local architect to assist you with plans and costs and always make sure you set out accurate budgets from the outset.

Lenders will cater for all types of scenarios (dependant on the exact type of works required!).  Each lender will work on the valuers comments once they have visited the property and adjust their offerings accordingly.  Just because the high street or your current lender says no, does not mean that it can't be done! 

Have you heard of the Tipton Building Society?  What about the Saffron, Harpenden, Principality, Dudley, Furness, Shepshed, or the Stafford Railway Building Societies?  Not necessarily household names, but we are seeing these names and a lot more like them launching innovative products.  Not always looking for huge volumes but looking to fill gaps in the market and this should be applauded.  

A good broker will, in most cases, have a relationship with these types of lenders, understand their requirements and ensure all the correct information is submitted from day one.  There really is no better time to utilise the expertise and staffing levels they can provide for you in what’s becoming an over informed and more recently, highly competitive market place.

Have you been offered a 'Product Transfer'?

I am looking at two main categories for this week’s column. 

First off, it’s product transfers.  These are the options the lender will give you to stay with them.  So, you’ve been with your current lender through the term of your deal - normally a two year tracker ends after twenty four months, or your five year fixed rate might end on a specific end date.  Either way, the lender will normally write out to you three months in advance to offer you the next ‘big deal’.  Or is it?  I’ve had one high street lender offer a client of ours a deal 0.3% higher. To put the boot in, they are also actively offering rates 0.5% lower to new clients.  So, a client on 1.6% and wants to remain with their lender, who are offering them 1.9% to stay.  The same lender is offering new customers 1.4%!  So much for loyalty.  We had another recently where the lender wrote out and offered the clients a great deal to stay.  The client spoke to one of our mortgage advisers, who could offer a rate 0.1% lower, to stay with the SAME LENDER!  It really pays to look around and double check that you are being offered the best deal.  Plus, although the lender may not mention mortgage brokers in their renewal letter to you, nearly all lenders now offer product transfers through brokers. 

Which brings me on to my second point, choice.  It is still tough to get a mortgage in the current climate and now, more than ever, you should do your homework and speak to a ‘whole of market’ mortgage adviser and compare all mortgages available. If the person you are speaking to is not offering whole of market advice, i.e. they just review a panel of selected lenders, you may not be getting the best product for your needs and/or requirements.  For some of the larger brokers, lenders may even put one of their own underwriters in-house, so that your application can be processed within their offices.  This helps with speed, instructing valuations and dealing with queries quickly.

And remember, you can place your mortgage with whoever you like. You are under no obligation to anyone, despite what some may say! Everyone covets your business and there appears that there may be some unusual and possibly non-compliant tactics being used to gain your signature. Bedside manner counts! If you don’t like their stance, or they’re ‘forcing’ you to use them, walk away….