The profile of older borrowers is not straightforward. Some are forced to take out mortgages because they’re overstretched or, increasingly, wanting to help offspring with major expenses such as house purchases or university fees. Now more than ever, the services of a quality mortgage broker are essential when buying a house.
There is now “enormous” pent-up demand for mortgages that stretch into borrowers’ 70s, 80s and even 90s, lenders say – and deals are becoming increasingly available.
But others are at the opposite end of the wealth spectrum: they have ample capital and income and are borrowing as a way of protecting their estates from inheritance tax.
Older borrowers who want to raise money Bigger initial mortgages, smaller pensions and a greater need to offer financial support to children and grandchildren mean more people require loans for longer.
“There are some people who, for example, are reaching the end of an existing mortgage but do not have the wherewithal to repay the capital without selling up and moving. That’s a more ‘distressed’ situation.
“But there is another group of people who have ample income and who simply want to continue borrowing at low rates because they have better uses for their capital.” said Andy, of Manchester Mortgages
For the former group, depending on their age and circumstances, rolling their conventional mortgage into an interest-only “lifetime” mortgage is an obvious route.
For example, “lifetime mortgages” fall under the umbrella term “equity release”. The borrower typically doesn’t make monthly payments at all. The interest, generally a fixed rate, rolls up and is compounded.
This interest – along with the original capital sum – is repaid when the borrower sells their home to move into care, for example, or on death. Fixed lifetime mortgage rates are higher than standard mortgage rates, mainly because the lender is taking a risk on the unknown length of the mortgage term.Read More