Would You Want A Mortgage In Your 90's?

Most mortgage borrowers aim to make sure their home loan is paid off by the time they retire.  The idea of repaying a mortgage without the regular income that a salary brings is not an attractive option for many.

Banks, as a rule, tend to be wary of offering mortgages to older borrowers, knowing that there is less time in terms of prime earning years for the mortgage to be repaid in.

However, there are some lenders who now offer mortgages to older borrowers and whilst few people actively plan to pay a mortgage at the end of their lives, for some it is a new financial reality.

Getting a Mortgage While on a Pension

Following the financial crisis of 2008 and the ensuing property slump, the government became very particular about enforcing responsible lending.

The kind of borrowing that was possible during the decade of ‘cheap money’ from 1997 onwards had resulted in many borrowers being over committed, in negative equity and facing repossession of their homes.

Lending from 2014 became even more stringent, as banks and building societies were required to conduct thorough audits of prospective borrowers’ financial means, in order to vet their suitability for borrowing.

It is of course unlawful to discriminate against a borrower on the grounds of age, just as it would be to discriminate in any other way; banks cannot refuse to lend because the borrower is too old.

However, older borrowers looking for low cost mortgages are often declined based purely on repayment criteria. If a lender believes that once a borrower retires their earning potential will decline, a loan is often refused.

Options For Retired Borrowers

Attempting to borrow after having retired is therefore even more challenging for many older people seeking a mortgage.

The credit market is not completely off limits to older borrowers and several lenders offer specialist mortgage products.

The Buckinghamshire Building Society, the Harpenden Building Society and the Staffordshire Building Society are three of a number of lenders who will lend to retirees who meet the borrowing requirements.

However, in many cases, older borrowers are forced to find other means of financing a mortgage such as equity release schemes and lifetime mortgages.

Both these options are far more expensive than a regular mortgage and can result in the borrower losing ownership of the property.

Most retirees with dependents and grandchildren are concerned that the wealth they have accumulated throughout their lives, goes to their families.

Lifetime Mortgages are a loan secured against the value of a property and they are only repaid after the homeowner passes away or has to go into long-term care.

Interest is added to the loan throughout the life of the agreement and the mortgage is repaid from the sale of the property when the borrower dies or goes into care.

This is normally a very attractive deal for the lender who can quickly access far greater equity in the property than the value of the loan.

For borrowers without dependents, it offers a secure property for life with no obligation to repay, but for the majority of borrowers who have relatives, it is a less enticing deal. The tax-free savings that can be made by passing on wealth in an estate no longer apply.

The equity in the property, which would normally be passed on to the next generation, becomes impossible to leave to children and grandchildren.

Borrowing for older people has become more complex in the past ten years and many of the options available need to be carefully considered.

There are lenders who will cater for older borrowers but it is normally a good idea to have as complete a picture of the mortgage market as possible.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

For more information please do not hesitate to contact the team at Ward Williams Financial Services Ltd on 01932 830664 or by email on wwfs@wardwilliams.co.uk.

Save Like The Young Ones

Saving for a rainy day is what lets you buy an umbrella to keep you dry until the rain passes.  Alternatively you may be saving with a specific goal in mind, for example to buy a house.  Like many aspects of life, your saving needs and habits may change as time goes by. 

If you are on the younger side, you may be looking at paying for your wedding, putting together a deposit on a house or planning for the costs of having children.  If you are on the older side, then you may already have passed the bulk of life’s financial milestones.  Instead you may be looking at saving for your personal goals.  Alternatively you may be saving to help your children. 

Whatever your age, the guiding principle should be to save money but enjoy life.  You should also look at the most efficient and appropriate ways to save.

Treat savings as a key part of the family finances

In addition to day-to-day purchases, such as grocery shopping and utility bills, there are also recurring and foreseeable expenses which need to be managed.  For example insurance policies may need to be renewed and household items, such as washing machines, may need to be replaced. 

In very simple terms you will either need to have the money to pay for these or you will need to use credit. 

It is also advisable to think about potential emergencies or challenges and how you would cope with them.  For example having cash savings may form part of a plan for dealing with a period out of paid employment.

Do you really want to keep all your eggs in one basket?

As well as thinking about how much you need to save, it can be helpful to think about where to keep your savings.  Here are some ideas.

Physical cash

Although keeping cash in the house (or elsewhere) means that you are missing out on the opportunity to earn interest, it can be convenient to keep some of your savings in physical form.  If you need to use cash, but do not want to, or cannot, go out, then having a stash of cash close to you can be very useful.  Likewise if you live in a place where there is a limited number of ATMs, it may be useful to have a Plan B.  Obviously storing physical cash has security implications.  You will need to think about the pros and cons of this option for yourself.

Instant-Access Savings Accounts

These come in various forms such as standard savings accounts and individual savings accounts (ISAs).  While the money is available to withdraw at any time, you will need to ensure that you understand how you go about accessing it.  If you feel it is reasonably likely that you will need to withdraw more than the £250 available at ATMs, then you will need to check that there is somewhere accessible where you can pick up your cash, e.g. a local bank branch or Post Office.

Non-Instant-Access Savings Accounts

Some savings vehicles require a notice period before cash can be withdrawn.  The reward for this may be better interest rates.  Again, you will have to weigh up the reduced convenience against the potential gains.

Alternative Savings Vehicles

Premium bonds do not offer interest, but they do keep their cash value and can be redeemed at any time.  Plus there is always the possibility that you will win, somebody has to.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN.

YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED

For more information please do not hesitate to contact the team at Ward Williams Financial Services Ltd on 01932 830664 or by email on wwfs@wardwilliams.co.uk.