Archive for the ‘Mortgage’ Category

Would You Want A Mortgage In Your 90’s?

Tuesday, September 29th, 2015

04 Would You Want A Mortgage In Your 90'sMost 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 lenders 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.


Can You Get A Mortgage Before The House Is Built?

Tuesday, July 21st, 2015

mortgagebuildHow do you find your dream home? Well that depends on what your dream home is.

If you’re looking for a character-filled period property then obviously you will need to buy an existing home. If, however, you’d prefer a modern home built to your exact requirements, then maybe it’s time to look at building your own home.

How Do I Build My Own Home?

Building a home is obviously a major undertaking.

First of all you will need to find suitable land. This means a place where you would be happy to live and where you can get planning permission for a house. How easy this will be depends greatly on what part of the country you want to live in. It is likely to be easier to find a plot of land in rural Yorkshire than in Central London.

You will then need to decide exactly what type of home you want. Again a 1 bedroom cottage will be cheaper to build than a 4 bedroom family home. With a self build you can always start small and leave your options open to extend later, e.g. if you start a family.

Finally you have to decide how you want to go about building your new home. If you have the necessary skills you can, of course, build it yourself. Otherwise you will need to get in people to help. If you need professional help then you will need to budget for this.

Budgeting to Build Your Own Home

The budget for your future home can be divided into 4 parts: land, fees and miscellaneous costs, materials and labour.

Land, materials and labour are all essentially self-explanatory. How much you will need to budget for these depends on what you are building, where and how.

As a note of caution, be very realistic about what you can achieve yourself. Your time and health have a value and trying to spread yourself too thinly can be a recipe for struggle if not disaster.

For an accurate budget, you will also need to be prepared for various fees and miscellaneous costs you will encounter along the way. For example, like buying a house, buying a plot of land may require the help of a solicitor. You may also require 3rd-party insurance during the build process. Then there may be connection fees for utilities and other services.

Financing The Build

The good news is that building a home from scratch can work out much cheaper than buying the equivalent property ready-built. The bad news is that self build mortgages are a specialist market.

As fewer people require them, there is less incentive for lenders to offer them at all. There is even less incentive for them to offer the wide range of options and deals available for mortgages on ready-built properties.

In practical terms, most self-build mortgages work along broadly similar lines. The buyer pays the costs up-front and then recovers the money from the lender in stages. This means that people building their own home need to have sufficient funds to hand, to cover each phase of the build process until they are refunded.

It may be possible to find a self-build mortgage which pays the money for each building phase up front. Prospective builders should, however, look carefully at the cost of these mortgages. The convenience may be outweighed by extra charges.

On the subject of extra charges, self build mortgages are likely to be more expensive than traditional mortgages. This is partly because lenders see them as more risky and partly because there is less competition in the self-build market.


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