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Mortgages

There are options for older mortgage borrowers

A change in Financial Conduct Authority rules means the return of interest-only retirement mortgages – but still more needs to be done to help finance people’s retirement years.

Older borrowers are still being left out in the cold after mainstream lenders became more risk averse following the credit crunch, particularly when it comes to interest-only mortgages.

They may run into difficulties when their home loan term ends if it stretches into retirement, or can struggle getting a new mortgage because of their age, even if they can afford repayments on the loan.

In a bid to increase borrowers’ options, the Financial Conduct Authority (FCA) changed its rules in March, and now defines retirement interest-only deals as standard mortgages, offering a boost to older borrowers wanting to downsize or unlock the value of their home to fund improvement projects.

Since the changes, some lenders are now offering interest-only retirement mortgages if borrowers meet their lending criteria.

But what if their circumstances are unusual and don’t neatly fit the “tick box” of mainstream lenders? For example, they may have been gifted the property by a relative, or have a minor credit blip on their record from years ago. Alternatively, they could be buying a non-standard buildings or ex-council homes, be self-employed, or fit a number of these situations.

However, options are available. In one case, we provided a £200,000 interest-only mortgage for a couple, who are in their 60s (not pictured) and were long-term renters, allowing them to buy their home.

They already live in the £350,000 house the wife and her sister inherited when their mother passed away, and wanted to buy out her sister, who agreed to pass them her half of the house through a gift of deed.

However, the husband had a single blip in his credit record; a debt to a mobile phone provider from 2013, which has now been settled. This meant they were turned down by high street banks. We were the only lender who could provide what they were looking for, and agreed a five-year fixed £200,000 mortgage, including £25,000 for home improvements.

The couple plan to repay the loan by selling their home when the husband retires in nine years, and buy a flat in which to spend their retirement.

In cases like this it is important that lenders can show greater flexibility to get older borrowers the finance that they need by looking at all the factors involved in their mortgage application.

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