My wife and I have been left £120,000 and need some advice. We are both in our 57th year and have been renting our home for a good 25 years now.
We pay £950 a month in rent but want to live in another area, closer to our children.
We’d like to move to a high valued town, Great Dunmow, in Essex.
I was looking into an interest-only mortgage and would appreciate any possible guidance.
I am self-employed with a limited company which has earned £80, 000+ over the past two years and my wife is looking for a part-time job at present.
John Pitt, by email
Older borrowers in their 50s and beyond have found it trickier to get a mortgage since 2014
Jonathan Harris, director of mortgage broker Anderson Harris, replies: Older borrowers in their 50s and beyond have found it trickier to get a mortgage since rules called the Mortgage Market Review were introduced in 2014 – this saw lenders insisting that the mortgage was paid off by retirement age.
With you looking to potentially take out a mortgage at the age of 57, that would only leave you eight years until the state retirement age of 65, which would mean substantial monthly payments and these are likely to be unaffordable.
The good news is that the situation has eased somewhat in recent months with lenders more prepared to lend beyond retirement age. A number of lenders will now lend up to age 75 while one will even lend to age 90.
The other potential issue you have is that you are self-employed with lenders scrutinising income more carefully than for those who are PAYE.
This is because traditionally self-employed workers, in conjunction with their accountants, have looked to minimise their income in order to reduce their tax bill.
While entirely legitimate, this is not helpful from a mortgage perspective. That said, all is not lost and the key will be for you to get your borrowing capacity confirmed before looking at the mortgage options available to you.
Jonathan Harris, director of mortgage broker Anderson Harris
An independent mortgage broker is a good place to start as they will be able to look at your situation and recommend the best course of action.
They will also have access to all the mortgage products on the market and know which lenders will consider older borrowers.
However, they will need more detail than you provide in your email: a broker would need to understand the income generated from the limited company, for example – is the £80,000 you refer to profit before tax with all costs met?
What income verification do you have for the past three years in terms of personal tax returns and SA302s (a document confirming exactly how much income you have declared for tax purposes). Most lenders will want sight of these documents to confirm income.
Under today’s mortgage rules, lenders look at more than income but also assess affordability of a proposed mortgage based on your overall level of commitments, so you will need to provide full details of all your monthly expenses and outgoings via your bank statements.
You are seeking an interest-only loan, which would keep your monthly mortgage payments at a more affordable level than a repayment deal but the lender would need to fully understand your plans for ultimately repaying the loan.
The likely purchase price that you anticipate having to pay to get the property you want in the area will also be relevant.
Without all of the above, it is difficult to advise if this is a suitable avenue for you to be pursuing or whether you are better off continuing to rent.
It is worth speaking to an independent mortgage broker to give you the level of detail that is required to assess whether you should proceed or not.