It has typically been the policy of most major lenders to issue mortgages only to those able to repay the balance in full prior to their retirement. As of late, lenders have been acknowledging the UK’s skyrocketing average life expectancy, along with the desire of more people than ever before to work well into their 60s or 70s.

Consequently, more than half of all new mortgages issued are being allocated to borrowers who will still be repaying their debts after their 65^th birthdays. That’s according to new figures from UK Finance, which indicate that 52% of new homeowner mortgage lending activity involves borrowers planning to continue repaying long after turning 65.

The UK’s ageing population is spurring an inevitable shift in attitudes towards mortgage lending, reports UK Finance.

Growing demand from older applicants

The report from UK Finance indicates that this is the first time more than half of all new mortgages issued are going to those who will still be repaying their home loans after their 65^th birthday. Demand for mortgages among applicants aged 55 and over has been growing significantly for several years.

In 2014, less than one-third of all mortgages issued went to applicants who would complete their repayment obligations beyond the age of 65.

Speaking on behalf of UK Finance, director of mortgages Charles Roe said that the trend was only likely to continue gaining momentum indefinitely.

“There’s been growing demand for mortgages from those aged over 55, and this is set to continue as more people live and work for longer,” he said.

“For the first time since records began, more than half of all new mortgages are due to end after the homeowner’s 65th birthday, and lending to over-55s has grown even where mortgage lending in the wider market has remained subdued.”

“Later life lending, both now and in the future, will be imperative as existing homeowners look to later life products for accessing equity as they get older.”

Equity release products have also seen unprecedented demand from homeowners across the UK. However, decisions regarding equity release should only be reached after enlisting the support of an experienced broker or financial adviser.

While attitudes towards finance in later life are changing, the potential consequences associated with secured borrowing must always be carefully considered.

“UK Finance’s findings underscore the integral role that later life lending plays in consumers’ long-term security,” commented the chief executive of the Equity Release Council, Jim Boyd.

“Attitudes towards home finance in later life have changed, and homeowners are increasingly comfortable with mortgage borrowing into retirement and open to the benefits of realising some of their property wealth as they age.”

“Property wealth can play an important part in a holistic approach to funding retirement, and, as an industry, we must work together to ensure consumers get the information they need to weigh up increasingly complex financial decisions to do this.”

 

Purchasing any residential property with the intention of letting it out can be an appealing prospect. In the UK, estimates suggest there are now approximately 2.65 million landlords operating within the private rental sector.

Does this mean that buy-to-let is the right choice for you?

Before making any major decisions regarding BTL investments, it is important to ensure you understand the benefits and drawbacks of becoming a private landlord.

What is buy-to-let?

The term ‘buy-to-let’ is used when an individual or business invests in a residential property to be ‘let’ out to tenants.

Rental properties are purchased using a specialist mortgage, which differs from a conventional home loan by way of both qualification criteria and overall borrowing costs.

Buy-to-let investments generate profits through monthly rent payments from tenants, which cover the costs of the mortgage and leave at least a small amount left over. Depending on the type of property and its location, rent yields and profits can vary from modest to exceptional.

What are the advantages of buy-to-let property investments?

The biggest benefit of BTL is its potential to generate a regular source of income for the owner of the property. Typically, rent is charged at a rate that not only covers the monthly mortgage payment but also all potential maintenance requirements for the property.

Buy-to-let property owners may benefit significantly from capital growth over time. Average UK house prices have been skyrocketing for some time and are predicted to continue doing so indefinitely. However, again, gains by way of property value increases vary significantly from one property type and location to the next.

BTL investments are considered among the simplest and quickest to exit, should it become necessary to do so at some point in the future. With demand for desirable homes at an all-time high, investors rarely encounter any difficulties selling their BTL properties for their full market value.

What are the disadvantages of buy-to-let property investments?

On the downside, qualifying for a buy-to-let mortgage is not quite as simple as qualifying for a traditional mortgage. There are higher deposit requirements and more extensive restrictions to take into account with regard to who is and is not eligible.

Interest rates and borrowing costs on a BTL mortgage are usually higher than those of a traditional mortgage. Prospective landlords must also take into account additional costs attributed to repairs, maintenance, and the general upkeep of their rental properties.

While demand for quality rental properties is insatiable across much of the UK, potential gaps between tenancies cannot be ruled out. During this period, the landlord is still required to make their monthly mortgage payments in the normal way, though without the benefit of rental income.

Independent expert advice

Before deciding on any BTL investment opportunity, it is essential to consult with an independent broker to discuss the options available. During your consultation, you will have the opportunity to determine your eligibility for BTL mortgage products and whether your financial situation qualifies you for life as a private landlord.

Call or e-mail anytime for more information on buy-to-let investments or to book your obligation-free consultation with a member of our team.

Medical professionals often run into a variety of unexpected obstacles when looking to apply for a mortgage. From doctors to dieticians to psychiatrists to surgeons, qualifying for a mortgage as a medical professional is not always as easy as it sounds.

With the help and support of an experienced broker, competitive deals can be found through an extensive network of specialised lenders.

Why Medical Professionals Encounter Issues When Applying for Mortgages

The medical profession is typically associated with high earnings potential, so why is it that so many encounter difficulties when looking to take out a mortgage?

1. A complex combination of revenue streams

Medical professionals routinely collect their combined annual income from multiple sources. This could include private practice, locum work, and positions within the NHS. With most conventional lenders, the revenue streams of a medical professional are somewhat fragmented, and you can immediately count them out of the running. Even if their total pay is significantly higher than that required to qualify for a mortgage, the complex nature of their revenue streams could stand in their way.

1. You may be looking to obtain consent to let

Some doctors and medical professionals, particularly those at the start of their careers, may find themselves spending much of their time away from home. In this case, a prospective homebuyer may be considering the option of letting out the property from time to time while they are not using it. In order to let out a home that has been purchased using a conventional mortgage, the borrower needs to obtain ‘consent to let’ from the lender. As this is not a standard facility offered by many high-street banks, alternative financing options may be necessary from specialist lenders.

1. Your work may take you overseas for significant periods of time

For many doctors and medical professionals, a property purchased in the UK can subsequently become a second home if their work takes them overseas for significant periods of time. This is also something that can bring complications into the mortgage application process, should the buyer wish to let out their UK home to private tenants or as a holiday home at a later date.

1. You’re a newly-employed doctor

Qualified doctors and medical professionals who choose to work for themselves are subject to the same restrictions as other self-employed mortgage applicants. This will typically mean providing a minimum of two or three years of tax returns and extensive proof of income in order to qualify for a mortgage. It may also be necessary to offer the lender a higher-than-normal deposit to qualify for the most competitive deals available.

The importance of independent broker support

Enlisting the support of an experienced broker at the earliest possible stage is highly recommended in order to both simplify the application process and pave the way for a competitive deal.

For more information on any of the above or to discuss the mortgage options available for doctors and medical professionals in more detail, call or email a member of our team today.

 

Self-employed workers have always had a tough time qualifying for a competitive mortgage. Today, things are only getting more difficult.

In the wake of the COVID-19 pandemic, lenders are scrutinising self-employed borrowers more intensively than ever before, to such an extent that even having received financial support from the government during the crisis could count an applicant completely out of the running.

This paints a fairly gloomy picture for self-employed workers looking to own their own homes. However, there are steps that can be taken to at least tip the balance slightly in your favour.

While there are no guarantees, each of the following could significantly boost your chances of qualifying for a competitive self-employed mortgage:

1. Provide comprehensive proof of income.

You can expect to be asked for extensive proof of income from the last few years, at least. The more evidence you can provide of income that is both stable and adequate to cover the costs of the loan, the more likely you are to qualify.

You may also need to provide evidence on future contracts, projects, and general assurances of long-term income.

1. Use an accountant.

An application submitted via, or at least endorsed in some way by, an accountant always carries more weight. Banks and lenders instinctively see applications, projections, and financial documents as more accurate and reliable when they come from an experienced accountant.

Even if this means paying for the services of an accountant for a few months, it is a small price to pay for the added credibility they bring.

1. Boost your credit score

Your credit rating will be taken into account as a major indicator of your worthiness for a mortgage. In addition, your credit score will heavily influence the interest rate that applies to your loan if your application is accepted.

It is advisable to do everything you can in advance to boost your credit score. Even just a few extra points added by tidying up your accounts and paying off a few smaller debts could work in your favour.

1. Save a bigger deposit.

The bigger the deposit you are able to provide, the more likely you are to qualify for a mortgage. Again, this is something that will influence the overall borrowing costs of the facility. Larger deposits mean lower-risk transactions in the eyes of the lender, plus a lower sum of money borrowed.

Offering a larger deposit could hold the key to getting your application through the door with many high-street lenders. If pulling together a meaningful deposit is proving problematic, you may need to consider alternative options away from the High Street.

1. Work with an experienced broker.

Consulting with an experienced broker before applying is essential. This will enable you to not only determine your eligibility ahead of time but also begin building the strongest possible case to support your application.

Many of the UK’s specialist lenders offer their services exclusively via broker introductions. As it may be necessary to direct your application to specialist lenders as a self-employed worker, broker support could hold the key to qualifying for a competitive mortgage.

One of the few things all homeowners have in common is the desire to become mortgage-free. However, most mortgage payers simply resign themselves to the fact that they will be tied to their debt and all associated borrowing costs for decades to come.

Not realising they could be needlessly throwing away tens of thousands of pounds.

New figures published by the Homeowners Alliance suggest that the average homeowner now pays around £3,154 in interest each year on their mortgage. Given the average 25, 30, or 35-year mortgage terms, this equates to an astonishing amount of interest paid over the life of the typical home loan.

Both the Homeowners Alliance and the Council of Mortgage Lenders are advising mortgage payers to seriously consider overpaying where possible.

The vast majority of lenders allow mortgage payers to pay over the agreed monthly instalments, either on occasion or on a regular basis. Those who do so often stand to make significant savings by repaying their mortgage early and reducing overall borrowing costs.

According to the Homeowners Alliance, overpaying by just £60 per month can, for some mortgage payers, reduce the length of the mortgage term by as much as three years. Even when accounting for any early repayment fees that may apply, this could still amount to a significant saving.

The higher the monthly overpayment, typically limited to 10% without incurring additional fees, the faster the loan is repaid. Depending on the length of the term and the size of the mortgage, this could equate to tens of thousands of pounds in savings and becoming mortgage-free several years earlier.

Refinancing to save money

Another option that can lead to significant savings is refinancing at the right time. This can be particularly useful for homeowners approaching the end of the initial fixed-rate introductory period.

When the initial two-year, five-year, or ten-year fixed-rate period of a mortgage comes to an end, the loan is automatically switched to the lender’s standard variable rate (SVR). At this point, the APR on the loan could jump significantly, resulting in a much higher monthly payment and significantly greater long-term debt.

Prior to this automatic transition, borrowers have the option of comparing the market to find a better deal from a competing lender. With the help and support of an experienced broker, being switched to an uncompetitive SVR with an elevated APR can be avoided entirely.

Even at a later date, it is still possible to refinance to a more competitive deal and reduce overall mortgage debt by thousands, though the earlier action is taken, the higher the potential for making significant savings.

For more information on any of the above or to discuss the options available for reducing your mortgage debt, contact a member of the team at UK Property Finance today.

 

Once little more than a novelty, the UK’s build-to-let sector is slowly but surely finding its way onto the radars of major investors. In particular, Lloyds Bank has outlined an ambitious plan to build an extensive 50,000-strong BTL property portfolio by the end of the current decade.

Consequently, many private renters across the country could soon see their conventional landlords replaced with banks and businesses.

With available inventory at an all-time low and skyrocketing rents having become the norm, the future private rental sector has never looked brighter, at least for those buying or building properties to rent out to private tenants.

Build-to-let is the arm of the sector where new-build properties and flats are owned and managed by just one landlord after being built to order. Advocates of big business BTL insist that corporate ownership could solve many of the problems faced by renters today, ranging from unacceptable fees to “rogue” landlords and short-term leases.

Announcing its aggressive move into the BTL sector, Lloyds is establishing its own private home rentals subsidiary, Citra Living, with the intention of adding tens of thousands of homes to its property rentals portfolio by 2030.

This one corporate landlord alone would occupy a full 1% of the UK’s total rental stock.

Meanwhile, John Lewis has also outlined plans to build homes to rent out privately as part of its five-year strategy to expand “beyond retail” Specifically, the company said at least £400 million would be invested in new ventures, with the aim of generating 40% of its overall profits from non-retail activities within the next 10 years.

“Entering the ‘build to rent’ market also allows us to furnish properties using John Lewis Home products and deliver Waitrose food,” it said.

How private renters stand to be affected

Some analysts and experts are optimistic about the potential for larger banks and corporations to move into the buy-to-let sector. They believe that by taking control of the market at least partially away from smaller landlords, private tenants may be afforded more protection and rights.

“The hope is that a larger corporate landlord such as Lloyds Bank would have the infrastructure, expertise, and finances to ensure that they comply with their legal obligations, as opposed to smaller and ‘rogue’ landlords, meaning tenants should be provided with the information and protection they are entitled to,” commented Hodge Jones & Allen housing team partner Sophie Bell.

There are those who only envisage problems for tenants and the sector long-term, should the trend of corporate BTL property ownership become popular over the coming years.

By 2030, Lloyds Bank has set its sights on building at least 50,000 homes, which would subsequently make it the single biggest BTL landlord operating in the UK.

“The only upside for consumers is that it may, and I emphasise the word may bring lower rents if there are more properties to occupy,” warned Lewis Shaw, founder of Shaw Financial Services.

“However, the likely outcome is that the opposite will happen; it would be very easy for large institutional investors or lenders to monopolise large swathes of an area and increase prices.”

At the risk of jumping straight to the conclusion, the short answer is sometimes

Comparing a conventional repayment mortgage to an interest-only mortgage is a little like comparing apples to oranges. Both have their benefits and points of appeal, though they are completely different in nature.

For most people, the prospect of taking out an interest-only mortgage does not seem realistic. The idea of being left with a major debt to repay at the end of the mortgage term can be off-putting, and understandably so.

Just as is the case with all financial products, affordability and cost-effectiveness vary on a case-by-case basis.

The difference between the two mortgage types

Roughly summarised, this is what makes the difference between an interest-only mortgage and a repayment mortgage:

• With a repayment mortgage, you gradually repay the full outstanding balance of your mortgage over the agreed-upon term, and at the end of the term, the mortgage is paid off and you own your home.
• With an interest-only mortgage, your monthly repayments only cover the interest. When the repayment period comes to an end, you still owe the lender the full price of your home, i.e., the full outstanding mortgage minus interest.

The latter is considered the most undesirable option; the vast majority of home loans are issued in the form of repayment mortgages. Being left with the full price of your home to be paid when the term reaches completion is a legitimate cause for concern.

This does not necessarily mean that a repayment mortgage cannot be a viable and cost-effective option; it all depends entirely on your financial situation and long-term plans.

Initial vs. long-term savings

A homebuyer takes out a mortgage of £400,000 with a ten-year introductory fixed rate of 2.5% over the course of 25 years. If this loan was issued as a repayment mortgage, they would be paying around £1,795 each month to the lender. With an interest-only mortgage, their monthly payment would be reduced to £834.

The borrower in question would be looking at around an extra £1,000 in their pocket each month, giving them the option to save, invest, or inject cash into their business. At the end of the mortgage term, when the balance of the mortgage is due, they could have accumulated enough cash to cover the debt and pocket a profit in the process.

By contrast, a repayment mortgage would leave the borrower with much less to play with each month but with no final debt to pay 25 years later.

Choosing the right option

Interest-only mortgages are not suitable for everyone. For the sake of simplicity, security, and confidence, most people are better off considering the standard repayment option.

There are instances where borrowers meeting very specific criteria could find interest-only a more economical option.

Consulting with an independent broker before applying is therefore essential in order to ensure you fully understand the options available and which are suitable for your requirements.

 

Nobody takes out a mortgage with the intention of missing payments. Unfortunately, nobody knows what may be around the corner either.

The events of last year reminded the world just how unpredictable things can be at the best of times. For a number of reasons, any homeowner could suddenly find themselves in a position where they simply cannot make their scheduled monthly mortgage payment.

In which case, what happens next?

While it is true to say that a missed mortgage payment can lead to heavy penalties and credit score damage, this is not always the case. It depends entirely on the policies of the lender and how the issue is handled by the mortgage payer in question.

One missed mortgage payment

For example, missing one mortgage payment and having until now paid every instalment on time might not be the end of the world. Just as long as you contact your lender as quickly as possible to explain why you are unable to pay this month, they are likely to show leniency.

If you choose not to speak to your lender and simply fail to pay the instalment, you are likely to incur fees and penalties. In addition, the missed payment could be logged on your credit history if it is not made within 30 days of the agreed-upon due date.

Two missed mortgage payments

Missing two mortgage payments in a row is likely to set alarm bells ringing with your lender. Again, missing a couple of mortgage payments and having contacted your lender to explain your situation may result in no action being taken against you. Contrary to popular belief, lenders would always prefer not to have to chase missed payments and go through the complications of reporting credit issues to the relevant bureaus.

Two missed mortgage payments in a row with no notification could see you facing even heavier penalties, along with significant damage to your credit score. It is therefore essential to contact your lender and openly discuss the issue if you are unable to pay.

Three missed mortgage payments

At this stage, the lender may decide to commence repossession proceedings. You will most likely be contacted several times by phone, after which a formal demand letter or ‘notice to accelerate’ will be sent by post.

This is essentially a final warning, indicating that repossession will take place if you do not settle your debt as quickly as possible.

Four missed mortgage payments

If you allow your debt to escalate and remain unpaid for 120 days or more, your lender will almost certainly provide you with formal notice of its intent to recoup its capital via the appropriate legal channels. Along with the long list of penalties and levies already incurred, you may now also be billed for the bank’s own legal fees.

Even at this late stage, your lender will most likely make every reasonable effort to allow you to keep your home and repay your debt. An agreement could be reached to repay a smaller amount each month until your situation improves, or perhaps take a temporary payment break. Either way, it is the sole responsibility of the debtor to contact their lender at the earliest possible stage in order to avoid eventualities like this outright.