Posted on 18 August 2011 by anne
We are 67 with an annual income £18,000 per year. Our house is worth £380,000. Could we get an interest only mortgage of £40,000, we intend to downsize in around 5 years?
There are several hurdles to overcome, but I think that we should be able to arrange the mortgage that you want. Lenders have increasingly restricted both the maximum age at which you can apply for a mortgage and the maximum age they will let that mortgage run until, at the same time they have severely changed the terms on which they are willing to offer interest only mortgages. There are now only a handful that will allow you to use the sale of the property as the method by which you will repay the mortgage with most relying on ISA's, long term investments or pensions to provide the funds for repayment.
Any mortgage application will depend on your own personal circumstances, including how your income is derived and whether or not that income is sustainable throughout the mortgage term. The last thing a Lender will want is the bad publicity associated with repossessing a pensioner and making them homeless.
If it does prove impossible to arrange a 'normal' mortgage then it may be possible to arrange an equity release home loan. These are interest only but instead of making a monthly interest payment the interest is rolled up and not repaid until the property is sold. This can make quite a dent in the amount of capital/equity that you then have available to downsize or leave to your estate. This type of mortgage should not be entered into without independent legal advice.
I believe we can help you and that you would benefit from speaking to one of our independent mortgage advisers. Please call 0344 346 3672 and tell the consultant the date and title of your question, they will then be able to advise you on your situation.
Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.
We recommend you seek professional advice with regard to any of these topics where appropriate.