Empowering Financial Solutions for Seniors: Our Collaboration with Prescoll Associates Ltd.
At NAAP Accountants Ltd, we believe in extending our expertise to serve all members of the community, including seniors aged over 70. To achieve this, we have proudly partnered with Prescoll Associates Ltd, a reputable financial consulting firm with a shared commitment to empowering seniors in obtaining loans and exploring various borrowing options.
We understand that financial needs and opportunities continue well into the senior years. However, navigating the complexities of loans and borrowing can be challenging, especially for those who have retired or are on fixed incomes. Our collaboration aims to bridge this gap, ensuring that seniors have access to reliable and tailored financial solutions.
Homeowner loans and borrowing options for the over 70/s.
Once you reach age 70, your loan options begin to change. That is not to say that it is impossible to obtain a loan if you are over seventy. but it is worth understanding how age can affect borrowing.
While most lenders impose maximum age caps, this will depend on who you approach. What is more, there are lenders out there specialising specifically in later-life loan products and we are here to point you in the right direction.
This guide will explain the impact of age on loan applications, how your options vary over time, and an overview of specialist retirement loan products. Our guides to equity release and lifetime mortgages are also available for more in-depth information.
Why does age impact remortgage eligibility?
As you get older, you start to pose more of a risk to mainstream mortgage providers, which is why it can be trickier to secure a loan later in life. Why? This is usually down to either a decrease in income or your state of health, often both.
After you retire, you will no longer be receiving a regular salary from your job. Although you may have a pension to fall back on, it can be difficult for lenders to know exactly what you will be earning. Your income is also likely to decrease, which can affect your affordability.
Older people are also at greater risk of developing health problems and are less likely to survive the full term of a standard 20/25-year loan, which can further inhibit eligibility. Maximum loan age limits are in place to help mitigate this.
What other factors affect loan eligibility if you are retired?
As with any standard loan, there are factors that can further impact your eligibility. For retired borrowers, the most significant issues after age centre around affordability, term length, and loan to value (LTV).
How affordability changes with later life lending:
Affordability is always crucial to mainstream lenders’ eligibility assessments. If you do not have sufficient evidence to prove you will be able to make your repayments each month, chances are you will not be approved for a loan. We however have plans available whereby affordability is not a factor in our decision making.
If your loan term runs into your retirement years post-retirement, lenders may cap the length of the loan term and/or ask for you to demonstrate that your pension will be sufficient to continue the repayments.
Most lenders will assess your affordability by calculating your debt-to-income ratio (DTI), which is your monthly outgoings divided by your gross monthly income. From there, they will usually cap your loan at 3/4.5x your annual income although depending on your circumstances this could change.
The maximum mortgage term length for retired borrowers:
As established, UK lenders have age limits for lending. One of these caps is a maximum age for taking out a loan (typically between age 65/70), and another for paying them off (usually between ages 80/85). We have loans available regardless of your age.
This directly correlates with term length eligibility. For example, if you are looking to take out a loan at the age of sixty-five it could be difficult to find a suitable lender, and if you do, they will be unwilling to lend on a 25/30-year term, as you will exceed most lenders’ upper age threshold part-way through.
With our help, we will be able to find you a lender from our handful of specialist and niche lenders who are willing to make allowances, and tailor the loan and the terms to match your exact requirements.
Property loan to value for retired borrowers:
Loan to value or ‘LTV’ measures the relationship between the loan amount you require and the market value of the property you require a loan for. The lower the LTV, the greater your choice of lenders and the more competitive interest rates you will be offered as with any standard mortgage application.
Other factors impacting later life lending eligibility:
There are additional factors that can create more obstacles for later life borrowing, such as the type of property you are offering as security and issues surrounding your credit history. a ‘non-standard’ construction type due to the risk associated with such properties.
If you are unsure as to what constitutes a non-standard property, why not contact us for free advice? Likewise, you pose a higher risk if you have a history of adverse (especially recently) or a poor credit score, which can inhibit your chances of approval or limit your options, although we have access to specialist lenders who will still consider your application.
What is the maximum age for mainstream loans?
There is no getting around the fact that age can count against you when it comes to getting a loan. Regardless of your circumstances, your options are more limited as time goes on.
Loans for over 60s: When you are in your sixties, options are more limited. As you approach retirement, you will certainly be asked to provide evidence that the income from your pension and any other investments will be adequate to cover your repayments if you want to take out a new loan.
Loans for over 70s: It can be difficult, to get a loan in your seventies. You may only be eligible for shorter term lengths of up to 10 years, although you could consider going down the guarantor mortgage route if you have a willing family member. That being said, lenders are more flexible than others, and based on your other circumstances specialist and niche lenders may have a wider range of options available.
Loans for over 80s: While options are far more limited for the over eighties, we work with a handful of specialist and niche lenders who will consider lending to you based on the equity available within your property. No other criteria are will be applied.
Options: What types of loans are available to the over-seventies?
(1) Lifetime mortgage. A lifetime mortgage is a form of equity release that you are eligible for once you are eighty. It is a mortgage secured on your property, provided it is your main residence, but you retain ownership. You can choose to earmark the value of your property as an inheritance for your family. The loan amount and any accrued interest is paid back when you move into long-term care or when you die.
(2) Home reversion. This is also a form of equity release, except that in this case you sell part or all of your house to a home reversion provider in return for a lump sum or regular instalments. A home reversion allows you to continue living in the property until you die, rent-free, on the condition that you keep up maintenance and insure it. You can earmark a percentage of your property for later use, for inheritance.
The percentage you retain will always remain the same regardless of the change in property values unless you decide to take further cash releases. At the end of the plan your property is sold, and the sale proceeds are distributed according to the remaining percentage of ownership.
(3) Guarantor Loan: A guarantor mortgage is one in which a relative or specialist company agrees to assume responsibility for a loan should the borrower be unable to repay it. Guarantor often uses their own home as security for the borrower’s mortgage. This can be a high-risk option for the guarantor.
(4) Retirement interest only mortgage. These are similar to standard interest only loans, except that the loan is usually only repaid when you die, move into long term care, or sell the house. To be eligible for this kind of loan, you only have to prove that you can afford the monthly interest repayments. While there is no minimum age requirement, these are aimed at older borrowers, who might find them easier to qualify for than a typical interest only mortgage.
(5) Downsizing and investment plan: This option is favoured by our clients. A property with a large amount of equity is of no practical use to a homeowner if they cannot afford to live the remainder of their life in relative comfort. You should look at this option as downsizing your home to upgrade your life.
By selling their current home and moving to a more suitable property you can achieve your aims and secure their financial future. Why should you struggle financially every day when you have better alternatives available to you.
A recent case study: Current owner, widowed male, 85 years old, owned a property in London valued at £2.35M with no outstanding mortgage. His sole income was a pension of £870 per month. He struggled every week just to make ends meet.
Solution: The property in London was sold for £2.25M and a more suitable 2-bed new build ground floor apartment with rear garden was purchased outright for £500,000. The property is less than half a mile from his previous home. This is important as the client never lost touch with the area, he had lived in for over fifty years.
The new property is manageable, easy to maintain, and has all the latest equipment and modern conveniences to make our client's life much more secure. The remaining monies were invested on our client’s behalf to earn a tax-free monthly income that the client required. Our client now has a quality of life he never thought possible.
(6) Equity based Loan: This is a popular plan and is available to all homeowners aged sixty-five and over. Criteria for the loan you require is based solely on the equity available in your property. There are no affordability calculations, age considerations, no credit checks required, and no monthly payments to make.
Loans are available from a minimum of £50,000 up to £10M. We can normally complete these transactions within a brief period of time.
(7) Lease extension Loan: Do you own a short leasehold property and want to extend the lease but do not have the funds available? Extending the lease can increase the value of your property considerably and make the property more marketable. We will fund the purchase of the extended lease up to 100% of the cost including legal fees. Further details on request.
(8) Individual to Ltd Company Loan: Should the client wish to arrange a remortgage or loan secured on their property, but circumstances dictate this is not possible, because of age, income requirements, credit checks, or any other reason this plan is ideal for you. We can arrange a remortgage or loan from £50,000 up to £10M.
There are obvious advantages to this plan. No age barriers, no affordability or credit checks and no monthly payments. Further details on request.
Fees and charges.
We do not charge upfront fees. However, all applicants will have to have their property valued by a (RICS) Royal Institute of Chartered Surveyors valuer. You are responsible for the cost of the valuation.
Loan term. We offer loan terms to suit all applicants' requirements.
Am I eligible for a loan if I am on a disability benefit or other forms of age-related benefits? Benefits are considered a valid form of income. Therefore, a loan application for someone on benefits is not treated any differently from an application where someone services their loan with other forms of income.
The bottom line:
Over-70s are perfectly entitled to take out a loan. It is treated with more caution by mainstream lenders but not by our specialist and niche lenders.
Our team of experts has access to a wide range of specialist lenders, as well as more niche providers specialising in later life lending, so we are confident that we will be able to secure you a competitive deal that works for you.