OT: Can retirees get mortgages?

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Has anyone had experience of getting a new mortgage while drawing a pension?

I may be moving house this year and a mortgage would be useful. I'm 60 and "retired" a few years ago but am still earning so have a reliable pension and unreliable other income.

Web searches have turned-up a little bit of info but the few leads I've followed have been time-consuming yet not borne fruit. My guess is that any mortgage would be a repayment type, for a low loan/value ratio, for a maximum of 10 years, and based solely on a multiple of the pension - but it would be very useful to hear from anyone who has already travelled the same road and found which mortgage providers are worth talking to.

[cpvh]

on? I may be moving house this year and a mortgage would be useful. I'm 60 and "retired" a few years ago but am still earning so have a reliable pensi on and unreliable other income. Web searches have turned-up a little bit of info but the few leads I've followed have been time-consuming yet not born e fruit. My guess is that any mortgage would be a repayment type, for a low loan/value ratio, for a maximum of 10 years, and based solely on a multipl e of the pension - but it would be very useful to hear from anyone who has already travelled the same road and found which mortgage providers are wort h talking to.

They could about 10 years ago when my In laws did so. They had a fair ammo unt of equity which was probably a dealmaker. They had an interest only mo rtgage and the reypayment vehicle was a pension with life insurance which t he lender was only too happy to sell them (I think they dealt direct rather than going through a financial or mortgage advisor.)

The other option which it was suggested some might take, was to buy the pro perty on a buy to let basis (mortgages for these were more redily available (at least at that time)) and then just live in it oneself. They felt thi s would be deceitful, and were happy to go down the more conentional route.

[Dave Plowman (News)]

I can't see a problem - assuming you don't want to borrow a high percentage of the property value. All they're really concerned about is getting their money back easily if you default.

[John Rumm]

You would certainly be able to get one of the equity release type mortgage products - either a so called "lifetime mortgage" or a "home reversion plan". Most of them allow scope for moving into the bargain.

[Dave Liquorice]

But if there are any children possibly one way of transferring the asset from parents to children whilst avoiding tax, be that inheritance or otherwise. The children would have to have the buy to let mortgage and rent the place back to their parents, the rent pays the mortgage and up keep.

Taking the house out of the parents combined estate might take them out of inheritance tax completely. IANAL and it would be very wise to get proper advice from a tax specialist. People are always finding "inventive" ways to avoid tax, HMRC are equally inventive in closing the loop holes.

[tony sayer]

But do watch the charges and rates a friend of mine got badly bitten with a scheme like that. Still as others have said if the lender can get their money back if it all goes wrong and you can afford it, someone will do it but prolly not at the best interest rates;!..

[Robin]

HMRC won't care if the children buy a house and charge the parents a commercial rent. But they will of course expect the children to pay income tax on any profit and possibly capital gains tax down the track as the children will not enjoy the PPR exemption.

As for inheritance tax on the parent's estate, the only saving I can see is any capital gain on the property. The parents would retain any capital they would otherwise have put into the house. Of course they could spend that capital - ie treating the exercise as an equity release scheme. But like most such schemes there are potential drawbacks - eg if the parents later want to move to a smaller place and the children don't want to trigger a capital gain and fund that new property; or if the children just decide they feel like an Aston Martin or Ferrari and give the parents notice to quit.

At the very least I'd recommend the parents talk to a trust and estates lawyer before DIY-ing a potential quaker.

[John Rumm]

For these products look for vendors who are members of SHIP (Safe Home Income Plans) IIRC - that guarantees minimum standards of protection and limits on fees etc.

[bert]

..And probably charge a higher rate of interest.

[Nightjar]

According to Which?, a home reversion plan for a 65 year old would involve surrendering around 70% of the value of the house in return for a payment of 20% of its value. That does not sound like a very good deal to me.

A lifetime mortgage seems to a somewhat better option, if you want the money for yourself, rather than leaving it in your estate (which could tempt me) but they are still very much slanted in favour of the lender.

Colin Bignell

[John Rumm]

Unless one's life is "impaired" then they are generally better deals if you are older.

Probably most attractive if you have no one to leave the house to.

[David.WE.Roberts]

I am about to finalise a mortgage whilst drawing a pension.

A pension is income like anything else - in fact more solid because you could lose your job but are very unlikely to lose your pension.

Mortgages normally do not run beyond age 75 so you would either be looking at a 15 year repayment mortgage, or possibly interest only if you have a RELIABLE repayment vehicle.

We are going with the Halifax because about 3-4 months ago when we were arranging everything they showed up as the best deal for us.

Very impressed with Which? Mortgage Advisers - they located the Halifax mortgage then told us that if we went direct (not through a third party broker) we would get a better deal. Thus doing themselves out of commission but getting us the best result.

You will have to do a budget questionnaire to prove affordability - you won't get a mortgage if you already spend all your pension and more :-)

Summary: pension should not be an issue.

Cheers

Dave R

[newshound]

Timely and interesting, thanks for posting

[Dave Liquorice]

The key words being "commercial rent". And they have to actually pay it, rather than just have it in the renatl agreement prefixed by "on demand" and accidentally forget to "demand" it...

If there is any.

CGT would require there to be a CG and that to be over the general CGT allowance, which for 13-14 is £10900.

Which could be considerable. My parents bought the house we were all dragged up in (and some of us where born in) for £2,600. Not sure what we sold it for but sneaky feeling it was around £180,000.

You used to be able to "gift" things and get taper relief over 7 years. But HMRC took exception to that and closed the larger loop holes. I *think* you may still be able to do something along those lines.

Quite agree, there are far too many mines in this particular field.

[Nightjar]

On 06/02/2014 22:42, Dave Liquorice wrote: ...

It still works that way, although it can be complicated if the total value of the gifts in the past seven years exceed the inheritance tax threshold. You are also allowed to give away up to £3,000 in any one tax year (or £6,000 over two consecutive tax years) and you can make any number of small gifts, not exceeding £250 per person.

These gives full details:

Colin Bignell

[stuart noble]

IME inheritance tax is pretty straightforward. Give it away and live another 7 years is the only way, and the term "give" is strictly interpreted. The bloke who gave his art collection to his daughter, but was able to "enjoy" the pictures when he went to Sunday lunch, apparently fell foul of their definition.

[blank]

Thanks, that's very interesting. OOI, since posting I've had a chat with a broker who said they could get a 2 year fix at around 1.9% or 5 year fix at around 3%, valid to age 75, but I don't know yet who it was with.

[Peter Johnson]

Santander won't be interested in any loan that continues after the borrower reaches 75.