55+ Mortgage case studies

The Lewis’s - Gifting to family

Mr & Mrs Lewis are aged 69 & 72 and have no mortgage currently on their existing residential property. Their children have left home but they want to raise £195,000 as a gift for one of their children and help them purchase a residential property. The property is currently valued at £350,000 and they want a mortgage term of 20 years.

They have chosen downsizing as their preferred repayment strategy, with them planning to move into a smaller property in the same area at the end of the mortgage term.

Both Mr & Mrs Lewis are still working stating they plan to do so until the age of 80. They are earning a combined employed income of £19,000.

The applicants are both drawing state pensions and also in receipt of private defined benefit pensions of £11,000 & £13,000 respectively, which both have 50% spouse benefit. Additionally Mr & Mrs Lewis have combined cash savings of just over £200,000.

The 55+ mortgage could be offered for the loan amount requested, providing flexibility to release equity to assist a family member, as well as enabling them to retain savings they have accrued for their retirement.

Why does this case work?

  • Ages qualify because youngest borrower is 69 and a term of 20 years takes them to 89 which is within the 55+ mortgage criteria age range (based on the youngest borrower).
  • Downsizing is an acceptable strategy because there is over £150K equity left in the property after the loan has been taken out.
  • Affordability works because both Mr & Mrs Smith have a good amount of income having both employment and retirement income, the defined pensions have a 50% spouses benefit on each meaning they could continue repayments in the event of their spouses demise.
  • As they both undertake part time administrative office based duties in their business roles we would consider it acceptable for them to work until age 80 and therefore can take this income fully into account when assessing affordability.

The Smith’s - Replacing interest only borrowing

Mr & Mrs Smith are aged 78 & 63 and are coming to the end of their interest only mortgage term. They want to borrow £80,000 on their property, to enable them to clear their existing mortgage and clear some unsecured borrowing. The property is currently valued at £240,000 and they want a mortgage term of 30 years.

They have chosen downsizing as their preferred repayment strategy, as they wish to remain in their existing property for as long as they are able, in order to remain close to family.

Both applicants are currently retired with Mr Smith in receipt of a full state pension and Mrs Smith due to receive a full state pension at 65.

Additionally Mr & Mrs Smith are in receipt of private defined benefit pensions for £25,700 & £15,000 which both have spouse benefit of 50%.

The 55+ mortgage could be offered for the loan amount requested providing them with the flexibility to continue interest only mortgage payments and to remain in their current property and remain around their family.

Why does this case work?

  • Ages qualify because the youngest borrower is 63 so a term of 30 years takes them to 93 which is within the 55+ mortgage criteria age range (based on the youngest borrower).
  • Downsizing is an acceptable strategy because there is more than £150K equity left in the property after the loan has been taken out.
  • Affordability works because both Mr & Mrs Smith have a good amount of pension income from both state pension and defined pensions with a 50% spouses benefit meaning one could afford repayments in the event of their spouses demise.

The Jones’s - Max loan to value

  • Mr & Mrs Jones are aged 75 & 66, both self employed in administrative positions for a London firm that they own and run, they are both still working and intend to retire at aged 80. With an outstanding mortgage of £100,000 the Jones’s wished to borrow £500,000 in order to clear their existing mortgage and also £50k of existing debt, along with gifting the remains to their children for property purchase. Their property is currently valued at £1.1 million, they requested a 5 year term on a 2 year fixed rate of 3.49%. They have chosen downsizing as their preferred repayment strategy, as they wish to remain in their existing property for the next 5 years and will then look for something smaller.
  • Both applicants earn self employed income £105,000 (Mr) and £35,000 (Mrs), on retirement both will receive a full state pension and they are also in receipt of combined rental income of £33,000 per annum most of which is currently paid to Mrs Jones.
  • The 55+ mortgage could be offered for the £500,000 loan amount requested providing the Jones's with the flexibility to pay off their mortgage and debts and so be better off month to month financially, whilst also providing an early inheritance and the piece of mind that their children are able to get onto the property ladder thanks to their help.

Why does this case work?

  • Income is acceptable as both Mr & Mrs Jones have good levels of self employed income, with Mrs Jones receiving the majority of the rental income on top of her salary, meaning the case remains affordable for both customers for the 5 year term requested.
  • As both Mr & Mrs Jones undertake administrative/office based duties in their roles, we consider it acceptable that they could work until aged 80 and can therefore take 100% of this income into account.
  • Downsizing is an acceptable strategy because there is more than £150K equity left in the property after the loan has been taken out. As the property was worth over £1 million it was referred to property underwriters who were able to confirm its acceptability.
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