Boost for older borrowers
A growing number of high street lenders are agreeing to increase the threshold for lending into retirement to 80-years-old and beyond.
The Nationwide Building Society has increased its upper age for mortgage maturity from 75 to 85 whilst Halifax and Scottish Widows have raised their thresholds to 80.
Barclays, NatWest and Royal Bank of Scotland have an upper age limit on mortgage maturity of just 70. And the Nationwide improved age limit is only for 'existing customers with retirement income'.
Those existing mortgage customers will be able to take advantage of the rise in the upper limit for buying a new home, taking a further advance on their current mortgage or remortgaging as long as the borrower has a deposit or equity of 40 per cent. The maximum loan size will be £150,000.
Halifax and Scottish Widows - both part of Britain's biggest mortgage lender Lloyds Banking Group - also announced plans to change mortgage rules, meaning that for new mortgage applications the term would be allowed to run until the borrower's 80th birthday. Halifax says the move is a response to changing demographics, with people living and working for longer.
When mortgage terms extend past the borrower's life expectancy, the lender usually takes the approach that if the borrower dies before expiry of the mortgage, any outstanding debt balance will be claimed against the borrower's estate.
Or the loan provider can require a 'guarantor' such as a borrower's child to be included as a lending condition. A deposit account can be opened with that lender and a standing order or debit mandate set up in the name of the actual borrower and their younger adult child so if the borrower dies, the younger borrower becomes liable.
The benefits of such schemes are that unlike equity release, the lender will make it a lending condition that interest payments are paid every month so no deferred interest rolls up.
Mortgage brokers advising potential new lender are to recommend making it a condition of lending that all applications taken from borrowers over the age of 80 have to take independent legal advice and involve a family member in the loan.