i Paper seeking mortgage comments

ended 13. May 2021

A journalist at The i Paper is looking for quick and pithy comments for two mortgage and property articles he's writing….

  1. Furlough and first-time buyers: What are the options for those desperate to get on the ladder following a year of lockdown and its impact on income?
  2. Borrowing later in life: What are the options available to older homeowners who need to extend their mortgage term beyond retirement?

Be short and punchy in your alert_responses. Journalists want soundbites not essays!

7 responses from the Newspage community

"If you are employed and your latest month's payslip does not contain any furlough payments, most lenders will accept your income as normal. If you are still currently furloughed, your options will be significantly reduced and the best outcome will be a lender accepting the equivalent furlough pay as your annual salary, but most will not lend to you at all. "For self-employed applicants the picture is bleaker, as many lenders are still requesting the latest 3 months' business bank statements to see what recent revenue looks like. For many, this is significantly reduced and it is then in the hands of the underwriter as to what level of income they are prepared to consider, if any. "Later life lending is becoming more of a mainstream transaction as the age of borrowers increases. More and more lenders are entering this market with a refreshing, logical approach to cater for the slightly more complex scenario. "Lenders such as 'LiveMore Capital' have joined the market with great 'retirement interest only (RIO)' products that provide a viable option for over 55s, who would otherwise be disappointed by mainstream lenders."
"First-time buyers now have more options to get on the property ladder than they have had in the past 12 months, especially with the reintroduction of 5% deposit mortgage deals along with the Government-backed initiative to turn generation rent into generation buy. "There is also the new help-to-buy scheme on selected new build developments, along with shared ownership schemes all geared around helping people to get on the property ladder. If first-time buyers are back at work following furlough and have the deposit saved along with the necessary fees to buy their first home, they should speak to an independent mortgage broker, listen to what they say, get all their finances in order along and seek to obtain an agreement in principle to put them in the strongest position when it comes to making offers. This is vital as it's such a competitive market at the moment you need to have the competitive edge over your bidding rivals and being prepared on the mortgage-front can often be the deciding factor. "For homeowners wanting to extend their mortgage beyond their retirement age, there's a number of options. The standard route of equity release is not as bad as many people think; there seems to be a lot of myths and misconceptions surrounding equity release. "Don't make the assumption that you're going to lose all your equity and there's going to be no inheritance to pass along. There are so many new options available it's worth a 10-minute initial chat with a good quality local equity release adviser. "Other than that there are RIO (retirement interest only) mortgages where you service the interest rather than repay the debt, however these are affordability-based much more like a standard mortgage so you have to be able to evidence sustainable pension income for these types of products and have a plan in the event of needing long-term care. "As with anything financial, it always pays to talk to a qualified trusted local expert."
"If you're a borrower who has returned from furlough, lenders are generally happy to treat you the same as anyone else as soon as you have a full month's normal payslip with no furlough showing on it. "If you are still currently furloughed that's when the going gets tough, but there are still a handful of lenders who will use your income with some further explanation and confirmation of return dates. "The main thing is that all is not lost if you have been furloughed. Brokers have been jumping through the furlough hoop for a year now and a good one will be able to help you obtain a mortgage. Muddling through on your own could prove a pretty thankless task."
"The pandemic has had a huge negative impact on many potential borrowers with lenders being particularly worried about people who have been furloughed. Many lenders will now require a letter from the employer confirming that the job will still be in existence past furlough and that income will not be adversely affected. "We are also seeing lenders being extra strict on borrowers from industries heaviest hit by the pandemic, such as travel or hospitality. It is now common for self-employed clients to have to supply current bank statements as well as accounts to prove cashflow during the pandemic. Laterlife lending has never been in a better place for many borrowers, with record low rates as well as over 5,000 later life lending products available for the very first time. "Homeowners in retirement with an income may well look at RIO (retirement interest only) mortgages where the interest is paid on a monthly basis, or later life products that do not oblige borrowers to make a monthly payment. Either way, independent advice is crucial here."
"Access to Mortgages is not great currently for furloughed workers. Lenders assess affordability on the reduced furlough income and, in many cases, just a percentage of that. "This puts a cap on how much you can borrow. If you have returned to work following furlough, the good news is a month or two later options open up at your full salary. "The new Government-backed first-time buyer scheme requiring just a 5% deposit is great for those who can afford it, but there have been no changes to affordability. You still have to demonstrate the affordability of a 95% loan-to-value mortgage." "This is a step-down on what is available to first-time buyers of new builds who can still access the Help-to-Buy Scheme where affordability is based on 75% LTV but requires just a 5% deposit, with the Government funding the rest."
Matthew Fleming-Duffy, founder: "When borrowing in later life, people now have three main options to consider. The first is a standard mortgage, which extends into retirement, noting that lenders will base their affordability assessment on your pension income and also that the term may be restricted by your age. "The second option is a relatively new proposition, retirement interest-only mortgages (or RIO for short). These work in a similar way to standard mortgages whereby they are assessed for affordability and you will need to make a monthly payment, but they do not have a set term. They run until death or until you enter long-term care. "Finally, there are lifetime mortgages, which fall under the banner of Equity Release. Just like RIO, they do not have a set term but you do not need to make a monthly payment. The potential issue with this is interest is still charged and will compound over the years, which in turn means that there will less cash left to pass on to your beneficiaries."
"It's hard to stomach but those on furlough will face tougher borrowing rules than those who have remained in full employment. Those on furlough should talk to their lender and make sure that they provide a letter from their employer confirming their basic salary, return to work date and any other terms of coming back to work. Many lenders will also have different lending criteria for those on furlough depending on how much they want to borrow - so it's always worth engaging a broker to secure the best deal. "For first time buyers, if scraping together a deposit together is an issue, they may be able to benefit from the Government's 95% mortgage scheme, and may still be able to take advantage of the Stamp Duty holiday. "For those who want to remortgage later in life, lenders will consider what the reason is for extending the term — is it to reduce payments as they are now on pension income? Or is it to release equity to bolster savings? Or something else? Either way, it is important to seek advice. Products such as retirement interest-only mortgages can be an option, but many still carry terms like regular mortgages such as length of payment terms."