A reader writes:
My husband and I plan to move from the south of England back to the north.
We have found a house, but it is something of a wreck and an architect said it could take six months or more to get it how we want it.
Our current house has a very small mortgage still outstanding, and we planned to increase this to raise cash to buy our new home.
We would remain in the remortgaged house while the building work is done on the new house, then redeem the mortgage in full when we sold up to move.
Difficulty finding lenders
However, we can’t find any lender to help us with this arrangement. Lenders seem to want to lend only for a minimum of two or three years - and only on a full repayment basis.
We could agree to this, but my husband is already 69 and they say the loan would need to end before he turns 70.
If we use only my income to support the loan, the lenders require my pension to support repayments in full. They won’t allow us to remortgage our old house for more than the sum we need for our new house, and use the balance to meet the loan payments.
It seems crazy that we can’t borrow £300,000 secured against a house worth £1.5 million, unless my pension alone covers the monthly repayments.
Read our guide to getting a mortgage after you turn 50.
Annie Shaw replies:
You have been caught out by the brave new world of ‘responsible lending’.
After the Wild West era prior to the credit crunch, when lenders were handing out mortgages at 125% of the property’s value and lending to people who could not afford repayments, the financial regulator now requires that lenders take full responsibility for assessing affordability, under pain of penalty.
This has produced a tick-box mentality with most lenders, who want to cover their backs.
The easiest way to do this is to treat the regulator’s guidelines as rules and never deviate from them.
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Try brokers and specialist lenders
I spoke to a broker, who said it will be all but impossible to fulfil your plan as laid out above.
A different broker may have a contact who might help, but you are unlikely to get any joy from a mainstream lender.
You could take out a bridging loan from a specialist short-term lender, or sell your property first and rent while the work is done.
Bridging rates have come down a lot recently, but bridging is comparatively expensive.
You would also run the risk of costs exceeding your estimates if the renovation work runs over time, or you have problems selling your present home.
While renting has its drawbacks, there are advantages to being on hand while the work on your new home is done, rather than trying to supervise the improvements remotely.
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