We were approached by a couple in their early 60s, both in full-time employment, whose interest-only residential mortgage was due to expire.
Due to their age, their current lender was unable to offer a new facility and had asked that the remaining balance be repaid.
Unable to make the full repayment and not wanting to down-size, the couple asked us to help them remortgage and had requested that they remain on interest-only terms, keeping their monthly payments low.
With combined gross earnings of less than £75k pa, it would not be straightforward to obtain interest-only terms up to the level of borrowing that the clients required. Furthermore, both clients are already aged 60 or over, which again limits the availability of interest-only finance.
We took the case to a lender that offers interest-only terms up to age 70, and quickly obtained an agreement in principle. The valuation, however, came back lower than expected, which increased the requested LTV to 64%. The lender applies a cap to interest-only borrowing at 60% LTV, so the mortgage had to be restructured to part interest and part repayment.
Despite this, the terms offered still resulted in much lower monthly repayments than their existing facility. The couple were more than happy to proceed under the new terms.
Property value: £530,000
Loan amount: £336,000
Term: 7 years part & part. £318,000 on interest only and £18,000 on repayment.
Mortgage payment: £663 pcm
Previous monthly payment: £1,204 pcm
Lender arrangement fee: £999
Consultant: Erin Gallacher, 01625 416392
9th May 2017