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Last Updated: Thursday, 3 March 2005, 23:23 GMT
Ask the expert: Mortgages and age
Duncan Pownall
Mortgage adviser Duncan Pownall

BBC News website's Ask the Expert column gives readers a chance to have their financial questions answered.

This week Bradford & Bingley mortgage adviser Duncan Pownall helps Your Money reader Mark Bellamy.

Mr Bellamy and his wife run a bed and breakfast at their home. They would like to borrow 50,000 to fund an extension.

They do not have an existing mortgage on the property, but are concerned their age could make it difficult for them to get a loan.

Mr Bellamy is 63 years old and his wife is 58 years old.

Duncan Pownall writes:

As a general rule of thumb, mortgage lenders would like to see the mortgage repaid by the time you reach pensionable age, which is currently 60 for women and 65 for men.

However, this rule is often more flexible when applied to self-employed people, such as yourselves, because of the simple reason that your retirement age is less likely to be set in stone.

DO YOU HAVE A QUESTION?

Most lenders these days are happy to lend to older borrowers, providing they have sufficient pensions and investments to keep up with mortgage payments.

The lender will give you the option of either a repayment or an interest-only deal.

If you opted for an interest-only loan, then you would need to ensure there was a suitable way to repay the underlying debt when the mortgage period - typically between 10 and 26 years - comes to an end.

There are schemes available that allow you to take out an interest-only mortgage for longer.

Although monthly payments would need to be made, there is no requirement to repay the underlying debt as it would be paid from the proceeds of your estate on death.

This may have implications for inheritance tax and separate specialist advice should be sought if you are concerned about how such a loan would affect your estate's value.

It was not clear from your e-mail if you require the money to extend your home or enhance your Bed & Breakfast facilities.

It is important to remember that, in general, lenders typically do not like money raised from releasing equity on a home to fund business interests.

If you need the money to build extra bedrooms for the B&B, you may need a commercial loan. If you need the 50,000 for additional living space, then you should need a residential mortgage.

Your first step should be to consult a mortgage broker with details about your property and business.

They will then advise you whether it is a residential or a commercial loan that you need.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.



ASK THE EXPERT

 


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