Mortgage broker claims - why would it benefit them to over-promise?

[HangerLaneGyratorySystem]

I'm in my 60s with a lump sum from divorce settlement but its not enough to buy anything, not even a 1 bed flat so I need a mortgage of some sort. I've spoken to a mortgage broker who has good reviews, long established local company.

Although I can afford repayments now, I will retire on a state pension, very little savings etc., but this broker is insistent he can get me either an interest only mortgage or a mortgage till I am 80 in order to let me borrow around £100k and keep repayments low. I can extend my retirement date to 75 relatively easily, but I didn't think anyone would lend to me beyond that date, and certainly not to 80, because how will I continue to make the repayments on a state pension?

Two other brokers who charge less have said try to borrow less and only take the mortgage to 75, and quoted very high repayments that I can't afford now (let alone when I retire!).

How on earth do I know who is giving me the full picture? (All this people charge, all whole market brokers)

Try habito or L&C mortgages, they do not charge a fee but your broker will be paid by the lending bank but not you. They are quite thorough, realistic in what you can and can't borrow. Up to 75 is not normal, usually up to retirement age 67/68. Up to 80 yoa is usually for buy to let's etc. good luck 🤞

just having a little bump for lunchtime in case anyone else can add anything? thanks

This sounds like far too much financial pressure. Have you looked at living in another area when you retire?

Santander lend up to 74 if that helps

Would it be possible to borrow now to buy something whilst you are working and then sell it and downsize to a cheaper area when you stop working? I dont know if the maths would work? Have you looked at over 55/60 properties they are often cheaper or shared ownership options? Maybe pension credits would kick in to top up the rent part post retirement? Would Citizens Advice have some insight?

Hi all yes my original plan is very likely going to mean I buy now, have it 5 years see how things are then when I am nearly 70, then sell up if needs be, see where DC are I could move areas.

My question was about why brokers would tell me I can do X Y and Z when it seems unlikely, and how do I chose a good one?

That's been the top one on all their lists so yes, seems like a prime candidate to lend.

It might be more prudent to rent for these 5 years and invest in stocks and shares as 5 years is a very short time and the sunk lost costs of buying and selling (plus cost of interest) might well leave you at a loss unless there is a big boom in what you buy. Maybe a finacial advisor could run the numbers for you.

You might well get UC towards rent whilst you work?

Thats a very fair point @Mudsludge but no, won't get UC - I don't have any entitlement and I don't earn enough to rent a flat - I'm currently paying towards rental from both my salary and the equity, so that's going down. I've also been given one (no fault) eviction already so it feels very precarious. But I had already realised that I could earn more in interest on my capital if I invested it, than if I saw an increase in the value of a house/flat. Its a very difficult situation.

I’d imagine if they are charging you, they will get you to appoint them, sign the contract and then tell you that you don’t actually meet the affordability criteria for that product and then sell you the same product that everyone else is offering

Would you be open to Equity release OP? That way you could either do interest only or even roll up of interest if you wanted.

I used to work for a mortgage broker and a traditional mortgage with interest only sounds unlikely to be honest unless you have a very good income/ a plan for the repayment at the end. Some lenders don’t have upper age limits but work on a case by case basis but 80 would seem unlikely if you’d not be able to afford the repayments with your pension. I haven’t worked in the industry for some time though and am not qualified, it might be that the mortgage broker is aware of certain lenders and products that the others are not. My old boss was extremely knowledgable and wouldn’t make claims unless he was pretty sure. Do all the brokers you’ve spoken to have access to whole of market?

Sorry op, I’ve just seen that you have said they are whole of market brokers. Are their fees payable on completion?

@PeanutCat1 we had interest only when married which has caused us to sell the house with very little equity in it so I was dead against it, but one broker has strongly recommended it saying interest payments would be around £450 a month which is great, I can then save quite a bit. I'd still have to sell at some point, but I just find it very hard to believe I'd be given an interest only mortgage - as @Sagepage says above, sounds like these brokers will charge me and THEN say oh no it didnt work out, you didnt get the mortgage - bye.

@PeanutCat1 - no, payable in advance. As you say interest only might be an option (I thought equity release was for someone who owned a house already?). I've googled the roll up option - that seems to just build debt for the future? I don't want the DC saddled with problems. Good to know about though.

So it is definitely possible to purchase a property with equity release, obviously the lender would want to ensure you can afford the interest only payments but because it’s a lifetime mortgage you dont need a repayment plan as such which would cause you to sell etc. You could do interest only equity release and then if you decide to move in a few years time your could either port that to a new property or sell and repay and then buy something.

Roll up would eat up your equity in the property, there would be a no negative equity guarantee but that could mean that your sons might not inherit anything from you.

There are lots of brokers who only charge on completion which is something I would be looking for personally, I wouldn’t want to be paying in advance if they can’t find you something you’re happy with.

I think there might also be over 55’s interest only options that have a set term which could be worth looking into but I guess the issue is also that at the end of term you would need to repay so you could end up in the same position that you’re in now, at least with the equity release you don’t have to worry about the term coming to an end.

What mortgage lenders are prepared to do these days is becoming silly. When I heard how much NatWest were willing to lend us last year, my jaw hit the floor - it was 5.3x my partner's salary on a single income household. And we're not young either.

I think it's plausible that these mortgages exist, but I've no idea how they expect you to pay past 75.

Motives? Hmm. Sometimes brokers work with lenders they prefer, ones they know give them an easy time of it. Almost all brokers seem to default to Nationwide, for example.

But it could be that they get a financial incentive if they sell x number of this type of mortgage by y date.

As to mis-selling to you to then say 'sorry, computer says no', that would raise some serious eyebrows with their regulators. Idk that any reputable broker would do it.

I would pick up the phone to L&C, who are free, and say 'others are offering me this, can you explain why? what are the cons?'

They're only paid by the lender.

Paid brokers are paid by both the lender and the borrower.

ps: I bet the lender is Skipton. They seem to be the ones with the most broken moral radar, from my observations over a couple of years.

Interest only mortgages are on the decrease, possibly because people have to sell up and move eventually, (like you did) because they’ll never own the house. You used to see them advertised a lot. Hardly ever now.

Can you move just over the border into a cheaper county?

@RentalWoesNotFun not sure if you say that because I'm on a thread saying I currently live in Dorking, but I'm actually from North Kent, which is cheaper. However, even if I spent a bit less, the issues around the mortgage remain.