Mike Walters, Head of Sales – Mortgages and Bridging

Moving home can be stressful. Anyone who has been through the juggling act of keeping a chain of buyers and sellers happy and then moving all your worldly possessions out of one place and into another on the same day, will confirm it can be a waking nightmare…

…It’s bad enough when you’re a reasonably fit and healthy 40something. Imagine what it’s like if you’re elderly or infirm.

It’s great of course that many of us now live to a ripe old age and for those that can manage it, maintaining your independence is as important at 70 as it was at 17. Downsizing from the family home to something a bit easier to look after is a sensible step for our senior citizens. If only the moving house part wasn’t so daunting. The good news is that older people, and their children who often help to make the transition easier, have several financial options at their disposal to reduce the stress of moving.

Bridging finance, second charge loans and UTB’s new Mini-Mortgage can all be employed to remove the need for a downsizer to sell their existing home before purchasing their next one. Although they can’t completely remove the hassle of dealing with estate agents, sellers, purchasers and solicitors, being a de facto cash buyer in these circumstances has several advantages. The additional clout of being a cash buyer can often mean getting a great deal on the purchase price and they’ve also got less chance of losing the property to another buyer during the buying/selling process. A big advantage is being able to avoid that manic moving out and in day when everything has to happen at once. For an older downsizer, the opportunity to move at a more leisurely pace may make the prospect much more appealing.

If the downsizer’s own home has sufficient equity to fund the new home purchase, bridging can be a quick and straightforward solution. Cash can be available within days of the application if required enabling the borrower to strike when they find the right new home. The term is usually up to 12 months giving plenty of time to complete the move and if interest is rolled up on top of the loan there are also no repayments to make and no affordability tests to pass. The entire loan plus interest and charges is simply repaid once the home is eventually sold.

If the downsizers prefer greater flexibility over the repayment term and like the idea of a mortgage more so than a bridging loan, our new Mini-Mortgage might suit them better if their existing home is unencumbered. The maximum loan size is £100,000 which may be enough to secure their next home if the purchase price is low or they’re adding the Mini-Mortgage to other savings. The maximum age upon completion of the mortgage term is 85 and with no early repayment charge the borrowers can redeem the loan before the full term without penalty if it suits them. If their existing home is already mortgaged, but they have sufficient equity, they can also look at a second charge loan, although with both the Mini-Mortgage and the second charge the borrowers would have to meet affordability criteria.

Sometimes it’s the downsizer’s children who take on the financial responsibility of arranging a reduced stress move. Bridging is still an option if the equity is available in their own home but recently we completed a £310,000 second charge for a couple funding one of their parent’s downsize. The longer term of a second charge loan increases the flexibility for the borrowers and even if they do decide to repay quickly, like the Mini-Mortgage, our second charges don’t have an early repayment charge so there’s no penalty even if they only have the money for a few months. The higher maximum loan size of £400,000 for a second charge loan means it might provide enough funds to buy the future property outright and may be suitable for borrowers who already have a first charge but have plenty of equity. Again, affordability criteria must still be met.

Living longer is a nice problem to have and lenders like United Trust Bank have become adept at providing financial solutions to take at least some of the stress out of later life house moves.