Buy-to-let lenders reconsider age restrictions

Buy-to-let lenders may soon reconsider age restrictions.

Buy-to-let lenders could soon be reconsidering the age restrictions they impose on investors in the wake of government plans to give pensioners unlimited access to retirement savings.

The age restrictions by lenders exist despite buy-to-let lenders calling for bigger deposits than with residential loans and being assessed on whether rental income will comfortably outweigh monthly mortgage payments.

Landlords who are currently often locked out of borrowing past age 75 are already seeing a slight easing in restrictions, with a major lender introducing an age limit of 70 on buy-to-let investors applying for a mortgage, but letting them take up to a 35-year term.

Buy-to-let lenders vary as to the maximum age you can be at the end of the mortgage term.  For example, at Aldermore Bank it is 85, while at Paragon it is 80 and high street lender Lloyds sets its maximum at 75.

Currently, many existing landlords complain of difficulties in obtaining many mortgages on offer if they want to borrow beyond their seventies.

When investors reach the maximum age, terms set by many buy-to-let lenders require the landlord to then sell their property to repay the mortgage; or find the money to do so elsewhere.

These restrictions mean that many investors struggle to secure buy-to-let mortgages in later life, or even to remortgage existing loans.

The recent changes to a major lender’s criteria will now allow more people to borrow into retirement.  If other providers follow suit, it could mean more older buy-to-let investors may emerge in the future as they access their full retirement fund to purchase property.

This latest move comes after Chancellor George Osborne unveiled a major overhaul of the pensions system in the Budget which will allow, from next year, more of a pension fund to be taken as cash from the age of 55, without incurring harsh tax penalties.

There are dangers with these new rules though.  If the property market crashes or rents become static, pensioners could find their retirement income seriously depleted.

There is also the fear that an influx of older buy-to-let investors could push already fast-rising house prices higher resulting in first-time buyers being pushed out.

Post courtesy of This is Money.