FIVE things that determine how much you can borrow in later life

One of the most common and important questions asked by prospective later life borrowers is: how much can I borrow? And while not all later life lending products work in exactly the same way, in this blog we explain the five different factors that can impact the figure.

1. Your property’s value
The value of your home is an important factor in determining the amount you can borrow, regardless of which type of later life loan you are applying for. Lenders will offer you a percentage of your home’s value, known as a Loan to Value or LTV. So, the more your home is worth, the more you can potentially borrow. But it is possible for someone with (for example) a house worth £250,000 to be able to borrow more money than someone with a house valued at £350,000. And that’s down to one, or a combination, of the following factors.

2. Your age
With most later life lending products, the older you are the higher the LTV percentage you will be offered. As many later life borrowing products are designed to last for the rest of your life, your age – and therefore your likely life expectancy – plays a key role in determining how much a lender will offer you as an LTV. Someone aged 55 applying for a lifetime mortgage, for example, could get an LTV of 24.5%. If they were 75, that figure almost doubles to just under 48%.¹ It’s important to note, however, that there are products now available that can offer higher LTVs to younger clients rather than older ones, so it’s vital that you discuss all of your later life lending options with a specialist adviser to get the deal that’s right for your needs.

3. Your partner/spouse’s age
If you are applying for a loan with someone else – your spouse or partner – this can affect the LTV in two ways. Firstly, the lender will base the LTV on the youngest age. The bigger the gap in age between you and your partner, the bigger the impact will be on the maximum LTV offered. Secondly, and less common today than it once was, some lenders offer slightly different LTVs for single versus joint life applications for the same product. Single life applicants are typically offered LTVs that are 1% higher than joint life applicants of the same age.

4. Your health
There are some later life borrowing products that take your health into consideration and provide a higher LTV if you have certain medical conditions or lifestyle risks. This could be anything from smoking or being overweight to having serious medical conditions such as cancer or Parkinson’s. Even relatively mild conditions can have a significant impact on the LTV so it is always worth disclosing any medical history you (or your partner, if relevant) have had, even if you are no longer receiving treatment.

5. Making repayments
Lifetime mortgages – a form of equity release and one of the range of borrowing options available to later life borrowers – typically do not require borrowers to make any interest repayments. Instead, the interest rolls up and the total debt (capital plus interest) is repaid when the borrower dies or moves into long term care. A recent innovation in this market now gives borrowers who can afford to do so the option to repay some or even all of the interest on their loan and receive a higher LTV than a borrower who is rolling up their interest. These loans are subject to affordability assessments so will not be suitable for or available to everyone.