Your IndustryJun 25 2015

Buy-to-let options for retired clients

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This is not the case however in the specialist buy-to-let sector – for example, covering off loans to limited companies and finance for houses in multiple occupation (HMOs), he adds.

What is key to getting the best deal, according to Mr Young, is the adviser needs to develop close relationships with a range of lenders and perhaps also needs to work with one of the specialist distributors.

He says specialist distributors will provide help and support and offer access to products and terms that the individual broker might have difficulty securing on their own.

Tony Müdd, divisional director tax and consultancy at St James’s Place, says advisers operating in this area will quickly find high street lenders have been reducing the maximum applicant age from around age 90 to between 70-years-old and 75-years-old over the last five years.

However, he says building societies are providing some flexibility with the maximum age on application being up to age 85.

Mr Müdd says the clients who meet the age criteria and the requirements relating to income and rental coverage will have all the market leading products available to them.

Future options

In terms of what the future holds for this product, one thing our experts agreed on is there will be a growing demand for buy-to-let products for the at-retirement market.

Fleet Mortgages’ Mr Young says he is not sure there will be specific buy-to-let products that cater exclusively for the newly-retired but adds “never say never.”

At the moment the current range of product options is suitable for these individuals and Mr Young says he suspects those lenders who haven’t widened their maximum lending age will do so in the fullness of time.

Mr Young says: “Investing in property has a strong appeal in the UK and I don’t see this faltering anytime soon – the important point is that we maintain responsible lending practices because there may be the temptation to run up the risk curve far too quickly – we are already seeing this in some areas.

“We need to ensure that we only lend to people who can afford to pay the mortgage back – it is a simple way to go about business but it is absolutely fundamental. If we can maintain this responsible approach then the future for buy-to-let is bright.”

Hopefully more lifetime mortgage providers will start to look more favourably on buy-to-let properties as suitable security, says St James’s Place’s Mr Müdd.

He says the ability to raise funds on buy-to-let properties can help to supplement retirement income or long-term care funding albeit with risks and tax issues that an investor needs to be aware of.

When it comes to innovation, Mr Müdd says this is more difficult.

However, with the changes introduced to pensions, he says perhaps it is time that the government reviewed its previous decision of not allowing residential property to be held as an asset in pension.

This would change the dynamics of whether to use your pension fund to purchase a buy-to-let property considerably, Mr Müdd notes.

He says: “It would reinvigorate the buy-to-let market and with the new rules that allow the clients pensions to continue after death, could allow families to pass down their properties to their children which, for many, could be the only way of getting on the property ladder in the first place.”

Dominic Field, chief executive of Temple Field Property, says many new and flexible options are coming to market to cater for what is being termed ‘grandlords’.

He says: “This is a rapidly growing market and as such product providers are gearing up for new customs and offering options to customers.

“As the market becomes more competitive better deals will become available. As always, potential clients need to be careful to seek good value and carefully consider their options before committing.”