How can I get a mortgage at 80?

Q I am a life tenant in the house of my late wife who died at the end of last year. I turned 80 last July and have found quite recently that, although I have good neighbours, when I am ill - I am a lifelong asthmatic - it has been difficult to get help. Also the house has a big garden needing constant care and attention, even in winter.

I have found a two-bedroom flat in a purpose-built block for over 50s which I would like to buy. My problem is, I have no equity in bricks-and-mortar, having waived any interest in the house for reasons I shall not go into.

Presumably, at my age I would be eligible for an interest-only mortgage. I can afford an annual mortgage payment of up to ?7,000. I have savings equivalent to about four years' repayments, so that my two sons can, on my death, have some latitude to decide when the flat can best be sold.

What would be the likely advance I could obtain?

An alternative would be for a son who has considerable equity in his house to apply for a repayment mortgage but with me making the actual repayments. Is this feasible without tax problems for him?

TM

A You are right in thinking that your age means that you are eligible for an age-related interest-only mortgage where you pay only interest while you live in a property and where the loan is repaid with the proceeds of selling the property when you permanently vacate it - to move to a residential nursing home, for example, or on death.

However, only a handful of lenders offer this kind of mortgage and of those that do, none will advance the full asking price. The most that the Halifax and Loughborough building society will lend, for example, is 75% of their valuation of the property (which may be less than the purchase price) while Chorley & District building society will lend a maximum of 50% of the value.

So if the flat you have found costs ?100,000, the biggest possible mortgage you'll get is ?75,000 and you'll need a cash deposit of at least ?25,000. But Halifax and the Loughborough will lend this value-based maximum only if they think you can afford the monthly repayments which is decided on a case-by-case basis following a detailed assessment of your income and outgoings. The biggest advance you can get from the Chorley & District building society is either four times your pension income or half the property's value - whichever produces the lower figure.

The alternative you suggest - of getting your son to take out a mortgage - is perfectly feasible. But what this would mean is that he would become your landlord and any money you gave him to cover the mortgage repayments would count as rental income in the eyes of the Inland Revenue and so would be subject to income tax. Proceeds from the eventual sale of the property could also be subject to capital gains tax.

On the plus side, any mortgage interest your son pays - along with various other expenses related to letting the property - can be deducted from the rental income to reduce the amount which is subject to tax. You will find more detailed information on the tax rules relating to rental income in the free (but very long) booklet IR150: Taxation of rents, A Guide to property income.