Over 70s looking to borrow for holiday home

My parents are looking to buy a holiday home for C €200k and along with their savings need to borrow €100k. They have a home, mortgage free, worth around €500k and have a private pension of €20k plus a contributory state pension each.
Ideally they'd like to borrow the shortfall as a mortgage on the holiday home and if / when they die any shortfall will come out of their estate. Is this possible?

The banks they have approached have told them that at age 70 they are too old to borrow and are steering them in the direction of equity release schemes or some scheme whereby the will loan them the amount at 6% interest which will be fully repayable from their estate. Is this not the same as their proposal only more expensive?
Any help on this greatly appreciated.

Such equity release schemes can be bad value for money and involve high rates of interest and, consequently, a creeping ownership by the lender over the house on which the loan is secured. SHIP and BoI LifeLoans (can't find link) are two common sorts of packages in this area but I think that they differ in some ways. There are discussions of both of these and the whole issue of older people borrowing or doing equity releases elsewhere on AAM so you should try searching for these in case they are of interest to you. You should also check out some of the (often critical) press coverage of and (some AAM links also appear in there too!). See also this recent thread on the same topic. These products may be suitable for some people but as ever people should apprise themselves of the details before making any decision. If necessary get independent, professional advice and certainly don't depend on sales people (from SHIP, BoI or elsewhere) for independent advice. Is there no other way that your parents can raise the money - e.g. from their children etc.?

Hope this helps.

Thanks Clubman for the prompt reply.
We, the kids would help out but with young families etc this is not altogether practical. We just thought that with their income they could easily service a 100k mortgage especially if interest only and this would be repaid on death if not cleared along the way. They've also got around 40k coming in around 18 months via SSIAs.
Surely some bank would consider this?

The banks are not allowed secure borrowing against the SSIA, so they won't be able to commit your parents to using the SSIA's for this purpose. I wonder if it makes sense for them to buy the property. You could get an awful lot of rental weeks/months for their €100k savings!

unfortunately the bottom line is they wont qualify based age....it wouldnt be prudent lending for banks to approve a mortgage facility funded by pensions.

We just thought that with their income they could easily service a 100k mortgage especially if interest only and this would be repaid on death

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the only way it would be repaid on death is if they have a mortgage protection policy assigned to the morgage again unfortunately given their ages its not likely they wil get mortgage protection,.. unless they have a whole of life policy already in place for a min of €100,000

the only way it would be repaid on death is if they have a mortgage protection policy assigned to the morgage again unfortunately given their ages its not likely they wil get mortgage protection,

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Surley the property could be sold or mortgage paid off by children to hold house.

unfortunately the bottom line is they wont qualify based age....it wouldnt be prudent lending for banks to approve a mortgage facility funded by pensions.

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Why not? Someone on a pension of 40k in good health would have a greater disposable income than a younger person on 40K no kids etc to support.

Why not? Someone on a pension of 40k in good health would have a greater disposable income than a younger person on 40K no kids etc to support

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Dont know why not, guess a lending underwriter could answer that.. either way lenders have a strict cut off age of 70 for mortgages.....!!!!

Just to add to my earlier post [broken link removed] is another company offering loans similar to SHIP and BoI LifeLoans in case that's of any relevance.

Molly said:

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Dont know why not, guess a lending underwriter could answer that.. either way lenders have a strict cut off age of 70 for mortgages.....!!!!

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Well actually, mother is 69 and father will be 70 at end of year...I got the year wrong. Will this make a difference if as you say 70 is the cut off?

unfortunately not, should have explained ,the loan must expire by age 70, which only leaves them with a few months to borrow the money over.

Here's a thought:

Let the children borrow the money -say €100k.

Let them acquire a share in the holiday home for this money (i.e. a 50% interest). Let the parents pay the kids rent which equates exactly to the loan interest (kids should be able to get an interest only from Bank of Scotland no problem - LTV is only 50%, parents can give guarantee if needs be).

The interest bill and the rent are the same, so no income tax problems, and instead of paying 6% on a "sale of reversion" type product, the parents are raising the money at 3% from Bank of Scotland.

BTW - I am not looking to plug BOS generally - other banks give cheaper loans; but I think they are the only ones who will give interest only with no questions asked as to how you will fund capital repayment.