Older borrowers need LPAs

Published: 08/07/2015

One of the debates to emerge in the aftermath of the Mortgage Market Review (MMR) has been how to address the demands for mortgages on into later life. This issue is of course fundamentally affected by not only an ageing population but also by the phasing out of the default retirement age meaning that there is an increasing number of people opting to work beyond 65 and of these a considerable number are still paying their mortgage. Head of Wills and Probate, Linda Cummins looks at one of the implications of this growing trend.

“Those who choose to have a mortgage carrying on into later life should seriously consider the steps they need to take to minimise their risk. Undoubtedly one aspect of this is to realistically consider their income and the likely extent of their working life as they apply for their mortgage however, health can quickly deteriorate in later life and that can also have an impact on income.

“A Lasting Power of Attorney (LPA) can be a valuable risk management tool for older borrowers. If an older borrower becomes ill – suffers a heart attack or stroke for example and that affects their mental capacity and ability to manage their own financial affairs then if they make an LPA and appoint an attorney then their attorney can step in and legally access their bank account to ensure that their mortgage payments continue. A Property and Financial Affairs LPA gives an attorney the authority to deal with the borrower’s finances and property including managing their money. Without an LPA in place family members or close friends, no matter what the circumstances, have no inherent right to access the borrower’s bank accounts.

“If there is no Property and Financial Affairs LPA in place then any family member, a spouse for example, who needs to access the borrower’s bank account – to ensure that mortgage payments continue to be made despite the fact that the borrower’s income may have ceased – is reliant upon the Court of Protection. Typically the process for the Court of Protection to decide who will be appointed to manage an individual’s affairs takes 32 weeks. It’s a long time to wait if your lender is chasing mortgage arrears!”

Content correct at time of publication