January 7th, 2019. Chris Evans
Mortgages in Retirement: A Guide to Mortgaging and Remortgaging in Old Age
More often than not, mortgage lenders will set their own age cap, typically between the ages of 60 and 70. However, a gradual change has come, opening up mortgage options in later age, such as the new over 70 lifetime mortgages.
It’s strange how mortgages are seen as exclusive to younger people as earnings and savings tend to peak in people’s mid-fifties. There are ways to borrow and remortgage in old age, with a few niche options and avenues opening up as reach our twilight years. However, choosing to remortgage in old age comes with more obstacles than usual.Navigating the waters of mortgaging in retirement will be made easier with the advice below.
Talk to a Broker or Mortgage Advisor
As with all mortgages, be sure to talk to a broker to understand all of your options. While brokers are suitable to first-time buyers, they can help pinpoint the best deal for those who want to remortgage in old age too. Brokers can help bring you the best deals, whereas mortgage advisors can help you understand complex processes such as guarantor mortgages, equity release schemes and downsizing.
Develop a Repayment Plan
When applying for a mortgage, you should always come with a comprehensive repayment plan and payment history. Much like applying for a job, your mortgage application should be free of any egregious mistakes or omissions. In older age, you’ll likely have to take loans with a significantly tighter repayment period, which means less interest but higher monthly payments.
Alternatively, there is an option to have an interest-only mortgage, but this means a lump sum needs to be paid at the end of your term, which may mean risky business if you’re well into your late seventies or eighties by then.
Additionally, you will need to consider who repays your loan should the inevitable happen ahead of schedule. While this isn’t a nice conversation, it’s an important one. Arranging this will give the bank confidence, as well as ensure your loved ones will not endure unneeded financial stress. Organising a Lasting Power of Attorney is a massive help too.
To bypass common pitfalls, applicants can consider a few options that lend themselves well to late life borrowing.
Consider Bespoke Options
Certain loan options are suited for retirement age, namely the over 70 mortgages and guarantor mortgages. Over 70 mortgages are essentially retirement interest-only mortgages (RIOs) as part of a lifetime mortgage scheme. The mortgage is useful for older borrowers whose interest-only mortgages are due to mature, but are unable to pay off the remaining balance.
Guarantor mortgages are usually reserved for younger borrowers, but they can be adapted for older people. Essentially, this mortgage sets up a guarantor – such as your children – who will take responsibility for the property and payments should you be unable to pay.
Equity release on your current property is a possible avenue too, which allows you to access cash tied up in your home. You can take this money via a lump sum or in several instalments, while using this money towards a deposit for another property.
Equity releases are common with RIOs and lifetime mortgages, which require little to no repayments when alive. Upon death or a move into long-term care, the home is sold by the bank.
Downsizing is also an alternative option, which is essentially selling up your current property to buy a smaller, cheaper place to live. Older people can then use this financial windfall for this new home’s mortgage or to finance their living costs.
Ensure You Choose the Right Term
The older you are, the more important the term of your loan will be. Your age will directly influence how long you will have to pay the loan, so ensure you have ample savings and enough equity against your property to make your payments.
Overall, just like any other mortgage, mortgages in retirement require careful planning and sound advice. There may be some more hurdles, but there are more options than ever before to re-invent yourself and your property in old age.
Are You Looking to Get onto the Property Ladder?
If you’re encouraged by the news that mortgages in retirement are becoming the norm, then our friendly and experienced mortgage brokers can help. Get in touch with us today to learn more about over 70 mortgages and how much you could borrow.
Article By Chris Evans
January 7th, 2019
Chris heads up the specialist mortgage team which encompasses first charge mortgages, buy-to-let finance and second charge loans.
Chris has spent the last 17 years gaining experience in mortgages, protection and secured loans with roles at Legal & General, Nemo and Mortgage advice bureau giving him a broad understanding of the property finance markets.
Having Joined the Pure Group in 2017 he has worked with Ben to establish and grow the 1st and 2nd charge proposition exponentially in a short period of time. Chris has overseen the recruitment and development of an extremely experienced team of employed and self employed advisers that continues to deliver year on year growth.See more articles by Chris