Retirement Mortgage Options

As lifestyles change an increasing number of people are looking to borrow into retirement. However for many people looking for a mortgage that lends into retirement can often be tricky. Here we summarise 3 options currently available.

Standard Mortgage

A number of lenders have recently made positive changes to their maximum age limits they lend up to. A growing number of building societies will now lend up to age 80, a few will stretch to 85 and some even have no upper age limit. Most lenders will require you to take out a capital repayments mortgage on this longer term however there is now an interest only option available to age 99. One thing in common with all these mortgages is they use an affordability calculation based on your current income and/or potential retirement income.

Retirement Interest Only Mortgages (RIO’s)

Retirement-interest only mortgages (RIOs) are a relatively new set of products designed to help older borrowers aged over 55 who may struggle to get a standard residential mortgage. They allow you to borrow against your property and only pay back the interest (and not the loan itself) RIOs are very similar to standard interest-only mortgages but there are some key differences. With most RIO mortgages, you only repay the loan when you sell your property, move into residential care or die. But some retirement-interest only mortgages carry terms like a regular mortgage, meaning you either pay them back after a set number of years or when you reach a certain age – 90, for example. Rather than the onerous steps you have to take to prove your income with a standard residential mortgage, you only have to prove that you can afford the interest.

Equity release

Equity release refers to a range of products letting you access the equity (cash) tied up in your home if you are over the age of 55. You can take the money you release as a lump sum or, in several smaller amounts or as a combination of both. Most importantly this option is dependent on age and health rather than your income. The most common form is a mortgage that isn’t paid off until you die. So if you have no one to leave your assets to, it’s a decent, though expensive, route to raise cash. If you do have people to pass assets to, equity release generally means there will be less for them to inherit. Then again, it is your money, so prioritise your own standard of living.

Please contact our independent mortgage brokers who will be able to discuss your options available to you.

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