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Later Life Borrowing

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Equity Release

Later Life Borrowing

When considering a mortgage that extends into, or starts during, your retirement there are a number of options available. The summary below is designed to help you understand these options.

Who lends to older borrowers?

Virtually all lenders allow you to take out a mortgage that extends past your stated retirement age as long as you can afford the payments and the mortgage is repaid at the end of the term.

However, there are also some banks, building societies and specialist firms that offer lending products that go well beyond a stated retirement age and some that will only require you to repay the mortgage at the point of moving into long-term care or through your estate at the end of your life.

What products are available?

Standard mortgages that extend into retirement
These are conventional mortgages but have terms that extend beyond your retirement age, provided you can evidence that you will continue to be able to afford the loan until the end of the mortgage term. You will need to make monthly payments of either capital and interest (repayment) or just interest (Interest Only).
Retirement Interest Only Mortgages (RIO)
A RIO mortgage is an Interest Only mortgage that allows you to pay just the monthly amounts of interest throughout the term until either the death of the last remaining borrower or when the last remaining borrower moves into long-term care. When one of these events occurs the mortgage ends and the amount outstanding must be repaid in full.
Equity Release - There are two types of equity release products
Lifetime Mortgages

The key difference with this product compared to a standard mortgage or a RIO is that monthly payments are not required. However, many lenders will allow you to make full or partial interest payments either on a monthly or ad-hoc basis. Either way, the mortgage is repayable upon death of the last remaining borrower or when the last remaining borrower moves into long term care.

Home Reversion Plans

Home Reversion Plans are technically not a mortgage, it is a property sale transaction that allows you to sell a percentage of your property but continue to live in it usually rent free until the end of your life or until you move into long term care. You can typically sell between 25 per cent and 100 per cent of your property to the provider, and the amount you receive in return will be significantly less than the market value.

We will help you understand if any of the above options are right for you, so please get in touch if you are considering later life borrowing. We are experts in this market and will make sure you receive the right advice.

A LIFETIME MORTGAGE WILL REDUCE THE VALUE OF YOUR ESTATE AND MAY AFFECT YOUR ENTITLEMENT TO MEANS-TESTED BENEFITS AND TAX STATUS.
THE IMPACT OF NOT SERVICING MONTHLY INTEREST PAYMENTS ON A LIFETIME MORTGAGE IS THAT THE OUTSTANDING DEBT CAN GROW RAPIDLY, THUS REDUCING THE VALUE OF YOUR ESTATE. FOR EXAMPLE, IF THE INTEREST RATE WAS 7% A YEAR, A £50,000 LOAN WOULD DOUBLE TO £100,000 AFTER 10 YEARS ASSUMING NO REPAYMENTS ARE MADE. THIS IS AN EXAMPLE FOR ILLUSTRATIVE PURPOSES ONLY AND PERSONALISED ADVICE AND RECOMMENDATIONS SHOULD BE SOUGHT FROM A QUALIFIED PROFESSIONAL.
YOU ARE STRONGLY ADVISED TO REGISTER A LASTING POWER OF ATTORNEY. THIS WILL ALLOW YOUR AFFAIRS TO BE MANAGED BY SOMEBODY ELSE IF YOUR MENTAL ABILITIES SIGNIFICANTLY DECLINE.

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