Retirement Mortgage

As you enter your sixties, you might be considering different mortgage options to see you through your retirement. Here are some retirement mortgage options for you to make the most of your retirement years in your home.

Is there an age limit for retirement mortgages?

The age limits used to cap mortgage eligibility will vary from lender to lender. Most lenders tend to use 70 as an age limit, however, you may be able to find a specialised lender who uses an age limit of 85 or over. Some may even choose to waive a maximum age limit completely, but this entirely depends on your own personal situation.

How do I know if I can afford it?

It’s important to make sure you can afford any monthly repayments to cover the cost of your mortgage, whatever type of retirement mortgage you secure. Particularly as a pensioner, if you don’t have a regular income, your lender will ask to see proof of pension statements. There are different retirement mortgage types for you that the lender may consider less risky, like equity release, as this is secured against the value of your home.

A good way to get a rough idea if you can afford a specific mortgage is to use a mortgage calculator online. However, these vary from lender to lender, so it is always better to speak to an expert to make sure you can afford the monthly payments.

What information will they ask me to provide?

The type of assessment will depend on whether you are applying for a retirement interest-only mortgage, equity release, or a standard mortgage. However, most applications will require your health, your age, your income and proof of pension if you have one, and your credit history will be checked. It could also be worthwhile to consider the property type, as lenders will favour standard construction types.

What options are available to me as a pensioner?

There are several options available to pensioners, from equity release to retirement interest-only mortgages.

Options are included below:

  • Retirement interest-only mortgages (RIO)
  • Equity release mortgages (also known as a lifetime mortgage)
  • Home reversion schemes
  • Hybrid equity release

What is a retirement interest-only mortgage (or RIO)?

Like a standard interest-only mortgage, retirement interest-only mortgages involve monthly interest-only repayments. However, as a retiree, you may receive more favourable mortgage rates for an RIO, as you only need to be able to afford the monthly interest repayments. The loan is repaid after you sell your house, move into long term care or when you die.

What are the benefits of a retirement interest-only mortgage?

Generally speaking, most retirement interest-only mortgages are cheaper than standard equity release. You won’t have to downsize to a smaller home as a large number of retirees might need to, and you avoid a fixed loan term. You also increase the chance of having an inheritance to pass onto your children and may be able to pay off your outstanding debts by releasing equity in your home. An added benefit over lifetime mortgages is that you avoid interest roll-up which is when interest increasingly builds over time.

What are the disadvantages of an RIO?

As with all mortgages, if you cannot keep up repayments, your home may be at risk. You also have the inevitable selling of your home when you die or when you enter long-term care. Even though you will only have to pay interest-only, you will still have to pass the retirement mortgage affordability checks, which is why it is so important to speak to an expert advisor.

What is a lifetime mortgage?

A lifetime mortgage is also known as equity release, where homeowners over 55 can unlock some of the value in their homes. A set amount of money is borrowed against the value of your home as a long-term loan. The loan is then paid back with the money generated from the eventual sale of your property (in this way it is similar to RIOs).

How do I know if equity release is the right plan for me?

The benefits of equity release include:

  • Using the money generated to supplement your retirement income.
  • You continue to own your home for the duration of the plan.
  • The money released can be used in whatever way you require.

The disadvantages of equity release include:

  • Your home needs to be sold when you die or move into long-term care.
  • Taking out a lifetime mortgage can affect your tax position or means-tested benefits.
  • As interest is added, there may be no value left in your home at the end of the plan.
  • It might reduce your options for moving or selling your home.

It is important to be aware of the implications of a lifetime mortgage, please consult with our mortgage advisors to make sure this is the best plan for you.

Is hybrid equity release better for me than full equity release?

Hybrid equity release is a middle ground between a full retirement mortgage and an interest-only mortgage, where you pay an agreed percentage of the mortgage off each month as well as the interest using a repayment plan. When this period comes to an end, you’ll still have an outstanding balance to pay on the property. A bonus of this that you keep more value in the property, however, you will also have to be able to afford the higher repayment rates and be subject to affordability checks.

What is home reversion?

A home reversion scheme means you’ll be selling either some, or all of your property under market value, in exchange for a tax-free payout, a monthly income over time, or a mix of the two. You remain in your house as a rent-free tenant. Unfortunately though, as you don’t own the house (or all of it), you could be forced to move in certain situations.

Can you help me with my decision?

At CS Mortgage Solutions, we have decades worth of experience and a team committed to excellent customer care and finding the right retirement mortgage solution for you. We make the process easy by contacting solicitors, and even negotiating on your behalf, all as part of our friendly and straightforward service.

Make a quick and easy booking on our easy enquiry form, email us at info@csmortgagesolutions.co.uk or give us a call today on 0330 332 5432.

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