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Tuesday, April 7, 2020
Savings for the Seniors


A Retirement Mortgage Could Help You Stay in Your Home

Big changes have been happening regarding retirement and how a retirement mortgage could help you stay in your home. This…

By Senior Savings , in Savings , at June 21, 2019


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Big changes have been happening regarding retirement and how a retirement mortgage could help you stay in your home. This has been a crucial lifeline to those struggling with the thought of selling their own or going into foreclosure. Previously, many lenders wouldn’t provide remortgaging loans options to people over 70 especially with the financial crisis that caused a recession. But, there have been positive changes and now loans are being offered to people of any age without an end date. If you’re wondering if you are going to have to sell or are struggling to make ends meet, it’s important to know your options.

Could a retirement mortgage help you stay in YOUR home?
The simple answer, yes. But let’s take a look at how you can benefit from a retirement interest-only mortgage.

What is a retirement interest-only mortgage? 
It’s a loan offered to older borrowers between the ages of 55 and 65. You only make the monthly payments on the interest of the loan, not towards reducing the balance. Lenders will ensure that you are capable of affording the monthly interest payments before approving the loan. The outstanding capital on the loan is paid back when the home is sold, the borrower dies or is placed in a long-term care facility. The retirement interest-only mortgage also protects the equity of your home. If you are a couple taking out a retirement interest-only mortgage, keep in mind that the lender will want to be sure in the event that one of the borrowers dies, the other borrower can maintain the monthly payments of the loan.

How do you apply for a retirement interest-only mortgage?
There are approximately 13 lenders providing loans for older borrowers with no end date. Lenders with big names such as Nationwide along with traditional lenders and high street banks.

Equity release as another alternative. 
Another alternative is equity release, which is a lifetime mortgage with no end date and available to people over the age of 55. It’s important to keep in mind that the interest payments are rolled up each month and added to the capital of the loan. When the house is sold, your debt will be deducted from the proceeds of the house. In order to qualify, you must own your home. You will then be able to receive either a lump sum or installments from your equity. However, be mindful that the interest does add up quickly and can be an expensive way to pull from your home equity.

The verdict?
If you are an older borrower between the ages of 55 and 65, you are entitled to other options in order to remain in your home. Both the retirement-interest only mortgage and equity release can help you keep more of your income, pay off debt, and most importantly keep your home. For many, this also means they have something to give as an inheritance.

It’s important to weigh the pros and cons of each loan and make an informed decision based on what works best for you. What is important is that you have a plan, which lenders want to ensure you have before issuing a loan. Many lenders want to be sure that you have spoken with a specialist. Therefore, make sure that you do your due diligence before jumping into something that may not work best for you. However, if you determine that it’s a great option, you can rest assured that you can enjoy living in your own home on your terms.