The misconceptions that all lifetime mortgages will have a detrimental effect on the heirs to the estate are misguided. Due to adverse publicity sections of society have been inappropriately been led to believe that lifetime mortgage schemes are bad news. Given the right situation & scenario, the best lifetime mortgage plans can offer an olive branch that may change how retirement life can be enjoyed. Less financial pressure & the ability to chase dreams of their golden years are one of many justifiable reasons for the most common question ‘can I have a mortgage in retirement?’
As a general rule of thumb, mortgages are normally offered to applicants based on affordability calculations through their earned income. Consequently, the concept of mortgages has traditionally been for those individuals that are young enough to be in employment & expected to be so for the whole mortgage term. For example, a lender would expect someone taking out a 25 year mortgage to be under the age of 40 years, thus having the mortgage repaid by they have retired.
This does of course, makes perfect sense. However, consumers should now start taking note of the fact that interest only lifetime mortgage plans offer a case for retirement mortgages to become a potentially more viable option. Why should someone over the age of 65 not be able to take out a mortgage and have the ability to repay only interest & maintain a level balance thereafter?
Given the fact that retirement income is guaranteed; unlike any employed or self-employed individual, then why are they excluded from the many high street lenders? State pensions will always be paid along with any annuity purchased or company pension scheme in payment. Additionally, these are more than likely to be index linked each year, thus making affordability an increasingly viable strategy.
As a result of these factors, lenders are becoming more flexible in their approach to retirees mortgage needs & thus more prepared to offer mainstream mortgages to people over the age of 60. Currently, these lenders will only go upto age 70 & some to age 75. Nevertheless, this still doesn’t provide the financial solution to pensioners due to the FCA’s implementation of the mortgage market review (MMR). This has resulted in lenders on being only able to provide capital & repayment mortgages, rather than an interest only mortgage unless a suitable savings plan had already been set up to run alongside prior to even starting the mortgage.
The problem with this scenario is the how long the term of the plan can be. Given the fact that some existing retirement mortgages are being applied for at retirement & need to be repaid by the oldest persons 75th birthday, the term can be quite short. Repaying a capital & repayment mortgage over a short term of 10-15 years can prove very expensive & unaffordable for many.
However, shop around & research specialist mortgage brokers who deal in this area could uncover a couple of gems that will lend to age 85, & one in particular the Hodge Retirement Mortgage plan can even run for the rest of their lifetime.
How Common is an Over 60s Mortgage?
Due to the ever increasing cost of living & inflation currently has resulted in the inability of borrowers to save up regularly & pay off their debts. This has also been fuelled with the past rise in property prices that has taken place since the 1980’s.
We’ve all heard the adage ‘asset rich & cash poor’. Never has this been so true. The older generations in particular are living in properties that they could have purchased for what now seems a meagre £2,000 in the 1960’s, but now have extremely valuable assets. Regardless of this, they still cannot necessarily afford a comfortable lifestyle. This issue has become particularly noticeable given that the pension crisis has become even more widespread.
Given these economic facts, the interest only lifetime mortgage for the over 60s is actually more common than one would think. With the advent of schemes such as the Hodge Retirement Mortgage Plan, more2life’s interest choice plan & Stonehaven’s interest select equity release scheme, help is certainly now at hand.