What specialist mortgages are available for over 50’s and beyond?
We are here to advise and recommend a solution which is best suited to your circumstances. We always ensure that our clients are 100% confident that they understand any recommendations we offer before they agree to go ahead with an application. If this takes multiple meetings and phone calls we’re more than happy to oblige.
In no particular order here is a summary of options available, all of which we are qualified to advise in.
A Lifetime Mortgage
Is a type of mortgage whereby you release funds from your property in the form of Equity. It is targeted at homeowners over the age of 55 who might find it difficult securing or taking on a standard mortgage, or perhaps don’t have the income to make regular payments. Like a standard mortgage, different lenders offer different loan to values (LTV’s) – the higher the LTV, the more money you can get out of your property. Unlike a standard mortgage, depending on your personal circumstances, you may not be able to make payments each month, which is allowable on this product. If this is what you do, any interest will ‘roll-up’. When the last borrower passes away or goes into long term care, any outstanding debt to the lender will be repaid via sale of the property and the remaining funds will go to your beneficiaries.
You can either apply for a “lump sum” amount for a specific need/s. This is when you take out a set amount and don’t have plans to withdraw any further funds.
Alternatively, you can apply for a ‘drawdown’ option. You will have the initial “lump sum” upfront, but you can access further funds in the future without having to go through the application process again. The ‘drawdown’ facility is popular, and it gives people the confidence that they still have funds to rely on in the future, if needed. Interest is only paid on the amount that is released. We always ask you to do a ‘shopping list’ on what your future requirements for the funds are. This way we will only release the funds needed to ensure you are not paying a higher rate of interest just to have additional funds ‘just in case’.
If you choose to ‘roll-up’ the interest on your loan, then you will be provided with a table of how much the outstanding amount will total up to at the end of every year. Obviously, death isn’t planned nor timed, but we can show you how much in total it’ll cost over a specified amount of years, so you can then work out how much equity will remain for your beneficiaries.
The interest rate that the initial loan completes on will be fixed for life, so you don’t have to worry about any interest rate increases.
We will only advise on products that are approved by the Equity Release council. This means that you have a lifetime guarantee to live in your property, as well as if you ever owe more than the value of the property, you can still live there until you die. Your beneficiaries don’t have to repay any shortfall on what is owed.
Retirement Interest Only Mortgages
This is still a mortgage secured on your property that is also repayable on death of the second party or long term care. The difference with a Retirement Interest Only (RIO) mortgage is that an affordability check has to be carried out at the start of the transaction to ensure that you can make and retain the monthly repayments together and if one party were to die.
Rates are often fixed for life, which helps when reviewing affordability and planning for the future.
As this is a standard mortgage, it is not approved by the Equity Release Council (although it is still regulated by the Financial Conduct Authority) This could mean that as a last resort, if repayments are not made your home could be repossessed, the same as any other mortgage type.
Payment Term Lifetime Mortgages
Generally available for over 50’s. This will allow you to borrow against your property at a stage of life that can have it’s financial challenges. Children may be at university and unexpected costs arise.
You will be able to make interest payments for a set period of time. This is decided at the outset. After this period has ended, your mortgage will revert to a standard Lifetime Mortgage.
Interest Only Mortgage
An interest only mortgage is when you can borrow a set amount on your property and make interest only repayments monthly for a set period of time. Some lenders will allow a term up to age 90.
Your income and outgoings will be looked at to ensure you have the capacity to maintain the repayments now and until the end of term.
Most lenders who allow this option require you to have a set amount of income as well as minimum equity remaining within your property.
Home Reversion Schemes
Home Reversion Schemes are not as common as a Lifetime Mortgage. Whilst we can advise on this type of lending, the circumstances that make this an appropriate scheme are less common, so we will always look into the Lifetime Mortgage first. A Home Reversion allows you to sell your home, or a part of it, to a home reversion provider. You will then receive a lump sum or regular payments based on a percentage of the property’s market value. You also have the right to remain in your property and this is typically only available to people aged over 60 or 65. There is no day-to-day interference and no restrictions and you treat your space the way you always have, as a private home to live in freely. The percentage you retain in your property will always remain the same regardless of the change in property values, unless you decide to take further cash releases. At the end of the plan your property is sold, and the sale proceeds are shared according to the remaining proportions of ownership.
Considerations
Within these definitions, there are many different options available, and it is important that your current and future needs are assessed so that you can be advised as to which is the right type of plan for you.
We can also help you to establish how taking any of the mortgage options available to you might affect your tax position, your eligibility for means-tested benefits or your ability to move or sell your property.
There are advantages and disadvantages with all options, but our advisers will explain these to you. If you would like your family to be involved, we can also – with your permission – answer any questions that they may have.
Our objective is to ensure we choose the best plan to fit your needs.
You will be given a personalised illustration on the product you choose to go ahead with; this will include all features and risks. We will go through this with you in our appointments before we submit any application for you.
One of the most important things to look out for when considering any of these products is the Equity Release Council logo. Approved members of the Equity Release Council, such as Acclaimed Mortgage Consultancy Ltd, are able to display this logo and shows that they are committed to the Council’s Code of Conduct, full details of which can be found at www.equityreleasecouncil.com.
Please note, interest only mortgages or RIO mortgages are not products that can be approved by the Equity Release Council. This is because, the property can be repossessed if you do not keep your repayments up to date.
If this may sound like something you’re interested in or you simply have more questions on, please make use of our live chat, call us on 01676 533 658 or request a call back here. Alternatively, you can contact our Later Life Lending specialists directly via email at sandy@mortgage-consultancy.co.uk.
Some of our fantastic providers
Learn more about Later Life Lending (Equity Release)
Why use Later Life Lending?
Releasing equity can be used in a variety of different ways and can be helpful for over 55’s to provide an income if needed. Learn more about the potential benefits.
What are Lifetime Mortgages?
There are now various types of later life lending schemes; choosing the right one is absolutely crucial. Learn more about which may be best for you.
Is Later Life Lending right for you?
Releasing equity is not always suitable for everyone. We will explain if we feel that releasing equity is not the right option for you and how releasing equity works. Learn more about your options.
