When reaching retirement age many traditional lenders are declining to offer mortgages for pensioners. However, there are retirement mortgages available providing solutions to releasing equity from your property. Affordability is based on pension & investment income and retirement mortgages can run for a fixed number of years, or your lifetime.Since the introduction of the Mortgage Market Review (MMR) in 2014, mortgagees have tightened their retirement mortgage lending criteria. So-much-so that borrowing beyond age 65-70 from residential mortgage companies is difficult to find. This has significantly impacted in many ways; from employees in their 50’s looking to borrow longer term, pensioners looking for house purchase, gifting or generally raising funds to enhance their retirement. Pensioners are finding lending into retirement a problem. Nevertheless, solutions do exist and here’s where Equity Release Supermarket’s expertise in finding mortgages for over 50s can help.
How Do Retirement Mortgages Work?There are various types of what could be classed as ‘retirement mortgages‘. They are essentially a loan secured against the property that commences either prior to retirement, or whilst in retirement. This could be for a fixed term of years e.g. 10 or 15 years, or over the lifetime of the homeowners.
During the mortgage term homeowners will need to make repayments of capital and/or interest in accordance with the terms of the mortgage deed. These payments will affect the balance accordingly, either to maintain a level balance for interest only mortgages, or reduce the balance such as the capital and repayment basis. Retirement mortgages arranged on a lifetime mortgage basis will continue until the last person has died or moved into care. At that point the house would be normally be sold with the remaining proceeds passing to their estate.
Which is the Best Retirement Mortgage?The choice of plan made will be determined by the borrowers financial situation and importantly anticipated changes in the homeowners lifestyle. Retirement mortgages will take the individuals incomes into account which must be stable and verified. If looking for mortgages for over 50’s and taking borrowing into retirement, then both income prior to, and into retirement must be evidenced.
Post MMR, it is now the lenders responsibility to prove affordability, so understand vigilant checks will be made. In such situations prior to retirement, lenders will usually request proof of the following: –
- If employed – P60’s would be required and to prove future income in retirement a state pension forecast and any occupational scheme pension forecast may be necessary.
- If self employed – then last 3 years trading accounts and SA302’s maybe needed, plus pension forecasts
- The last annual DWP State Pension letter
- P60’s from all private and occupational pension schemes
- The last 3 months bank statements as further evidence receipt of receipt of funds.
The decision as to which is the best retirement mortgage would start with understanding how much capital is initially required, the age of the homeowners and the property valuation. Using Equity Release Supermarket’s experienced advisers we can ascertain which mortgage lending solution would most suitable. Your adviser would take many factors into account affecting which type of retirement mortgage is recommended such as:-
Homeowner(s) age, property value, income, credit history, term/future event, management of balance/inheritance.
Specialist Advice on Mortgages for PensionersWe are now starting to see lenders specialise in retirement mortgages, from smaller localised banks and building societies, to equity release companies extending their existing product range. These institutions are providing much welcomed retirement mortgage solutions to an age group that historically have managed mortgage debt throughout their lives. With usually good credit files, pensioners are penalised, when in fact they can offer a more secure, regular income & offer a lower credit risk to UK mortgagees. See our retirement mortgage products here.
Reasons to Borrow in RetirementIt’s now clearly evident there has been a changing in attitude towards retirement as more people want to fulfil their lifelong goals and dreams. However, this comes at a cost and where savings, pension pots have fallen short, alternative means of income/capital via retirement mortgages may need to be found for the following reasons: –
- Mortgage repayment – where lenders are pressing for repayment, a retirement remortgage maybe needed
- House purchase – moving to a bungalow, retirement development, or nearer to the children for support
- Gifting to children – providing a deposit on a new property can help the children onto the property ladder
- Home Improvements – if the decision is made to remain in situ, maybe it’s time to upgrade the house?
- General expenditures – having an emergency fund, new car, holiday & all the comforts retirement demands
Hopefully, this retirement mortgages section has enlightened your understanding of the issues, types and solutions available in this corner of the equity release marketplace. The natural next steps would be to compare retirement mortgages, use our maximum retirement mortgage calculator or call 0800 678 5955.
Your home may be repossessed if you do not keep up repayments on a Retirement Mortgage. To understand the features and risk always ask for a personalised illustration.