As a nation, we’re living longer and healthier lives, which means there are more things we can and want to do in later life. Whether it’s making a final move to a dream home and location, splashing out on some well-earned luxuries or travelling around the world, older people are more active than ever and are looking into the options around mortgages in retirement.

In response, mortgage lenders have been developing more and more solutions for borrowing over the age of 55. Some offer products designed for homeowners to release the equity in a property they already own. Others cater to those with sufficient retirement income for a mortgage on a new or second home.

Mortgages in retirement are popular for:

• making improvements to their home
• buying another property
• consolidating other debts with a more competitive interest rate
• paying off the capital at the end of an interest-only mortgage
• helping a loved one to buy a home of their own
• funding luxury lifestyle purchases like a car, motorhome or boat
• enjoying later life through travel and experiences

Everyone’s financial circumstances are unique, and the best way to discover the correct borrowing option for you is to speak to an experienced and independent broker. So why not book a friendly and informal chat? Call us on 020 3773 4181 or email us at info@apexfinancialadvisers.co.uk, and we’ll get right back to you.

Meanwhile, here’s our guide to mortgages for older borrowers.

HOW DO MORTGAGES IN RETIREMENT WORK?

Mortgage lenders have two ages they look at: how old you are when you borrow and how old you’ll be at the end of the mortgage term.

Generally speaking, if you take out a mortgage at least ten years before you’re due to retire, the amount you can borrow will be based entirely on your salary. As you get nearer to your retirement age, lenders will look at your current salary and request details of your projected pension. After retirement, the amount you can borrow is based entirely on your pension.

For equity release products like Lifetime Mortgages, your income is less relevant as there is no requirement to make monthly repayments. Instead, the loan amount is based on your age and the equity in your home.

Every lender has its particular formulas, criteria and ideal borrower profile, so do get in touch to discuss the best option for you.

BUYING A PROPERTY IN RETIREMENT

Perhaps you’re looking to buy a more expensive property and the equity in your own home doesn’t cover the cost. If that’s the case, you can still borrow well into your retirement.

There is no legal age limit on how late you can get a mortgage, but different lenders have different criteria. The vast majority require you to repay the mortgage by your 75th birthday, although a few accept a higher age limit of 85.

Like any other mortgage, the amount you can borrow depends on the value of the property and your ability to pay. If you are retired, lenders will consider the income from your pensions and investments much like an annual salary.

The term of the loan is also a factor. If you borrow at 55, your mortgage term could still be as long as 30 years. But if you are 70, you will need to repay the mortgage over a much shorter period, which could make the monthly repayments prohibitively expensive.

To increase the affordability of mortgages in retirement, the FCA (Financial Conduct Authority) introduced the RIO (Retirement Interest Only) in 2018. It’s a mortgage specifically designed for mature borrowers who have enough income to meet monthly interest payments. The loans have no end date, and the capital sum is only repayable when you sell the property or when you enter long-term care or pass away.

Some RIO mortgages also allow you to repay some of the capital, reducing the loan balance over time and leaving more to pass on to your loved ones.

Income multipliers and loan-to-value limits vary from lender to lender, so please get in touch if you’d like to see how much you can borrow and from whom.

REMORTGAGING YOUR HOME IN RETIREMENT

Mortgages in retirement aren’t limited to buying a new home. If your home has equity and you have an income from a pension or other investments, remortgaging can help you make home improvements, fund other lifestyle purchases or even consolidate any unsecured borrowing at a more competitive rate.

Think carefully before securing your debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

Straightforward remortgaging will take into account:

• the value of your property
• whether you have any loans already secured on it
• any personal debt you have
• the income you receive from pensions, work and investments.

The process is very similar to taking out a mortgage on a new home, except there’s no moving involved. First, the lender will ask a surveyor to carry out a valuation. Then, after approving your loan, they take out a charge on your property and record it with the Land Registry.

If you sell before repaying the loan, your solicitor will settle the mortgage from the proceeds of the sale. After that, they’ll send you the remaining amount.

Lenders have different criteria around property values, loan amounts, and loan-to-value ratios, so please get in touch to find out more.

EQUITY-RELEASE MORTGAGES IN RETIREMENT

A Lifetime Mortgage is a type of equity release. The loan is secured on your property but you don’t need to make monthly repayments. Instead, the debt is repaid either when the property is sold or you go into long-term care.

Lifetime Mortgages can be a practical option if your income doesn’t meet the requirements for a typical repayment mortgage. That’s because they’re based on your home’s value and equity, rather than your income or ability to pay,

You can borrow from age 55 upwards, and the percentage of equity you can release increases with your age. There’s no upper age limit, and you can take out a single lump sum or draw down a series of payments.

You can use a Lifetime Mortgage for almost any purpose, including:

• paying off your existing mortgage
• making home improvements
• going on a trip of a lifetime
• making a major purchase
• gifting money to a loved one

Remember: interest will continue to mount until the loan is repaid, which means a Lifetime Mortgage isn’t suitable for everyone. Depending on your age, and if you wish to bequeath your home to loved ones, you may want to consider other options.

However, a Lifetime Mortgage could be the answer if you want to help your children onto the property ladder now. Nonetheless, you and your beneficiaries should all understand the potential implications for efficient inheritance planning.

Final words

There are many options for mortgages in retirement, from high street names to specialist lenders. So if you’re wondering about the best way forward from here, we’d love to help you with your plans.

Call us on 020 3773 4181 or drop us a line at info@apexfinancialadvisers.co.uk. We tailor our expert and friendly advice precisely to your specific requirements and circumstances.