Once you are in your fifties your mortgage options begin to change. Right now you are probably at the peak of your earning powers and may have many different mortgage choices at your disposal. You will still be able to apply for a loan with a 25 year repayment period, for example.
But it’s worth considering that this could be the last time that you will be in this position. That’s because once you hit your sixties and seventies, it can be more difficult to get a conventional residential mortgage.
Most UK lenders set an age limit on their mortgages, meaning that the maximum age for taking out a new mortgage is usually 65 to 70, and the age limit for settling the loan ranges from 70 to 85. Plus, the closer you are to retirement, the more likely it is you will have to provide more information about how you can afford the loan, including pension planning documents to assure the lender that you can still pay off the mortgage. So, it’s worth planning now to make sure you are ahead of the game.
If you want to access cash from your home or get a better interest rate on your mortgage, you could consider remortgaging to a new product. You will probably have to pay a remortgaging fee, which could be around £1,000 depending on the product. However, it could mean that you are able to release money from your home for home improvements or other projects if you borrow more or get a more affordable interest rate.
You could also choose to downsize to a smaller property or a cheaper area to reduce your mortgage payments or pay it off all together.
Make regular overpayments
You could also extend the term on your mortgage to reduce the monthly repayments if you wish to do so but, if it’s possible, it’s usually a better idea to make regular overpayments to reduce the mortgage term and the amount of interest you will pay overall. Doing so can make a substantial difference to your interest payments. Just check the fine print and make sure that the overpayments are not above the limit stipulated by your lender.
Access to mortgages and loans for over-55s can come with challenges. Speak to our mortgage experts Fluent Money who are on hand to give you the best advice. Book a call today.
If you have substantial savings you could benefit from taking out an offset mortgage. With these types of mortgages, you save money into a savings account linked to the loan. The money accrued then counts as a short-term overpayment on the loan and is ‘offset’ against the balance, reducing your interest payments. However, the interest rates charged tend to be higher than those on conventional mortgages and you won’t earn any interest on your savings. Offset mortgages can be a good option when the Bank of England base rate is low.
Retirement interest-only mortgages
Once you become 55, although lenders may tighten their criteria on traditional residential mortgages, other options become available to you. Retirement interest-only mortgages are a relatively new product that more lenders are providing. The loan is secured on your property and you only have to repay the interest each month, not the capital, which is paid off when you enter long-term care or the last borrower dies. It may be a way to pay off an existing interest-free mortgage that is about to mature, but may have a capital repayment vehicle that has not generated enough of a return to pay it off.
You only have to prove that you can afford the interest payments each month but there is often the ability to repay the loan if you wish to do so. It’s worth bearing in mind that taking out a retirement interest-only mortgage can affect your access to certain means-tested benefits.
If you have equity in your home it may be possible to access it via a lifetime mortgage. Equity release or lifetime mortgages are secured on your property and enable you to release cash that is otherwise tied up in it. You are then free to use the money as you wish - for home improvements or to gift to your loved ones, although they may be liable to pay inheritance tax on the money. There is no need to make monthly repayments on the loan as it will be paid off when you enter long-term care or die, and your property is sold.
Unlike with a home reversion mortgage, you will still own your own home but the equity available in it will be reduced. However, you can choose to protect a portion of it for your beneficiaries to inherit.
Lifetime mortgages are not for everyone – downsizing can be a better alternative if it is possible – but it can be a good way to unlock cash from your property if there is no alternative. Plus, under the Equity Release Council’s regulations, all lifetime mortgages from its lenders offer a ‘no negative equity guarantee’, so that should the proceeds from your property sale not be enough to settle the loan, the debt will be written off.
Older people’s shared ownership schemes
If you’re 55 or older and are a first time buyer or can’t afford to buy a new home, you could access a government-backed home ownership scheme specifically designed for older people. You can buy up to 75% of your home and you won’t have to pay rent on the remaining 25%. The scheme is only currently available in England and to be eligible you have to have a total household income of less than £80,000 or £90,000 in London.
Always think carefully and take specialist mortgage advice before securing a loan on your property.
Written by Piper Terrett, Fluent Money Group
Access to mortgages and loans for over-55s can come with challenges. Fluent Money have the largest panel of lenders that provide equity release, second-home mortgages, buy to let and retirement interest-only mortgages. This combined with the expertise to support you hand in hand through the application process means they offer you the best advice and chance of securing the funding that you seek.