Later Life Lending
Retirement is a phase of life that often prompts a reevaluation of financial strategies, and for many, this includes exploring new mortgage options. Perhaps you’re keen on clearing your existing mortgage debts, considering equity release to enhance your lifestyle or support loved ones, or contemplating a home relocation. This is where later life lending can offer a viable solution.
What is later life lending?
Later life lending refers to an array of borrowing options tailored for individuals typically aged 55 and above. Its flexibility allows it to cater to a wide range of financial needs, from purchasing a primary residence, a second home, or a buy-to-let property to refinancing a property to settle current debts.
Later life lending isn’t confined to debt reduction or property acquisition alone. It also serves as a valuable tool in supplementing pension income, financing care costs, or meeting lifestyle expenses like home renovations, vacations, significant purchases, family needs, or even Inheritance Tax planning.
Three pillars of later life lending
Later life lending essentially revolves around three mortgage products:
- Traditional Mortgages
- Retirement Interest Only Mortgages
- Equity Release - Lifetime Mortgages
Traditional Mortgages
Traditional mortgages come from banks and building societies and require an affordability assessment. You’ll make set monthly payments until a chosen term (usually up to retirement age). There are two payment methods: capital repayment (paying off interest and some of the capital each month) and interest-only (paying just the interest each month). Traditional mortgages can have either fixed or variable interest rates. They also allow overpayments, typically up to 10% of each year’s capital balance.
Retirement Interest Only Mortgages
These mortgages are similar to traditional ones, but you only need to make monthly interest payments. The outstanding balance is repaid when the last applicant dies or enters long-term care, usually through the property sale. Interest rates can be fixed for a set term or life. Overpayments are also allowed without early repayment charges.
Lifetime Mortgages
Lifetime mortgages do not require an affordability calculation or any monthly payments. The interest is rolled up over the loan, and the total balance is repaid upon the last applicant’s death or entry into long-term care. These mortgages come with a “no negative equity guarantee” and offer the ability to make payments without early repayment charges. They can also include features like drawdown, inheritance guarantee, and downsizing protection.
Consider your specific financial situation carefully
Securing a mortgage in the later stages of life is a decision many individuals make. Some own properties but need help to meet daily expenses with their pension income or savings. Others may reach the culmination of an interest-only mortgage agreement without the necessary lump sum to settle the capital. Each type of mortgage has advantages and disadvantages, so it’s essential to consider your financial situation and needs before choosing one.
Do you want to explore and discuss your later life lending options?
If you’re considering later life lending and need expert advice, Fitch & Fitch is here to help. We understand that everyone’s situation is unique, and we’re committed to helping you find the best mortgage solution to fit your retirement plans. Contact us today for more information, and let’s start planning your financial future together.