Later life mortgages – all you need to know
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Later life mortgages – all you need to know
In this guide:
- What are later life mortgages?
- How do later life mortgages work?
- Why do people choose later life mortgages?
- Are later life mortgages becoming more popular?
- What age do you need to be to take out a later life mortgage?
- What types of later life mortgage are there?
- Trusted advice from your Bristol mortgage broker
- Contact information
What are later life mortgages?
Later life mortgages are mortgage products designed specifically for people in the later stages of life. They give older people the opportunity to borrow money against the value of their home which is likely to have risen if they’ve owned it for many years.
How do later life mortgages work?
Borrowing in later life involves taking out a mortgage secured on your property provided it is your main residence while you still retain ownership (some lenders will also do this on properties that are not your main residence). You can ring-fence some of the value of their property as an inheritance for your family and you can take the borrowed amount as a single lump sum or multiple amounts.
Some clients are still working well into their 60s, hold a healthy pension income, or have investments or inheritance that could be used to repay a mortgage. We work with lenders that can accept 100% of a borrower’s pension and manual underwriting processes mean they can consider a proportion of other forms of income when assessing affordability.
Why do people choose later life mortgages?
Later life mortgages can help people achieve many different goals. Using the value of your home to release funds into your bank account could:
- help you achieve a better standard of living by, for example, buying a new car or going on holiday
- pay for home improvements you want to make or adaptations that might be required to help you live in your home for longer
- be given to your grown up children who are struggling to save a deposit for a home of their own
- help with Inheritance Tax planning as the money released from your home is removed from your estate. We cannot give personal tax advice so please get independent advice from your accountant or financial planner on how a later life mortgage could fit into your plans.
Are later life mortgages becoming more popular?
Whilst there can be fluctuations in the short term, according to media reports, more people are turning to later life mortgages in recent years. In the current cost of living crisis, asset rich but cash poor pension prisoners are turning to their homes to help them battle rising prices.
What age do you need to be to take out a later life mortgage?
Ages vary by lender but most will accept applications from people over the age of 55.
What types of later life mortgage are there?
There are two main types of later life mortgage:
- Retirement Interest Only (RIO)
RIO mortgages require you to pay only the monthly interest on your loan. The term is usually set to end when the last home owner dies or goes into care, at which point, the whole balance of the loan is due. The lender will review your pension and investment income to make sure you can afford the repayments.
- Equity Release
Unlike RIO mortgages, equity release products do not require you to pay monthly interest on the loan. Money released and any interest would be repaid upon death or should the client go into long term care, whichever happens first. This means that no affordability assessment is required by the lender.
Trusted advice from your Bristol mortgage broker
Here at Mortgage Style, we are members of the Equity Release Council (ERC); the national body promoting the highest standards of advice and conduct in the Equity Release sector. You can read more about the ERC and how it’s helping people unlock the potential of their homes here.
Get in touch today
We hope this guide has been helpful and you now know more about later life mortgages. If you’d like to talk to us about your situation, please contact Kelly Flanagan, our Senior Mortgage and Protection Advisor, who has many years’ experience advising clients on later life mortgages:
0117 907 0818
Equity release includes Lifetime Mortgages and Home Reversion Schemes. We can advise and arrange Lifetime Mortgages and will refer to an approved specialist for Home Reversion schemes.
There may be a fee for mortgage advice. The precise amount will depend upon your circumstances.