Posts Tagged ‘interest only mortgage’
Tuesday, June 14th, 2011
Retired homeowners can now safely make plans for their future with the help of an equity release scheme.
There are a number of equity release schemes available today in the market. Some of these are:
- Interest only mortgages
- Lifetime mortgages
- Home income plans
- Home reversion
Amongst these schemes, the interest only mortgage is very popular. It can either have a fixed or tracker rate of interest which is to be paid at the end of every month. Interest only mortgage schemes have gained popularity in recent times.
This scheme is highly suited to people who are retired and it can help them in their old age. Those retirees who are opposed to the roll-up effect of conventional equity release schemes, can find solice in these interest only lifetime mortgage schemes. The reason being is that the balance will always remain the same & never increase, thus protecting any beneficiaries inheritance.
The interest only mortgage scheme is considered as the safest option by many people. It promises a fixed capital lump sum to spend on anything they wish in retirement.
In other plans such as home reversion, one sells all or part of the property & can thereafter live rent free in the home for the rest of their lives. These schemes do not start until age 65 & now only account for 3% of all equity release plans taken out.
It should be noted that none of the interest only schemes put the retired person at a risk to lose their right to live in their property. However, monthly payments must be maintained in order to not default on their mortgage. Obviously, these interest only mortgages always come with the health warning – Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
Should you have any questions on lifetime mortgages, home reversion schemes & interest only mortgages please contact the Equity Release Supermarket advisory team on 0800 678 5159 or alternatively email mark@equityreleasesupermarket.co.uk
Tags: equity release, equity release schemes, Equity Release Supermarket, Halifax Retirement Home Plan, home reversion, home reversion plans, home reversion schemes, interest only mortgage, lifetime mortgage schemes, lifetime mortgages
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Sunday, May 29th, 2011
The Halifax equity release scheme is an interest only lifetime mortgage plan. It is specially developed for retired individuals to boost their retirement standard of living. With this type of scheme, the outstanding balance remains unchanged throughout the plan tenure. The applicant only needs to pay interest regularly to the lender.
Traditional roll-up equity release schemes do not require the applicant to make interest payments. However, the interest keeps rolling up over the tenure period. This means that the outstanding loan keeps rising all the time. With the present interest rates, the loan amount will keep doubling after approximately every 10-11 years dependent upon the equity release interest rate. This means, if you have a loan of £10,000, after 10-11 years, you will owe £20,000.
Retired individuals, who can afford to make monthly repayments from their state benefits or pension, should opt for a Halifax equity release plan. While considering opting for equity release, it is important to get the right advice from the professionals. As professionals have the required knowledge and expertise, they can help you get the right scheme that will cater to your needs.
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Why do people opt for a Halifax equity release plan?
The Halifax equity release scheme, being an interest only mortgage plan for pensioners, does not require any form of repayment. This is also one of the most exclusive features of the Halifax equity release plan. With this kind of scheme, your mortgage is automatically allocated for a term of 40 years. However, should you live longer than this period then this lifetime mortgage plan will continue until death or the last person has moved into long term care.
It is due to these reasons that the Halifax equity release scheme has become extremely popular amongst retired individuals.
Contact the mortgage desk on 0800 783 9652 or email admin@equityreleasesupermarket.co.uk for the latest rates & information.
Tags: equity release, Halifax, Halifax Retirement Home Plan, Home Retirement Plan, interest only lifetime mortgage, interest only mortgage, lifetime mortgage schemes, lifetime mortgages, mortgages for pensioners, pensioner mortgages
Posted in Halifax Retirement Home Plan | No Comments »
Tuesday, March 8th, 2011
On Thursday 3rd March 2011, the equity release market saw another welcome lender return with Stonehaven relaunching their Lump Sum & Interest Select plans.
Having been absent for over a year whilst new funders were sourced, Stonehaven have now streamlined & simplified their product range.
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One product in particular will answer a common question –
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“Can I have an interest only equity release plan where I can repay the interest?”
Well the answer is now categorically – ‘YES’
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Before discussing the Stonehaven Interest Select option in greater detail, let’s have a look at the two products launched.
Stonehaven now have two propositions available to customers: -
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1. Lump Sum Only Option
2. Interest Only Equity Release
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The lump sum option does as it says on the tin; namely two lump sum options which offer different loan to values. Stonehaven are not launching at the maximum release end of the market, but aiming competitively with lower interest rates.
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Lump Sum Lite has the lowest interest rate at market leading 6.13%.
Plans start at 55 & this product will release 11% of the property value at this age.
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The Lump Sum plan has a higher interest rate of 6.24%, with a higher release of 14% at age 55.
Both plans have no drawdown facility, but a simplified single lump sum option from the outset.
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Next we come to the Interest Select products.
These innovative plans allow you to choose how much of the interest charged you would like to repay each month, and also how long you wish to pay this for. You could pay off the whole interest, or if you have a specific budget just pay off part of the interest with the remainder rolling up onto the original capital borrowed.
In effect it can be classed as an interest only lifetime mortgage for pensioners.
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Traditional equity release may not be suitable for everyone, especially due to roll-up of interest & the reduction this will make to potential beneficiaries.
Therefore, particularly suitable for people with good disposable incomes & used to servicing & managing debt throughout their working lives, these people can now control how much inheritance they leave behind by these new equity release schemes.
Primarily, it can be regarded as a half way house between a conventional mortgages and roll-up equity release. The scheme is an interest only eqity release & has all SHIP safeguards and protection offered by the FSA.
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However, a major feature of the Interest Select plan is the ability to be converted over to a full roll up scheme at a later date. This could be when one party to the mortgage dies or financial circumstances dictate that no more monthly payments wish to be made.
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Simplification on the new Interest Select means that when conversion arises, the new rate on the equity release plan will only be 0.2% higher than on the previous Interest Select. However, better still, should the roll-over date be previously set, then roll-over will be at the SAME interest rate as the original interest only element.
With interest rates starting at 6.13% which are currently the lowest in the market, a particularly attractive proposition can be found here for those interest rate tarts!
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TIP – Should one be able to afford the minimum monthly contribution of £25pm for the minimum roll-over period of 12 months, then one can easily achieve a roll-up equity release plan with a 6.13% monthly interest rate thereafter!
Surely, a tip not to be passed by?
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There have been four Interest Select plans launched which surely indicates which way Stonehaven feels the market potential lies.
These range from the Interest Select Lite at just 6.13% & releasing 11% at age 55, upto Interest Select Max with an interest rate of 7.57%, but releasing a higher 19% at age 55.
An example of borrowing £40,000 on the Stonehaven Interest Select Lite at 6.13% would result in monthly payments of £205pm.
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Qualification Criteria for Both Schemes
All Stonehaven equity release products are available to people aged 55 and over, living in a main residence in England and Wales & must have a minimum property valuation of £70,000. The minimum release has been reduced to £10,000.
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Additional Features
No Negative Equity guarantee
There is the guarantee that when the property is sold on death or long term care, the proceeds payable to Stonehaven can never be greater than the property value itself. This guarantees there can be no excess debt passed to the beneficiaries.
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Protected Equity
A valuable inheritance protection feature applicable to the lump sum plans. There is the facility to choose to protect a percentage of the final sale value of the property. Point to note is that the no negative equity guarantee and the amount that Stonehaven will lend are based on the value of the unprotected portion of the property.
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Thus, another chapter unfolds in the equity release storyline; providing greater diversity in the whole of market lifetime mortgage product range. A welcome read & a promising sign of further things to come for the industry.
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If you have any questions, or wish to obtain advice on the Stonehaven range of products please contact the Equity Release Supermarket team on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk
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Tags: equity release, Equity Release Adviser, equity release schemes, Halifax Retirement Home Plan, inheritance protection, interest only mortgage, lifetime mortgage schemes, lifetime mortgages, SHIP, Stonehaven, Stonehaven interest select
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Friday, October 29th, 2010
Equity release has been around for quite a long time and is available in different forms. Due to the important role it plays in retirement planning, equity release has gained plenty of attention these days. Unlike traditional schemes, equity release is one of the best tools for generating income after retirement.
Equity release schemes are described in many different ways, as home income plans, lifetime mortgages or home reversion. Essentially, every scheme offers a mechanism to release the equity you have built up in your property. Equity release offers you a way to release some of the value of your property during retirement when you need it the most. By opting for an equity release scheme, you will not need to move out or sell your property in order to gain the benefit of the equity tied up within it.
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Enhance your life during retirement with equity release
Equity release can be the best option for individuals who need extra money to give a boost to their spending power to cover their cost of living. Homeowners over 55 years of age can apply for equity release.
Unlike traditional mortgages, equity release schemes do not require you to make routine repayments. If you are using an equity release scheme to consolidate debt, you must know that you will be taking an earlier unsecured debt to secure against your property. If you are looking for a way to generate income during your retirement, an equity release scheme can be an alternative solution as a means of topping up your retirement income.
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To discuss any issues raised, please contact the Equity Release Supermarket team on 0800 783 9652.
Tags: interest only mortgage
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Tuesday, October 26th, 2010
Planning for your retirement in essence should start in your earlier years; however as we know life unfortunately doesn’t always go to plan!
Here we discuss the merits of the niche interest only mortgage product; the Halifax Retirement Home Plan which is becoming an increasingly popular way of providing mortgages for pensioners.
Since writing my original article on the Halifax Equity Release plan (click here to view), interest has certainly been escalating. The main reason being that people in retirement are unaware of their mortgage options once they finish work. But life must go on.
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What is the history of the scheme?
Established in 1984, the Halifax Retirement Home Plan was initially available through the Halifax branch network and was developed to provide low cost mortgage finance for the retired & elderly.
However, under the Financial Services Authority review of the lifetime mortgage market in 2006, Halifax withdrew the branch license to offer lifetime mortgage advice.
Therefore, the responsibility for providing advice on the Halifax Retirement Home Plan was left completely with lifetime mortgage qualified advisers including independent specialists Equity Release Supermarket.
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So what is the Halifax Retirement Home Plan?
In simple terms the scheme is an interest only mortgage for people who are retired & facilitates the release of equity tied up in the property. The release of funds can be for almost any purpose including:-
- debt consolidation including paying off credit cards/loans or mortgages
- holidays including cruises or just day trips
- replacement car or caravan
- home improvements
- gifts to the children providing a deposit for house purchase
- supporting your lifestyle through retirement.
Qualification for the Halifax equity release scheme is based on income. Halifax will only accept non-earned income & this must be in the form of: -
- Occupational pensions
- Private pensions such as personal pensions or retirement annuities
- State pensions
- State benefits including pension credits & disability benefits
The stated minimum age for the Halifax Retirement Home Plan is 65. However, as long as there is no earned income & justification for the size of the mortgage can be based solely on the above income, then ages lower than 65 can be achieved.
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How much can be released?
The minimum release on the Halifax Retirement Home Plan is only £15,000. However, to establish the maximum release possible would require the use of an affordability calculator.
Halifax does not base the size of release on a multiple of income, but whether the interest only mortgage can be afforded through retirement.
The data Halifax requires for this calculation includes income, credit status, number of applicants & credit commitments outstanding after the new mortgage commences.
This procedure can be carried out by qualified advisers such as Equity Release Supermarket & is an accurate assessment of the potential borrowings on this scheme.
The overall maximum release available can never be more than 75% of the valuation of the property. Therefore, should the affordability calculator show a figure greater than this, it will still be capped at 75% of the property value.
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Does Halifax require a repayment vehicle?
The answer to this is NO.
As the Halifax Retirement Home Plan is an interest only mortgage for pensioners, no form of repayment is required.
In contrast, the mainstream mortgage market is actually tightening its grip on new interest only mortgages, whereas this Halifax equity release scheme will still accept repayment by virtue of the eventual sale of the property. This would be on death of the surviving partner, moving into long term care or earlier property sale.
The term allocated to the Halifax home retirement plan is 40 years which should provide ample time for it to run for the rest of one’s life! This removes any concern about having to find the funds to pay off the Halifax scheme during your lifetime.
Most mortgage providers will only accept a mortgage term upto age 70-75 or in rare instances age 85. However, this only buys time as eventual repayment would be required. However, this scenario may still be suitable should one be downsizing at a predetermined date in the future.
The Halifax Retirement Home Plan therefore removes any element of capital repayment risk.
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So what interest rates & products are available?
Dependent upon whether you are a new or existing Halifax customer will determine the interest rates & products applicable.
Currently, the better deals are offered to new customers as they have access to the whole mainstream Halifax product range. This is a great advantage, as there is full access to current low rate tracker & fixed rate products. Click here for the latest interest only mortgage rates…
These include deals such as the current 2 year tracker rate at just 2.59%. Based on borrowing £50,000 this currently would only cost £107.92pm (3.6% APR).
Additionally, if remortgaging from another lender then there is the benefit of a free valuation & free standard legal fees, which reduces the set up costs significantly. I have experienced clients who have just £800 outstanding on a mortgage or even documents kept in deed store that qualified for this free remortgage package!
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What if I already have a Halifax mortgage?
The good news is you can still apply for the Halifax Retirement Home Plan. However, the situation here requires completely different advice & procedure. Should you wish to merely transfer onto the Retirement Home Plan then you can port over your existing rate which can be good news if on a standard variable rate. However, if you wish for additional borrowing then the process becomes a little more complicated.
The product range for existing Halifax customers is rather sparse & with the best deals starting currently at 4.99% fixed, hence there is a distinct advantage for new customers.
Such applications will be paper based & therefore processed manually which involves more human input. Experience has shown this results in a different underwriting approach to the process undertaken on new applications.
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Can I pay off the Halifax Retirement mortgage early?
The simple answer to this is YES.
Unlike equity release plans where penalties can potentially apply for the rest of your life, the Halifax interest only mortgage will only have early repayment charges for the initial product term. Therefore, should you have opted for the 2.59% 2 year tracker product discussed previously, the penalties would only apply for the first 2 years. After, this 2 year period the mortgage would then revert to the Halifax standard variable rate, currently 3.5%.
However, before the initial rate expires you will have the option to take out a new product from the Halifax mortgage range available at that time.
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So what is the advantage of the Halifax Retirement Home Plan over an equity release scheme?
The obvious answer to this is the fact that the Halifax mortgage is interest only & therefore requires a monthly payment of interest. The balance will always remain the same throughout the term of the plan. E.g. borrowing £50,000 today, will result in £50,000 requiring repayment once the house is sold.
In contrast, equity release schemes do not require any monthly repayment & therefore the balance will increase over time. Roughly speaking the balance of equity release schemes will double every 10/11 years.
From a beneficiary’s point of view, the Halifax interest only mortgage will guarantee an inheritance, as the final balance of the mortgage will always be known. This would be favourable for people who want to ensure the children definitely receive an entitlement to their parent’s inheritance.
With all this information & options available it is more important than ever to receive specialist advice to obtain the best deal for your personal circumstances.
Equity Release Supermarket can provide independent advice on both equity release schemes & interest only mortgages for pensioners.
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For further information or to request a quotation, please ring Mark on 0800 783 9652 or email mark@equityreleasesupermarket.co.uk.
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Tags: Halifax, Halifax Home Retirement Plan, Halifax Retirement Home Plan, interest only mortgage, interest only mortgages in retirement, lifetime mortgage schemes, lifetime mortgages, mortgages for pensioners, pensioner mortgages, retirement mortgages
Posted in Halifax Retirement Home Plan | No Comments »
Wednesday, October 13th, 2010
If you want to improve your lifestyle or repay outstanding debts and do not have enough cash then consider the potential of an equity release scheme. Homeowners who are over 55 and have little or no mortgage can release money against the value of their home. Due to different needs, different equity release schemes have been introduced.
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Lifetime mortgages and home reversion plans are two popular types of equity release schemes.
Lifetime mortgages are further divided into two subtypes:
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Roll-up lifetime mortgages – This equity release scheme is preferred by many people because they do not have to pay any interest. Instead the interest is added to the original balance & compounded year-on-year for the rest of one’s life.
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Interest-only lifetime mortgages – If you do not want your debt to build up then an interest-only lifetime mortgage can be the perfect option for you. Unlike other equity release schemes, this scheme allows you to pay off the monthly interest to the lender. By opting for the interest-only option, you can preserve more money for the future.The balance of the interest only mortgage scheme will therefore remain level for the rest of the term of the mortgage. Such schemes available include the exclusive deal Equity Release Supermarket have available with the Halifax.
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The Halifax Retirement Home Plan is available to those having already retired with a good disposable income with which they can service the monthly payments. The Halifax Retirement Home Plan is not available via the Halifax branch network as only lifetime mortgage advisers with the appropriate licence can advise on this product.
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Whether you choose a roll-up or an interest-only mortgage you can release the equity tied up in your property to provide the tax free lump sum you require.
You can use the tax-free money to spend as you wish including buying a new car, a second home or to go on a luxury cruise; the list is endless.
If you have decided to opt for equity release schemes then it is recommended that you receive advice from an equity release adviser who will guide you to the best equity release plan & guide you through the equity release process.
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To find a local Equity Release Supermarket financial adviser near to you click here.
Tags: equity release, Equity Release Adviser, equity release schemes, Halifax Retirement Home Plan, interest only mortgage, lifetime mortgage schemes, lifetime mortgages
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Monday, August 23rd, 2010
If you are 55 plus and own your own home that is your main residence, then you are eligible to choose from any of the current equity release schemes.
Today, many retired people are opting for equity release schemes because they offer a lump sum of money against the value of the property. Home reversion plan and lifetime mortgages are two different types of equity release schemes.
By opting for home reversion plans, you can sell all or just a part of your property in exchange for money. This tax-free cash will help you to live the rest of your life in financial security. There is also a lifetime mortgage scheme which allows homeowners to sell their whole property for money.
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Lifetime mortgages are further divided into various types such as:
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Roll-up plan – Under this scheme, you can borrow an amount of money from the mortgage lender against your home. You do not have to make any payments to the lender in order to repay the equity release mortgage. Instead the interest charged is added to your last years balance & compounded annually thereafter. Therefore the balance will increase year by year until the equity release planholder either moves into care or dies. At this point, the property is usually sold & the equity release company is repaid.
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Home income plan – By opting for this scheme, you will receive a regular monthly income against your home. In this scenario, a percentage of the value of the property is sold in exchange for a tax free lump sum. These funds are used to purchase an annuity which is how the scheme then provides the monthly income. The lender or financial institution will be paid by selling the home after you die.
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Interest-only mortgage – Unlike the roll-up plan, this type of equity release scheme allows you to pay off the interest charged monthly. Therefore the balance of the mortgage will remain exactly the same for the duration of the plan term. As a consequence the beneficiaries will know the exact amount that will be deducted from their inheritance. The actual loan is again repaid by selling the property. For interest only lifetime mortgage deals see our website.
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Out of the above mentioned lifetime mortgage schemes; you can choose the one which suits your financial needs by contacting Equity Release Supermarket on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk
Tags: equity release, equity release schemes, Home Income Plans, home reversion, home reversion schemes, interest only mortgage, roll-up scheme
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Sunday, August 1st, 2010
A unique, yet largely unknown equity release product – the Halifax Retirement Home Plan is increasingly being recognised as the answer to a financially secure retirement for the over 60′s.
Here we explain the process which leads to identifying whether you qualify for the Halifax Retirement Home Plan.
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Unavailable through the Halifax branch network, this lifetime mortgage can only be recommended by suitably qualified lifetime mortgage advisers such as Equity Release Supermarket.
Using their experience & knowledge, they are required discuss your objectives & using their independent financial status, can research the whole of the mortgage market to find the best deal for you.
Initially, the adviser will gather all relevant information necessary to understand your current situation including: -
- applicants – age & income
- liabilities including mortgage, loans & credit cards
- mortgage requirements – amount & type of product
- credit history
This information will enable the adviser to calculate whether you will qualify for the mortgage required.
Prior to this he will provide a key facts illustration (KFI) which outlines the particular product you are looking to apply for & explains its costs & features.
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The basis of qualification initially is the Halifax Retirement Home Plan calculator, which acts as a guide as to whether the case qualifies on an affordability level.
This will take into account total incomes including: -
- State pensions
- Occupational & private pensions
- Rental income
- Pension credit
- Disability living allowance (60%)
- Carers allowance (60%)
At the same time it will also need any outstanding monthly liabilities including: -
- Mortgage & other secured loans
- Personal loans & hire purchase agreements
- Credit cards
Using this data & assuming a credit worthiness commensurate with the applicants previous repayment history, the Halifax Retirement Home Plan calculator will advise a recommended mortgage figure.
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As this product is only available to people already retired, the Halifax Retirement Home Plan will not take into account employed or self employed incomes.
The scheme is not designed for people under age 65 & having earned income.
*However, the Halifax Retirement Home Plan does have flexibility on these issues, so always check eligibility first with Equity Release Supermarket on 0800 783 9652.
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Subject to the calculator confirming sufficient capital can be raised, then the next steps can be taken…
This would involve the Equity Release Supermarket adviser completing a ‘decision in principle’ with Halifax. This is a means of ‘dipping your toe’ in the water to ascertain whether in principle the application can be acceptable to the Halifax.
Details required are name, address, income, existing liabilities, mortgage amount & the product required e.g. tracker or fixed rate?
Upon submission of this information Halifax will assess this & credit score & complete a credit check on the applicant(s).
An online decision will be made by Halifax as to whether a full application can then be completed.
If successful, then conversion from decision in principle to full application can be made.
From there the payment of any fees are made with the valuation & solicitors then being instructed by Halifax & the case can continue to successful completion.
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All processing is now undertaken on the new Halifax online mortgage application system, which provides instant feedback on case criteria. This has improved processing times.
Completion times for the Halifax Retirement Home Plan are now ranging from application to receipt of funds of between 3-4 weeks.
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If you have any further questions regarding eligibility on this or other equity release schemes, please contact Mark on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk
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For additional information on the Halifax Retirement Home Plan & rates available visit our compare deals table.
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Tags: Decision in principle, equity release, Halifax, Halifax mortgage calculator, Halifax Retirement Home Plan, Home Retirement Plan, interest only mortgage, lifetime mortgages, mortgages in retirement
Posted in Halifax Retirement Home Plan | No Comments »
Wednesday, July 28th, 2010
Would you like to have a secure and enjoyable retirement?
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If your answer is yes, then an increasingly effective option for the over 55′s is using equity release schemes.
We all have different financial needs & the more recently developed equity release schemes are designed to meet these requirements. These schemes are incorporated within the lifetime mortgage schemes and reversion plan product range.
From this selection the roll-up lifetime mortgage scheme is preferred by the majority of people.
A lifetime mortgage scheme is specially designed for homeowners who are entering retirement and want to release equity from their home as a secured loan. Under this equity release scheme, the repayment takes place on death or the client moving into long term acre.
Once you have opted for this scheme, you can continue living in the same residence for the rest of your life, even if the equity release balance become more than the value of the house. This is due to the inclusion, at no extra cost, of the no negative equity guarantee. This ensures that no debt, over & above the property value can be passed onto the beneficiaries.
Reassurance is therefore given to the children that they cannot incur debt by the actions of their parents.
This rule is a condition of all lenders that are members of the equity release trade body – SHIP (Safe Home Income Plans) who provide consumer protection in the equity release marketplace.
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In Summary
A lifetime mortgage scheme can divided into the following types.
- Roll-up lifetime mortgage
- Fixed payment lifetime mortgage
- Interest-only lifetime mortgage
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Roll-up lifetime mortgage – Under this kind of scheme, you do not have to pay any interest or repayments for rest of your life. The interests will be compunded yearly onto your actual loan amount and it will be paid when the home is sold on death or moving into long term care.
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Fixed repayment lifetime mortgage – In this scheme, there is no interest added to the actual amount but you have to payback a fixed amount when your home is sold. The scheme remains the same even if you sell your home after six months or 25 years, hence it is always important you receive independent equity release advice. This equity release is currently offered by Just Retirement.
The maximum charge that can be secured is 75% of the property value. The value of the overall facility is determined by several factors including your ge, sex, property value & your health & lifestyle situation. Click here to request further details on this unique equity release scheme.
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Interest-only lifetime mortgage – People who do not want the build up & compounding of interest can choose to make monthly repayments of interest only. Using this method, no interest is added onto your main loan as any interest generated is repaid back on a monthly basis.
Before choosing a type of lifetime mortgage, you must consider your post-retirement income and what your needs will be.
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To discuss any of the above issues please contact Mark Gregory on 0800 783 9652 or visit the Equity Release Supermarket website at http://www.equityreleasesupermarket.co.uk
Tags: Add new tag, equity release, equity release schemes, Fixed lifetime mortgage, interest only equity release, interest only mortgage, Just Retirement, lifetime mortgages, No negative equity guarantee, Roll up lifetime mortgage
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Wednesday, June 30th, 2010
It is becoming more common for people reaching state retirement age to still have a mortgage running into retirement.
Even more so, there is a growing demand for extra mortgage lending once they are in retirement.
Here we discuss what retirement mortgage options are available, acceptable income sources & where to look for independent advice on these matters.
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There can be many reasons for having a mortgage beyond state retirement age; namely poor performing low cost endowments, previous unemployment or even long term health issues.
A mortgage that runs into retirement can have major issues with both affordability & term to its repayment date. Most lenders will require repayment on a mortgage by age 75.
We will now look at ensuring all available income is being claimed. Once researched, we can then discuss which of these are eligible for inclusion in mortgage affordability calculations.
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So what options are available on reaching retirement itself?
Well this will depend on affordability & how the financial management of the mortgage itself can continue. The main issue with regards to affordability of an interest only mortgage at retirement is how much retirement provision has been made & maximising any other available sources of income.
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What Type of Retirement Incomes Should I be Receiving?
Having reached state retirement age the state pension will become available. However, the level of this is dependent upon national insurance contributions paid over one’s working life. The current basic state pension is £97.65pw & on its own would not be sufficient to support an interest only mortgage payment alone. State Earnings Related Pension Scheme (SERPS) & any entitlement to the graduated state pension can possibly boost the state pension somewhat, but not substantially.
State pensions are a source of income that can be utilised towards a mortgage in retirement.
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Company pension scheme members can benefit greatly with additional pension income that could be index-linked yearly & be calculated dependent upon the number of year’s service.
There is also evidence that personal pension plans can also boosting retirement income. Increasing importance is being placed in this area on seeking independent financial advice. Due to falling annuity rates it is more important to shop around & optimise your pension fund. Annuity providers can now enhance your pension income if poor health issues exist.
Both company & personal pensions are a source of income that can be utilised towards a mortgage in retirement.
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With the recent economic downturn we have unfortunately seen the reduction in bank & building society interest rates. This has affected investors, once reliant on good interest payments, which would supplement their lifestyle. Again ensure you shop around to obtain a higher interest with your savings is more important than ever. Tax payers should make use of their annual cash ISA allowance of £5100 & non-taxpayers should ensure that Inland Revenue form ‘R85′ is completed in order they can obtain their interest paid gross.
Savings interest can be a source of income that can be utilised towards a mortgage in retirement.
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It is also important to check whether any means tested benefits are available from the Department of Work & Pensions. Dependent upon age there may be eligibility for certain benefits such as pension credit & savings pension credit.
Income levels below £132.60pw for a single person & £202.40pw (2010-2011) jointly could allow a claim for pension credit to be made. Also, check any entitlement to council tax benefit availability, which even though it cannot help mortgage payments directly, it can lower the monthly outgoings.
If there are disability issues then depending on the condition, disability living allowance (DLA), attendance or even carers allowance may be available.
Lenders have different rules on means tested benefits – to see which qualify for a mortgage in retirement contact Equity Release Supermarket on 0800 783 9652
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Maintaining employment through or into retirement does obviously alleviate some of the financial issues. However, experience has shown that there are difficulties in gaining employment.
Nevertheless, it is increasingly apparent that people are now looking to continue working into retirement & provide extra cash to support retirement lifestyle. If part time work can be found then it can not only assist the budget, but also the soul. People in retirement are feeling & looking younger & with more activity in retirement their average life expectancy is rising as social constraints are removed.
Employment income will only help people with existing mortgages going into retirement, but not anyone trying to obtain a mortgage in retirement. Lenders will only accept employment income if a new mortgage is to be repaid before state retirement age.
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Secondary investment properties can provide a form of rental income which can be used towards paying a mortgage in retirement. However, if any existing buy to let mortgage is in operation this will need to be declared & considered as part of the application.
As long as a tenancy agreement is in existence then this will be considered by the lender.
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Although not a specific means of retirement income, equity release schemes can also be considered a means of retirement support. The flexibility of drawdown equity release schemes now incorporates the use of drawdown facilities which are essential in supplementing a flexible lifestyle.
These drawdown equity release schemes provide an initial tax free capital lump sum, with an additional reserve facility that can be gradually withdrawn over future years.
Equity release lenders such as Just Retirement permit additional withdrawals in small amounts of £2,000 a time, which helps retirement planning & provides financial security for the future.
Another method of providing income from equity release is through a Home Income Plan. These equity release plans involve a combination of two products; a Home Reversion scheme & a lifetime annuity. The home reversion company purchases a percentage of the property in return for a tax free cash lump sum. The lump sum can then used to purchase the annuity which can then generate the lifetime pension income required.
Both these equity release schemes will not assist in obtaining a mortgage in retirement. However, in their own right they can provide alternative capital or income in retirement with no monthly payments.
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As you can see there are various income sources which mortgage lenders can consider.
With recent restriction on lending criteria, it is more important than ever to obtain independent financial advice on this specialist area of retirement mortgage finance.
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For further information & advice on mortgages in retirement, please click here for details of interest only mortgages currently available.
Alternatively please contact Mark Gregory on 0800 783 9652 or email mark@equityreleasesupermarket.co.uk
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Tags: Add new tag, equity release, equity release schemes, Halifax, Halifax Interest Only Mortgage, Halifax Mortgage, Halifax Retirement Home Plan, Home Retirement Plan, interest only mortgage, Just Retirement, lifetime mortgages, Mortgage in retirement
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