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What Are My Options if I Still Have a Mortgage When I Reach Retirement Age?

By Mark Gregory on November 12th, 2012

Retirement mortgages are becoming a rare breed. Nevertheless, with good research provided by an experienced equity release adviser, there are still such products available for the over 55’s. Products such as the Stonehaven Interest Select Plan are a good alternative to the now withdrawn Halifax Retirement Home Plan mortgage. If you have a pre-existing mortgage when you reach retirement age, there are certainly some options that are still available for you to consider.

 

Firstly, it is important to consider the changes in your income when you reach retirement. If your income during retirement still allows you to sustain the pre existing mortgage then the mortgage can be continued for a period. This will however be determined by the term of your existing mortgage and the attitude of your mortgagee. We have recently seen that since the FSA report into interest only mortgages, that residential mortgage lenders have revised their terms and attitude towards this sector of the mortgage market.

 

The repayment vehicle is where the issue has fallen down. Many people have taken interest only mortgages and for one reason or another never taken out the repayment vehicle that was meant to have provided the funds to repay the mortgage with at the end of the term. This has left a time bomb waiting to go off due to the sheer numbers of people with interest only mortgages now hitting their retirement years.

 

Affordability going into retirement is the one aspect of retirement planning most people do not look ahead for. Their income will fall as full time employment will usually cease and pensions as we all know have not performed as the quotes originally showed when personal pensions were originally take out.

 

Therefore, upon attaining retirement age, if you are unable to afford the mortgage, it is necessary to take the correct steps to remedy the situation. Your existing lender should allow you to switch to another interest only mortgage provider, should one be suitable to meet your requirements. To be able to do this, the loan-to-value ratio will be key as to what options will be available upon remortgaging outstanding. Now that the Halifax Retirement Home Plan mortgage has been taken out of service, what options actually remain to switch to?

 

By considering switching to an interest only lifetime mortgage can allow you to make monthly interest payments; the balance remains the same, which is repaid once the property is sold. The question to ask yourself is whether you require the mortgage to run for the rest of your life or to tie in with future plans, such as downsizing, or you only want the mortgage to run for a fixed number of years. Remember, selling your property and moving to a smaller property and paying off the balance is an option worth considering. The answer to these questions will determine the correct retirement solutions for you.

 

Equity Release Supermarket currently has two interest only lifetime mortgage plans available. Therefore, if your current lender does not provide this option, and you wish to remortgage then find an equity release adviser who can provide details. We can advise on both the Stonehaven range of interest select plans, or the recently launched more2life Interest Choice plan on 1st November 2012.

*UPDATE 1/8/21013 – Equity Release Supermarket has today obtained access to the new innovative Hodge Lifetime Retirement Mortgage Plan – for further details click here

However, always look at the options before pledging your future to an interest only lifetime mortgage product. You could be entitled to retirement benefits that can help you cope with the existing mortgage. For instance you could be entitled to council tax benefit or pension credit which could have an impact on your income & mortgage affordability. Certain organisations such as Shelter can provide mortgage interest advice and support to those who are eligible. It is worth exploring these options that can help with making payments.

 

There may be other residential mortgages that you can consider switching to. However, these companies such as Leeds Building Society may only provide a temporary reprieve due to the limited term permitted. Most lenders will usually want full & final repayment by a maximum age of 70-75.

 

It is therefore important to seek professional advice in order to make a well informed and well researched choice. Switching to an interest only lifetime mortgage such as the Stonehaven Interest Select Lite is one such option, wherein you make monthly interest payments for life and the balance on your mortgage remains the same. With Stonehaven interest rates now only starting from 5.99% monthly and thereafter fixed for the whole duration, for those that qualify this is an excellent & secure option available to people over age 55.

 

If you wish to cease making any payments towards the mortgage, maybe as you have no children or close relatives, then roll-up equity release schemes may also be a good option for you. A roll up equity release is where no monthly payments are required as instead the interest gets added to the balance. The equity release deals from some roll-up companies are excellent at the moment with the incentives to help with set up costs. For instance, the Aviva Flexible lifetime mortgage starts with rates as low as 5.57%, depending on personal requirements and this is coupled with free valuations and three cashback options.

 

However, if the thought of your inheritance disappearing before your eyes when you receive your annual roll-up lifetime mortgage statement arrives then its worth looking at companies like Stonehaven and more2life. You should know that interest rates are currently the lowest ever for Stonehaven in their six year history. From the number of interest only enquiries we now have, many people have also noticed and taken advantage of tying themselves into today’s lowest interest rates and fixing them & their futures up for the rest of their lives.

 

To discuss your equity release options at retirement call the equity Release Supermarket team on 0800 678 5159 today.

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