LIFETIME MORTGAGES FOR PENSIONERS

Lifetime Mortgages for Pensioners

This page was last updated on 1 November 2020

Lifetime Mortgages for Pensioners

If you are a pensioner in later life, you may be considering a lifetime mortgage as a way of supplementing your pension income, paying off debts, supporting family, or paying for home improvements in retirement.

This article will help you by answering the most commonly asked questions about lifetime mortgages for pensioners.

Topics that you will find covered on this page

What is the difference between equity release and a lifetime mortgage?

A lifetime mortgage is a type of equity release where you take out a loan secured on your home.

When you take out a lifetime mortgage in later life, you release equity currently tied up in your property value.

The money you release with this equity release scheme may take the form of a tax-free cash lump sum or a series of smaller withdrawals, depending on the life mortgage product you select.

You will not need to sell your home, so you will retain ownership and can continue to live on the property rent-free. You do not need to make any monthly payments unless you select the option to do so by taking out a flexible plan.

Instead, the loan is repaid upon completion of the mortgage term. This is when the youngest of the homeowners either dies or moves into long-term care.

After this point, your property will be sold. The proceeds from this sale will then be used for mortgage payments.

All lifetime mortgage products are authorised and regulated by the Financial Conduct Authority.

The Equity Release Council trade body also build a no negative equity guarantee into  the features of all its lenders’ equity release products. This ensures that lifetime mortgage customers will never have to pay off more than the value of their home.

Here is a video from UK Care Guide explaining how a lifetime mortgage works.

What is the maximum age for a lifetime mortgage?

Unlike standard mortgages, there is usually no maximum age for a lifetime mortgage because they are designed for those in later life or in retirement.  There a lifetime mortgage for pensioners will almost always be available.

However, the homeowner must be at least 55, and if you are making a joint application, both you and your partner need to meet this eligibility requirement.

The borrower’s age and individual circumstances will impact the total amount of cash they can receive as a loan . If you are older or in ill health, you can normally borrow more.

You should speak to a financial adviser for support before making a choice about which equity release service is right for your situation. These money experts can provide financial advice and let you know about any extra costs that you may encounter in the application process, such as solicitor or valuation fees.

Try our free lifetime mortgage calculator and see how much you could borrow, as a pensioner, in 30 seconds

Do I qualify for a lifetime mortgage?

There are some additional eligibility requirements for lifetime mortgages. The lending criteria in the applications are :

  • You must own a property in good condition in the UK. This also needs to be your main residence.
  • The value of your home must be more than £70,000. The exact price of your home will affect the loan amount and interest rate you can receive from the equity release plan.
  • Some lenders also state that they won’t accept sheltered housing, listed buildings, or a house next to or above commercial premises. This is because these properties will be harder to sell upon completion of the mortgage term.
  • You must not have any other mortgages or debts secured against your home, or you must pay off all debt of this type when you receive the loan.
  • You must receive professional help and advice from a finances adviser, as lifetime mortgages may impact your tax position and entitlement to state benefits such as pension credit.

 

However, the criteria can change for some providers and there some providers do not have an upper age limit, meaning that you can apply even if you are a pensioner.

"Unlike standard mortgages, there is usually no maximum age for a lifetime mortgage because they are designed for those in later life or in retirement. "

What types of lifetime mortgage are there?

There are several major types of products, and lifetime mortgage rates vary between lending companies and types of plans.

Different lifetime mortgage providers may also call these types by a different name.

You should call a money expert guide for further advice on which one of these plans has the best benefits for your personal circumstances.

Roll-up

In a roll-up plan, you receive a lump sum of money at the beginning of the mortgage term. The exact amount depends on property prices and the loan-to-value agreement of your mortgage.

Interest then accumulates on the initial loan amount in addition to however much interest has already been added.

Drawdown

Drawdown lifetime mortgages grant you the ability to release capital from your property in stages. However much money you choose not to withdraw will be held in a special cash reserve that you can access in later life.

You will only pay interest at the end of the term on the money you have withdrawn. These two factors work together as a way of managing your debt and controlling your finances.

Flexible

Flexible plans allow mortgage holders to make ad-hoc repayments. These monthly payments are voluntary, so you only have to make interest payments if you want to.

Flexible lifetime mortgage customers can repay a maximum of 15% of their initial loan amounts each year in this way.

Can you pay off a lifetime mortgage?

Most lifetime mortgages do not allow mortgage holders to repay the loan amount before the end of the mortgage term.

This is because the lender’s company works on the basis that interest will build up over the full mortgage period. Debt can, therefore, build up quickly, leaving less inheritance to your family estate.

However, the Equity Release Council guarantees that the costs of a lifetime mortgage will not exceed the total value of your home.

If in later life you do decide to end your lifetime mortgage early, you will incur an Early Repayment Charge. These fees vary from lender to lender, and are not transparent because they are based on government bond rates.

Some life mortgage providers also offer options to reduce the cost of interest down and help ensure there will be money left for your estate.

One alternative is to make an Inheritance Protection deal when you take out the equity release with a mortgage. This can be a good solution for protecting money for your family to inherit, but will reduce the cash sum you can receive in proportion with the percentage of your property’s value that you want to protect for your family.

Are there any alternatives?

Before you make a choice about which equity release product is best for you, it’s important to consider alternative deals such as:

Home reversion plans

In a home reversion plan, your property will be sold to a lender in exchange for a cash lump sum or regular payment into your bank account. But, you remain living in your home without having to pay rent.

Interest only retirement mortgages

With these types of interest only mortgages in retirement, you will receive a lump sum and then be required to pay interest each month.

You might need to provide your retirement income details in your application to prove that you can afford the monthly interest repayment rate.

Enhanced lifetime mortgages

These are like standard lifetime mortgages, except your medical records are also taken into account to determine your eligibility. If you are deemed to be in ill health, you can borrow a larger amount of money.

You should speak to a member of a financial advisory service for help and advice about which equity release product is best for your situation.

If you are a pensioner, we can help guide you through the lifetime mortgage process, and answer any questions you might have.  

You can contact us in one of 3 ways:

  • book an appointment directly in the calendar below
  • leave your contact details and we will get in touch with you
  • call us directly on 0800 953 3792

First, check how much money you could receive from a lifetime mortgage, then speak to someone, if you have more questions.

1) book an appointment in the calendar below.

 


2) Call us now and speak to an equity release specialist

You can call us between:

Mon – Thurs – 9am – 8 pm

Friday – 9am – 5:30pm

Saturday – 9am – 5pm

0800 953 3792

3) Leave your contact details and we will get in touch with you

All calls regarding equity release are undertaken by Key Equity Release, the UK’s leading specialist in this area.

Other articles that you may find useful

Lifetime Mortgage Providers

The Equity Release Council trade body has 14 members.  These lifetime mortgage providers are authorised and regulated by the Financial Conduct Authority. They all abide by the ERC’s no negative equity guarantee.

What Are Lifetime Mortgages?

Lifetime mortgages are a popular type of equity release where you take out a loan secured against the value of your home. This later life equity release scheme allows you to unlock money that is currently tied up in your property.

home reversion calculator (2)

Home Reversion Calculator

A home reversion equity release calculator is a tool that helps you find out how much money you could receive with home reversion plans. These are different from lifetime mortgage calculators that you often see.

drawdown lifetime mortgage (2)

Drawdown Lifetime Mortgage

A drawdown lifetime mortgage is a type of life mortgage where you can release equity from your home in a series of small withdrawals. This is instead of simply withdrawing one large cash lump sum at the start of the mortgage term.

Lifetime Mortgage Rates

The majority of lifetime mortgages have a fixed interest rate for life. Therefore, they are sometimes called a ‘lifetime fixed rate mortgage’. The rate will range between providers and can change quite often..

Mortgages For Pensioners

If you are a pensioner in later life, you may be considering a lifetime mortgage as a way of supplementing your pension income, paying off debts, supporting family, or paying for home improvements in retirement.

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