No matter how many years you spend saving and preparing for retirement, when the time comes it can often be that there isn’t quite enough to keep you comfortable or allow you to do all the things you hoped to do.
Whether you want to give some money to your children, make some home improvements, travel the world or simply enjoy your retirement without worrying about income, later life lending can provide some great options for the over 55’s.
At Bower, our knowledgeable financial experts are on hand to provide independent advice on later life lending opportunities and can help you to find the very best deal for your individual needs and circumstances.
What is Later Life Lending?
Retirement should be one of the best times in your life where after years of hard work you can finally take a step back, relax and do all of those things you didn’t have the time or the chance to do before. However, even with the best of intentions over the years, saving up enough money to last can prove extremely difficult.
Later Life Lending Solutions
Later life lending solutions can help you to make the most of your retirement and come in a range of options to suit your plans for the future such as;
Retirement Interest Only (RIO)
ROI mortgages were designed to accommodate older borrowers over the age of 55 who could struggle to get a mainstream mortgage due to age limits.
This type of mortgage allows homeowners to borrow against their property buy only pay back the monthly interest and not the loan itself. This means that the amount owed doesn’t increase over time and because you are only paying off the interest, the payments will likely be lower than a standard mortgage.
The terms of these loans usually mean that there is no fixed end date and as long as the monthly payments are made then you can remain in the home, but some include a fixed term that requires the loan to be repaid when you reach a certain age so always check the terms of any proposed plans carefully.
The remaining capital on the mortgage will have to be repaid from the proceeds of the sale of the property once you no longer require it, move into long term care or pass away. This does mean that you will not be able to leave it to your family which might or might not affect your decision.
Equity release allows homeowners over the age of 55 to access tax free cash tied up in their homes and helps to provide the financial freedom they deserve to fully enjoy their retirement. There are 2 main types of equity release – lifetime mortgages and home reversion plans.
2 Main Types of Equity Release
This type of equity release allows you to free up some of the value in your home without needing to move and whilst still remaining the owner of the property. The cash lump sum that is released is tax-free and you are free to spend the money as you wish.
The loan does not need to be repaid during your lifetime, only once you no longer require the property and have moved into full time care or passed away will your home be sold to repay the outstanding loan.
You can even choose whether or not to pay interest each month, if you choose not to then it will simply roll up and also be repaid out of the proceeds from the sale.
This type of equity release can result in you being able to leave less as inheritance, so if that is something that you had hoped to do then you will need to take that into consideration.
Home Reversion Plan
This type of plan is less common and requires that you sell a share of your property for which you receive either a cash lump sum or a regular income. Again the money received is tax-free and you are allowed to remain in your home rent free whilst continuing to maintain it.
There is no interest to be paid and if you keep a share of the property, then when you move into full time care or pass away, it will be sold and the proceeds shared according to the remaining split of ownership. This means that those who inherit the money will benefit from any increases in its value.
Could Later Life Lending Be Right For You?
Borrowing in later life can provide a wide range of benefits but at the same time it can also impact any potential inheritance you plan to leave as well as affecting things such as state benefits.
If however you are looking for a way to access cash that allows you to fully enjoy your retirement, without the stress or burden of worrying about money then later life lending mortgages or equity release could be the ideal financial solution.
Eligibility criteria can vary between equity release and later life mortgage providers but in general they require that applicants are;
- Aged over 55 with the limit set at around 70 to 85 for taking out a new mortgage and 75-95 as the limit for when the mortgage term ends.
- The mortgage is for a property which is your main residence.
- The home you are living in or buying is in the UK.
- That you can pass affordability checks by being able to prove you have a guaranteed income from either a state, private or workplace pension (unless applying for a Lifetime mortgage).
- For equity release the home you own must be worth over £70,000.
- For ROI mortgages the minimum loan amount is £10,000 which means your property must be valued at £100,000 or more.
If you are unsure of what type of later life lending might work best for your circumstances or if you have any questions, then do not hesitate to get in touch and the knowledgeable, friendly team at Bower can help you find the right solution for your needs.
Bower provides independent, impartial whole of market advice with an award-winning customer service experience. Initial advice is provided at no cost to you and without obligation. Only if you choose to proceed and your plan completes, would a typical advice and administration fee of £1,495 be payable.
If you are considering equity release, we strongly recommend that you read our ‘Advantages and disadvantages of Equity Release’ page carefully and talk to one of our specialists before deciding if you wish to proceed.
This is a lifetime mortgage or home reversion plan. To understand the full features and risks, please ask us for a personalised illustration.