Over 55s could be sat on more equity in their homes than they realise, especially given the house price growth seen in 2021. The two main products available to those heading into their retirement years are Lifetime Mortgages (more commonly known as Equity Release) and Retirement mortgages.
With the equity release lifetime mortgage, people don’t have to make monthly payments unless they choose to.
The mortgage is usually repaid when the last borrower moves into long-term care or dies, and the property is sold. Any leftover money is passed down in the borrower’s will.
With the two retirement mortgage types available, borrowers can take out a deal where they only pay the interest on the loan – or a mortgage where they pay back both the interest and chunks of the original loan.
With the interest-only deal, because the borrower is only paying off the interest, this means the capital – or the original amount borrowed – will be repaid when the last borrower moves into long-term care or dies.
With the retirement capital and interest mortgage, the mortgage will be fully paid off when the mortgage term ends.
TOP TIP: Before looking to borrow money, we encourage you to speak firstly to family. Involving them in the process is a really good way to keep the process clear and open for everyone involved. Furthermore, obtaining advice from a qualified professional is essential to the process.
What can you use later life borrowing for?
The pandemic has impacted many of our finances and with significant rises in living costs on the imminent horizon, many will be looking at where they can access additional funds. Funds can be released to repay an outstanding mortgage, repay debts, or even to pay for at-home care.
Equity Release Myth Busting:
There are still some myths surrounding later life borrowing more specifically around Equity Release.
This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration. Check that this mortgage will meet your needs if you want to move or sell your home or you want your family to inherit it. If you are in any doubt, seek independent advice.
* https://www.which.co.uk/news/2021/12/buying-your-first-home-in-2022-five-things-to-consider/ – Which?
**https://www.moneysavingexpert.com/news/2021/12/key-personal-finance-changes-to-watch-out-for-in-2022–from-insu/
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