Lifetime Mortgages For Over 70s

A lifetime mortgage is a type of equity release product that allows consumers to borrow money that is secured against their property.

With a lifetime mortgage, homeowners can request to receive their money in regular instalments (usually monthly), or as a lump sum.

The funds taken from the home are always free of tax, but interest is charged on the loan for the duration of the scheme. This interest tends to be lower than it is for conventional mortgages, but it builds over time if it is not repaid, so it amounts to a significant value.

Homeowners with lifetime mortgages are not expected to pay back the money they borrow.

Instead, when they enter permanent care or pass away, the equity release lender will sell their property and take some of the funds, and this is how the homeowner pays them back.

Advantages of Lifetime Mortgages

One advantage of a lifetime mortgage is that it allows the homeowner to remain the homeowner, and to stay in their property for the rest of their life.

This is particularly important for people whose homes are fit for purpose (i.e. disabled-friendly or retirement-friendly), people who live near to their family who can care for them, and people who are not in a fit state to move house.

Another benefit is that there are many different types of lifetime mortgages, so there is something for everyone.

There are plans with low-interest rates, plans designed for people in poor health, plans that allow you to make repayments, and plans that give you the opportunity to purchase a second home. In other words, equity release plans are tailored to the consumer’s needs (1).

Finally, the money that you receive via a lifetime mortgage is entirely tax-free. Some people even use equity release as a way to gift money to their relatives and avoid inheritance tax.

Normally, inheritance tax would be charged on any funds that are passed down as inheritance, but if money is gifted through a lifetime mortgage, this is not an issue.

Disadvantages of Lifetime Mortgages

On the other hand, there are some disadvantages to lifetime mortgages. One drawback is that there are costs involved with the equity release process, and not everyone is capable or willing of spending money on this. That being said, it is possible to use your equity loan to pay for this.

Another downside is that you will get into debt if you take out a lifetime mortgage, particularly if you are not paying back any of the loan or the interest.

Although you are free to spend your loan without having to pay back any money, this may be stressful for you if you prefer to rely on money that is entirely your own.

Finally, though we always claim that lifetime mortgages are very flexible, there are rules that apply to each and every equity release plan. This may mean that you cannot find a plan that suits all of your needs. For example, if you are fond of the voluntary repayment plan, it may frustrate you to find out that you cannot always repay all of the loan.

Alternatively, you may be able to repay the loan in full, but you would have to wait a certain period of time before doing so.

Who is Eligible For a Lifetime Mortgage?

To be eligible for a lifetime mortgage, you need to be a homeowner, as the equity release provider will need to be able to sell your property at the end of the scheme.

It is also essential that your property is worth at least £70,000.

In terms of age, you must be at least 55 years old to release equity from your home. Some lenders refuse to offer loans to people over a certain age, such as 85, but others are open to accepting customers of all ages above 55.

There are other factors that influence your eligibility for a lifetime mortgage, but these factors are different depending on which equity release lender you want to apply to and which equity release plan you want to have.

For example, some equity release lenders want to offer loans to people in certain locations, and they are willing to offer more money if you live in a particular area. However, generally, you can take out equity no matter where you live, which includes urban and rural areas and high-income and low-income areas.

The only way to find out definitively if you are eligible for a lifetime mortgage as an over 70 is to seek an appointment with an equity release adviser, who will ask you questions about your financial situation to find out whether you would qualify for an equity loan.

Are there Lifetime Mortgages For Over 70s?

Generally, if you are over 70, you will be able to take out a lifetime mortgage. Many lenders do not have a maximum age for equity release, so they even have applicants in their late 80s.

In fact, it may even be more beneficial for you to get involved with equity release than it is for a 55-year-old. This is because some lenders are willing to offer low-interest rates for older lenders, amongst other benefits.

However, keep in mind that certain lenders will not be prepared to offer you a loan. We recommend speaking to an adviser to find out whether you fit the lending criteria for an equity release lender near you.

Why is it More Difficult For Over 70s to Get a Lifetime Mortgage?

The main reason it can be trickier for someone over 70 to qualify for a lifetime mortgage is that they will be paying back less interest in total as they will be on the scheme for a shorter amount of time.

This means the equity release lender will get less money out of lending to someone in their 70s.

Types of Lifetime Mortgage For Over 70s

Over-70s can apply to any of the eight types of lifetime mortgages. These are:

The interest-only plan
The income plan
The voluntary repayment plan
The enhanced plan
The drawdown plan
The second home plan
The lump sum plan
The buy-to-let plan

However, it goes without saying that certain plans will be beneficial for some over-70s and not others.

As a general guide, enhanced lifetime mortgages are usually well-suited to over-70s as they may provide homeowners with larger loans and lower interest rates if they are above a certain age, and if they have a certain disability.

The lump sum plan and the income plan can both be great for over-70s, but for completely different reasons. With a lump sum arrangement, equity release consumers can use the tax-free cash to purchase something immediately, such as a new car or a holiday.

With an income arrangement, they can benefit from a top-up to their monthly income. This requires the homeowner to be earning an income, which is usually in the form of a state pension, unless they are still working.

In terms of plans that may be detrimental to equity release consumers above the age of 70, we would encourage you to be wary about the buy-to-let plan.

This is because you would be releasing a large amount of money to buy a new property, and all the money would go towards this. If you are in your later years anyway, it may not be worth it to get into debt for the sake of earning a monthly income from tenants for a relatively short period of time.

The same can be said for the second home plan, as this also involves having enough money to pay for a second property.

However, if you believe you would make the most of this second property, whether it be to relax in the summers, spend time with family, or get away from the city, you may decide that this plan is in fact right for you.

How to Increase Your Chances Of Getting a Lifetime Mortgage If You are Over 70

The reasons that an equity release lender is willing to offer you a mortgage are very different to the reasons a conventional mortgage lender would want to do this.

With a traditional mortgage, it is vital that over-70s can prove that they have a reliable history of paying back money they have loaned and that their income is high enough for them to be able to afford repayments.

However, this is not necessary with a lifetime mortgage, as repayments are not part of the scheme unless the homeowner chooses a plan that allows them to pay back some of the loan or interest.

This means that you are not guaranteed a lifetime mortgage if you have a high income and an excellent credit rating. However, it could make you more favourable to certain lenders, so it is a good idea to spend some time trying to improve your credit rating.

One way to increase your chances of getting a lifetime mortgage is to make sure you only ever deal with equity release advisers who are affiliated with the Equity Release Council.

This ensures that the process is above board, and it means that he will not miss out on any deals, as the equity release adviser will ensure they locate the best lender and plan for you.

Another tip is to keep your home in excellent condition, as this will make it more likely for the lender to be interested in offering you a loan.

You may live in a low-income area with a low-value property, but if it is in good condition, this could make your property even more desirable than a home in a wealthy area that hasn’t been well maintained.

Why Lifetime Mortgages For Over 70s are a Good Idea

One reason that it is a good idea for over-70s to take out a lifetime mortgage is that they can have peace of mind about their retirement. Instead of worrying that their pension and savings will not stretch far enough, they can rely on their equity loan to support them in their later life.

Lifetime mortgages are also great for over-70s as they can be spent on absolutely anything – there are no obligations to spend the equity loan on bills or paying off debts, though these are both sensible ideas.

This means that if a pensioner wanted to renovate their home to make it more suitable for their retirement, they could do this using their equity loan, without worrying about having to make repayments.

Another important point is that over-70s may struggle to qualify for traditional mortgages as they are usually not receiving an income from work. This means they cannot be relied upon to repay the money in the same way that employed people can.

What’s more, it is possible that they will pass away before their mortgage term ends, and lenders want to avoid this at all costs as it means they would receive less money. Sometimes, traditional mortgage lenders increase the interest rate for this exact reason.

On the other hand, with equity release, as the money does not have to be repaid, it doesn’t matter whether the customer is currently working or retired.

What’s more, the equity release scheme lasts for the duration of the homeowner’s life, so the lender does not have to worry about the homeowner passing away.

Finally, if you do not have any family to leave money to, equity release would be a great idea as you would be able to tap into the funds in your property without being concerned that your loved ones would be left with a reduced inheritance.

Why Lifetime Mortgages For Over 70s are a Bad Idea

Firstly, if you are over 70 years old and you are fortunate enough to have enough money in your pension and/or savings to afford retirement, taking out a lifetime mortgage is probably not the best idea.

This is because it is better to avoid being in debt if at all possible, and if you have any family you want to leave money to, they would get more money if you didn’t take out equity.

Secondly, you shouldn’t automatically rule out a traditional mortgage just because you are over 70.

It may be possible for you to find a conventional mortgage lender who is willing to offer you a loan, and because this would involve repayments, you would be able to pay off the debts instead of owing back a large amount of money at the end of your life.

Finally, equity release requires total commitment, as you are expected to stay in your property for the rest of your life and stick with the scheme.

Some lenders will charge you a fee if you decide to stop the scheme, and this can negatively impact your financial situation. With a traditional scheme, you would be able to let go of it at the end of your term, so the debt would be short-term.

Things to Keep in Mind When Getting a Lifetime Mortgage as an Over 70

We always advise our customers to do some research before taking out a lifetime mortgage, and this is all the more important if you are over 70, as there are some additional things to consider.

1. Check your benefits status

You should always speak to an adviser before deciding to take out equity, and this is especially important if you are currently claiming means-tested state benefits. Releasing equity can take away your right to receive benefits.

Decide whether you would be in a better financial situation if you continued to claim benefits, or if you decided to release equity with the potential to lose your benefits.

2. Consider your inheritance

Another important thing to consider is your intentions when it comes to leaving an inheritance. If you are not set on doing this, you can go ahead and release equity without thinking about the consequences after you pass away.

However, if we’re being honest, the vast majority of people want to leave money to their loved ones, so you should think about how taking out equity could impact on this.

In general, when a homeowner dips into the funds that were once inaccessible in their property, they are reducing the amount of money their family can get their hands on in the future.

However, you can ensure your family still inherit some money by selecting an equity release scheme that includes inheritance protection. These are often associated with home reversions, but most modern lifetime mortgages for over 70s boast inheritance protection too.

3. Reach a consensus with your partner

Though it is possible to take out equity independently, we would always advise that you have a conversation with your partner about this decision because it is something that will affect the two of you.

If you and your partner agreed to release equity from your property, the equity release scheme will only conclude when both you and your partner are in long-term care or have passed away.

On the other hand, if you have taken out equity on your own, and you either pass away or enter long-term care first, your partner will be asked to vacate the home very soon after the end of the scheme.

This is always best to be avoided, as it can be very stressful for your partner, and they may end up in a financial disaster.

What Happens If I am Rejected From a Lifetime Mortgage?

If you speak to an equity release specialist before making the decision to take out equity, it is very unlikely that you will be rejected from a lifetime mortgage. This applies to everyone, whether you have just turned 55, or you are over 85.

This is because equity release advisers are trained an understanding which equity release plans suit their clients, so they can inform you if they believe your preferred plan will not be suitable for you.

However, in the event that you are rejected from a lifetime mortgage, you are always able to apply to a new one. You will have to pay various fees for this application, but it should be easier the second time around.

If you do decide to apply to a new lifetime mortgage, please speak to an equity release adviser who is a member of the equity release council so that you can avoid spending time and money applying to another plan that you are not eligible for.

There are some obvious reasons that you may be rejected from a lifetime mortgage.

Aside from being too young (under 55 years old), not being a homeowner, or having a property that is worth less than 70,000 pounds, things such as having a leasehold property, having a retirement apartment, having an existing mortgage, and having a property that is in a bad condition, can all affect your entitlement to a lifetime mortgage.

If you discover that you are not eligible for equity release in any way, there other options that you could look into that would help you to survive your retirement without facing later life poverty, which is an issue that is becoming more and more relevant in the current cost of living crisis.

What are the Alternatives to Lifetime Mortgages For Over 70s?

1. Pension

Firstly, if you have enough money in your pension, this is the simplest and most common way to fund your retirement. This applies mostly to people who have been working throughout adulthood, without large employment gaps.

As you receive your pension income on a regular basis, it is a reliable source of income that can help you too cover the costs of everyday life, such as paying the bills or doing the grocery shopping.

What’s more, your pension is entirely yours to spend, so you do not have to worry about getting into debt if you rely on your pension as your main source of income.

On the other hand, not everybody is fortunate enough to have a reliable pension.

It goes without saying that anyone who has had to take time off work, for maternity leave or other reasons, will have a smaller pension. Self-employed people may also struggle if they have not saved up enough money for their retirement.

Finally, some pensioners saved a good amount of money from retirement, but they did not predict that the cost of living would rise to such an extent, which means that they have been left with less money than they imagined.

This may be a reason to consider a scheme like equity release, which is open to people regardless of the income they are receiving or have received in the past.

2. Savings

If you happen to have plenty of money in your savings, we would always advise that you rely on this instead of taking out equity from your property.

It is likely that you have reserved the savings for retirement anyway, so there is no harm in dipping into these when you need to. Having said that, not everybody does have enough savings to last them throughout their retirement, and some people don’t have any savings at all.

Again, this is where equity release could come in, as it does not discriminate against people who have not saved up a large amount of money. Even if someone is very cash poor, if they can offer a property to an equity release lender, they would be entitled to an equity loan.

3. Downsizing

If you are struggling with the cost of living, but you do not want to get into debt through equity release, you may want to consider downsizing to reduce the amount of money you are spending on bills and your mortgage.

Some people believe that downsizing always means moving to a smaller property. This is often the case, as smaller properties tend to be less expensive than larger ones, however, the key concept with downsizing is value and not size.

Going from a high-value property to a lower-value property is not always desirable, but it may be worth it in order for you to have more money in retirement.

There are also many reasons you may want to move house in your later years, such as being closer to family, being closer to amenities, or simply wanting to experience a new property after having lived in the same one for many years.

Something to consider if you are interested in downsizing is that you will need money to pay for the fees involved with this process (2).

Unlike with equity release, you cannot deduct these fees from your loan, so you will have to make sure that you can afford to pay out for downsizing.

3. Working

Some people have the stamina to continue working beyond retirement age. If you believe this is something you could do, we strongly recommend returning to work, as it is the easiest way to ensure you have a regular monthly income coming in.

Many over 70s who choose to return to work will reduce their hours to avoid becoming too fatigued, or they may even try to find freelance work to ensure they can choose their own hours.

However, we are not naïve to the fact that most people do not want to return to work, or they simply do not have the energy for it.

If you do not believe that working would be feasible for you in your later years, get in touch with us for more suggestions about how you could earn money in retirement.

How to Get a Lifetime Mortgage as an Over 70

If you are interested in getting a lifetime mortgage as an over 70, please get in touch with us at 0330 058 1579 or input your details on this page and we will give you a callback shortly.

Please do not be discouraged if you think you may be ineligible for a lifetime mortgage as an over 70, as it may be possible for you to find a lender that would be willing to offer you a loan.

You can only ever find out for definite if you reach out to us. We offer a free consultation to all of our new customers, so you lose nothing by contacting us to find out more about lifetime mortgages for over 70s.

If you happen to be reading this article despite not being 70 years of age or above, we may still be able to help you.

We offer equity release advice to people of all ages, particularly people who have reached the minimum age requirement for equity release, which is 55 years old.

We work in a wide variety of areas across the UK, so whether you live in a large city or a tiny village, we may be able to help you to discover how you can take out equity from your property, and how this would affect you and your family in the future.

Please head to our homepage to find out whether we work in your area, and browse our frequently asked questions to find out more about what equity release is, how it works, and what the various advantages and disadvantages are.

For general tips on how to survive the cost of living crisis as a pensioner, have a look at our blog post on budgeting suggestions.

We are aware that tightening your budget is not a miracle solution to the rising cost of living, but it can go a long way to help you manage your finances.

Finally, if you are certain that equity release is not for you, or you are not eligible, please do reach out to us to find out about the alternatives to equity release. Some of the most common alternatives are downsizing and re-mortgaging, and we would be happy to delve into the pros and cons of these schemes.

Whatever decision you end up making, we would be honoured to play a part in your financial planning for the future.

References

[1] Equity release: it’s 2022, not 2002 https://www.financialreporter.co.uk/equity-release-its-2022-not-2002.html

[2] Downsizing your home https://www.equifax.co.uk/resources/money-management/downsizing-your-home.html