Retirement Mortgages

For many seniors looking to maintain their quality of life and independence into their later years, opting for an equity release retirement mortgage for added financial support could be an attractive option.

There are several plans and unique features to choose from, granting homeowners the freedom they need to select a plan that’s best for them.

Having the ability to access the value they’ve invested in their property can offer a boost in the financial assurance that some senior homeowners may be looking for. This money can be used to cover monthly expenses, pay for home improvement projects, cover travel costs, and more.

As homeowners, retired seniors should have the opportunity to access the money they’ve invested into their homes when they need it most, and an equity release retirement mortgage could present the best option of making this a reality.

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What is a Retirement Mortgage?

Typically, a retirement mortgage consists of applying for an equity release plan such as a lifetime mortgage, which is a long-term loan provided by a qualified lender based upon the person’s age and value of their home (among other possible factors).

Interest will grow over time with many lifetime mortgages, but there are plans that allow homeowners to make regular payments before the term of the loan has ended.

Finding an approach that meets the needs and circumstances of each homeowner is one of the key first steps toward finding a retirement mortgage that genuinely serves its goals. For this reason, it’s good to understand what each plan has to offer and choose one that fits the homeowner’s outlook on their later years in retirement.

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What Kind of Equity Release Plans are Available?

Selecting an adequate retirement mortgage requires taking steps beforehand to prepare, including assessing the homeowner’s personal finances, knowing what plans are available, and consulting with a licensed financial advisor qualified to assist with equity release loans who can deliver valuable guidance and support.

Realising this, let’s now turn our attention to some of the most common forms of equity release plans available that can help homeowners enjoy their retirement to the maximum.

1. Lump Sum Lifetime Mortgage

Considered to be the “original” lifetime mortgage, a lump sum lifetime mortgage allows the homeowner to receive a one-time payment for the total amount their loan is worth with no payments necessary for as long as the homeowner continues living in their home.

Typically, these loans come with a fixed interest rate that is “rolled up” over the course of the loan and paid when the home is sold.

This form of retirement mortgage is well suited for those who aren’t expecting to remain in their homes for a particularly extended period of time, or who prefer a single large payment to address specific expenses or purposes.

No monthly payments are generally involved with this plan, so there’s no need to worry about paying for the mortgage until the term has ended and the home is sold.

2. Interest Only Lifetime Mortgage

Those looking to keep interest rates under control may be drawn to the more balanced approach afforded by an interest-only lifetime mortgage.

If you’re over 55, an interest-only lifetime mortgage lets you take out money based on the value of your home, but rather than rolling up interest and paying off everything once the loan ends, monthly payments are made on the interest instead.

This can be a great alternative for those interested in a lifetime mortgage but worried about interest becoming out of control. The amount you owe the lender never goes up or down as long as you continue making regular monthly payments on the interest for the loan.

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3. Drawdown Lifetime Mortgage

Another great way to keep costs associated with your retirement mortgage to a minimum is to opt for a drawdown lifetime mortgage.

A drawdown lifetime mortgage is a great choice for homeowners desiring a greater level of freedom and control over their retirement loan, enabling them to release money from only when they see fit.

This may be better for retirees wanting a plan that can adapt to different lifestyle or financial changes and situations. Interest will only accrue on the money you choose to release from the home, giving you the opportunity to save much more on interest than could be possible with some other plans.

4. Home Reversion Plan

Only those 65 and older may be eligible for a home reversion plan and are distinct from other plans with their own set of features. This plan involves selling all or a portion of your home to the home reversion provider in exchange for a lump sum.

The reason why some people choose a home reversion over other plans is that this format can allow the homeowner to know exactly what will be left behind as an inheritance, among other factors.

There is no interest to pay or monthly payments to make, and if you still retain a portion of your home within the agreement, its value will rise if the price of the home continues to rise.

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Who Needs a Retirement Mortgage?

Many reasons exist that may cause someone planning for retirement (or already in retirement) to look toward a retirement mortgage as a way of fulfilling their goals.

Some people may want more financial freedom or assistance in dealing with regular living expenses, while others may view a retirement mortgage as a way to handle major expenses such as helping a family member pay for university fees or paying for pets or travel costs.

The money released from the home can be used any way the homeowner decides, but it’s wise to have a clear idea in mind of what the extra money will be used for and to discuss your plans with a financial advisor who can help identify the ideal plan and strategy for you.

If you’re nearing retirement and looking for more ways to make sure you have the resources you need, a lifetime mortgage or equity release could provide the freedom you’re looking for.

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What Will I Need to Get a Lifetime Mortgage for Retirement?

It’s important to find a reputable financial consultant and do the necessary preparation and research beforehand to find a plan that’s well-suited for you.

Also, if you are employed, you will need to provide your P60 and state pension forecast as well as anything else that can provide evidence to the lender of future income in retirement.

For those who are self-employed, three years of trading account information is commonly requested along with SA302’s or any pension information if it applies.

Be aware that it is possible you may lose eligibility for certain means-tested benefits that may include pension credits or tax breaks in certain situations.

What is the Best Retirement Mortgage?

Knowing how much you will need to borrow, how much you’d like to leave behind as an inheritance, and how you prefer to access your money and pay for your loan will all play a part in determining what the best retirement mortgage will be.

It’s also strongly recommended to bring your current financial situation and goals for retirement to the attention of a licensed financial advisor who understands equity release plans and is prepared to assist you in choosing the ideal loan.

Doing your level best to work out all potentially important details beforehand and having a clear vision for what you hope to accomplish through your retirement mortgage will put you on firm footing for getting a successful and rewarding retirement mortgage.

After you’ve done your research and know what options and features will be meaningful in helping you enjoy a more secure retirement, you can now know for certain which choice will be the best one for you.

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Other Things to Consider

While an equity release loan can be a fantastic way to provide an extra layer of financial security during retirement, it doesn’t come without its share of complexities and potential risks if the borrower is not careful.

These can come in the form of errors in planning that result in high-interest costs, early repayment penalty fees, making it more difficult to move, and other issues.

This is why it’s always important to have a solid understanding of your financial limitations and commit to living within them so you can receive the most benefit from your retirement mortgage.

It’s also important to settle on the plan that makes the most sense for your priorities and future in retirement, something a financial advisor can help to simplify and outline all available options and choices.

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Contact Us For More Information

If you’d like to learn more about all the ways a retirement mortgage can help you live your best years during retirement, be sure to contact the friendly team at Equity Release Warehouse who can help to point you in the right direction.

We know the intricacies involved with choosing the proper equity release loan and will be sure to answer all your questions and provide any details or information you may need to take the next step forward.

Visit our contact page to request a callback or reach out to us by dialling 0330 058 1579