According to various mortgage lenders, most upcoming retirees plan on moving after retirement and take out mortgages before retiring since they think once they retire, they won’t get a reliable mortgage plan. Well, you don’t have to do it that way. There are various mortgage plans for your taking once you’re retired.
One of these incredible loan schemes is retirement mortgages1. They’re mortgages for pensioners that you acquire against the equity market value of your home. Here’s a comprehensive guide to these fantastic after-retirement products.
Do you need to know more though? Be sure to check the guide on ‘What is a Lifetime Mortgage.’
That said here’s a detailed guide on what these mortgage schemes are and how they work.
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Understanding Retirement Mortgages
Retirement mortgages are essentially a mortgage that you take against the value of your residence, and it starts before your retirement or while you’re in retirement.
During the loan term, your mortgage lender will require you to make repayments of cash or interest according to the terms of the mortgage contract, and this will instantly affect your balance eventually – it helps in levelling up your loan balance. You make the repayments for a fixed term2 of ten or fifteen years, or over the lifetime of the retirement mortgage.
Retirement mortgages that are arranged under the lifetime mortgage structure last until the last homeowner dies or moves into residential care. At that point, your plan provider will put up your home for sale, take up their share, and the remaining proceeds will go to your heirs.
What’s the Best Retirement Mortgage?
The best retirement mortgage depends on your lifestyle and financial state. Lenders consider your age, income, the amount of capital you need, and the value of your property.
Like most lifetime mortgage schemes, you have to be 55 years old and above, which is the state retirement age and have a home that’s value for more than €70,000.
Mortgage providers also take your income into account, which assists them in proving that you have a stable income and are verified. The lenders will also require you to offer evidence of your income through retirement to prove affordability.
Borrowing in joint names will also significantly influence the mortgage lender’s decision. The mortgage firm will also have to stress test your future affordability. They carefully evaluate the implication of one spouse dying, and if the survivor can continue to cater for the mortgage loan on their own.
Therefore, it’s important to get independent financial advice before taking out the mortgage loan since your local mortgage advisor will raise these scenarios. The financial advisor will also ensure that you get the best mortgage deals based on your circumstances.
What Documentation is Required for A Retirement Mortgage?
Based on the regulators’ review of the mortgage market (MMR)3 in April 2014, it’s the plan provider’s responsibility to prove your affordability. Therefore, you can expect to go through some vigilant checks. In such a situation, before you get into retirement, mortgage lenders will usually request proof of the following:
- If employed – the plan provider will need to see your P60. They’ll also need to check your state pension4 forecast, and any other occupational scheme pension forecast (to prove future income in retirement)
- If self-employed – the lender will need to check three years’ worth of trading accounts. You might also have to offer them proof of your SA302’s5 and pension forecast
If you’re already getting a substantial pension(s) then your mortgage provider will request to assess the following documentation:
- Your final annual Department of Work and Pensions (DWP)6 State Pension letter
- P60’s from all private and occupational pension plans
- Your last three months’ bank statements, as further evidence of receipt of pension income
Moreover, some plan providers will take your investment income and drawdown finances as an acceptable form of income and use it in determining your mortgage amount.
Who Are Retirement Mortgages For?
Whether you want some capital to fund your home improvement projects, help your kids onto the estate market ladder, pay for your vacation plans or clear off your debts, financial freedom is essential in your golden years.
It’s for that reason that many financial institutions and mortgage providers have adopted an alternative means of capital raising –retirement mortgages. These mortgage plans are specifically designed for cash-strapped homeowners. Therefore, if you need a retirement mortgage if you find yourself in these situations:
- If your mortgage lender is pressing for an outstanding, final mortgage balance repayment
- If you’re moving into a bungalow, retirement home, or nearer to your kids for financial support
- If you want to offer a deposit to help your family onto the property ladder
- If you want to make the necessary home improvements to upgrade your kitchen, gazebo, balcony or estate at large
- When you require capital for things like a new vehicle, car insurance, a vacation in Dubai or any of the creature comforts, you need to make your retirement memorable and comfortable. In any case, you worked so hard – you deserve the best of everything!
You don’t have to struggle financially or downsize to a smaller home in retirement. You can have the best retirement with a reliable retirement mortgage plan. Therefore, head to your mortgage advisor today and get yourself the best mortgage plan.
How much money could you release?
A lifetime mortgage plan allows you to access the value of your home, tax-free without having to sell up, so that you can have money to spend on whatever you want or need.