Mortgages For The Retired
Mortgages for the retired can sometimes be a tricky business and different lenders have different attitudes towards these mortgages. On the one hand many retired people have pensions, investments, and savings that will guarantee a regular income and should ensure that gaining a mortgage is not a problem. But whereas the income may not be a problem, the length of time of the mortgage repayments, as far as retired people are concerned, may put some lenders off.
Mortgage RepaymentA younger person applying for a mortgage will no doubt spread the repayments over 20 or 25 years time. Although the general length of retirement is generally regarded to be 20 years time, most mortgage lenders will generally not look favourably on lending to a retired person over this length of time.
Of course shopping around may help you find lenders, and there are reports that many lenders are recognising the fact that older borrowers do have enough income to repay loans. Your first point of call should be your own bank; they may look favourably on you if you have a long standing customer record with them, and have a good credit rating and regular income.
Beware the High-Interest LendersShopping around will of course allow you to gauge the best deals on the market and you will no doubt also come across the high-interest money lenders. Be very wary of lenders who claim that they will be able to help you no matter what your situation. You can often find advertisements for these types of lenders on daytime advertising and in the back pages of newspapers. The interest rates will be very high on these types of mortgages and loans, and any defaults will no doubt see you paying very high penalties.
Lifetime MortgagesIf you already own a home then a lifetime mortgage is a very popular option for releasing money from your property. A lifetime mortgage will release equity from your property in the form of a lump sum or regular income that you can spend on whatever you like. There are no monthly repayments although interest will be added to the mortgage. This interest plus the loan amount will be paid back to the lender when the house is sold; usually when you or your partner dies or if you move into long term care.
Although you will still be the owner of the property there are some disadvantages to a lifetime mortgage. The interest may grow quickly on this type of loan and if you repay the loan early you may end up paying early repayment charges. After the sale of the house there may not be that much cash left over for any dependants or to leave an inheritance.
Get Expert AdviceAs with any mortgages, loans, or equity release plans, you should take expert financial advice before going ahead with any contracts. Many people who have been given advice on lifetime mortgages for the retired have found that the information they were given had not been discussed enough and did not really suit their needs. A recent mystery shopper survey by the Financial Services Authority (FSA) found that lenders were trying to sell other investments from the lump sum that were not really suitable and were actually not much of an investment.
If you are considering buying some form of investment with part of your equity release money then make sure to check the interest rates. There is little point in borrowing money at a 7% rate and then investing in a policy that will only give you a 3.5% return after charges.
Always make sure you get reputable advice from an independent financial advisor and get as much information as possible on mortgages for the retired. If you are not sure about any financial investment, or do not have enough understanding of the mortgage or investment, then do not proceed. Taking responsibility for your own money may be the best way to keep your money secure.