Once you’ve retired, it can be quite difficult to get a mortgage with a traditional lender. This means that your options can feel very limited when it comes to borrowing over a longer time period or acquiring money once you’ve hit your retirement years.
However, while your options might feel limited, there are still some solutions available. With assistance from a top adviser, you can still find ways to release equity from your property through the use of a retirement mortgage.
What is a retirement mortgage & how does it work?
The concept of a retirement mortgage is actually quite simple. It is basically just a loan that is secured against your property. You acquire the loan either while you are in retirement or just before you go into retirement.
Once you’ve acquired the loan, you need to make payments toward the balance. Those repayments can be of capital and/or interest. The type of payments you make will be a condition of your loan and will be made in accordable with the mortgage deed terms.
In addition, the type of payments you make will have a direct impact on your overall loan balance. If you make payments toward both the capital and the interest, your balance goes down. If you make payments that cover the interest, your balance stays the same but doesn’t increase. You’ll make the repayments for a designated period of time, as set in the loan’s terms. The period of time could be a set number of years or it could be for the rest of your life.
How do I choose the right retirement mortgage?
The best tool to use in order to understand which retirement mortgage product suits your personal needs the most appropriately would our free smartER research tool. Similar to other comparison tools on aggregator sites, smartER will understand your personal circumstances/criteria before calculating which products you’re eligible for, their rates, and their maximum releases.
It is wise to get guidance on choosing a retirement mortgage product. Your choice will depend on your financial situation and the lifestyle you hope to have during your retirement.
The provider will factor in your income, which will need to be verified in order to qualify. If you plan on extending the loan through your retirement, you’ll need to show what your income will be once you’ve actually retired. This serves to prove that you’ll be able to afford the repayments even after you are no longer working.
Another factor that impacts eligibility is whether you are borrowing on your own or with a partner. It might seem like borrowing jointly is the better choice as it likely means you’ll be able to verify more income. However, that isn’t always the case. In the matter of a retirement mortgage, the provider will want to see that you, or your partner, can afford the repayments on your own. Once one of you passes away, the remaining borrower needs to maintain repayments so you must be able to verify affordability on an individual basis.
To choose the right retirement mortgage for you, you will want to take into account a few different considerations. First, you need to know how much cash you need. Then you’ll need to factor in the value of your property, your age and your income. By using our advisers at Equity Release Mortgage, you can better determine which product from which provider is right for your individual needs.
How much money can I release with a Retirement Mortgage?
What documentation do I need?
It is now required that lenders prove that you can afford the repayments of your loan. So, you should expect to have your income verified. To prove your income, the lender will require the following if you are currently employed:
• State pension forecast
• Any occupational scheme pensions
• P60’s
If you are self-employed, you’ll need the following:
• SA302’s
• Pension forecast
• Typically, 3 years of trading accounts
If you are already retired, you should expect to provide the following:
• P60’s from all pension schemes
• Last 3 months of bank statements to verify income
• Last annual Department of Work and Pensions State Pension letter
Aside from the above, you may also be asked to provide any proof of drawdown funds or investment income if it qualifies as a form of income that you want included in your lending application.
A retirement mortgage can give you freedom during retirement. You can spend the money however you’d like. Pay down existing debt, make a new large purchase or take a holiday. You can even gift your children or loved ones needed cash. Whatever the reason, a retirement mortgage can make your retirement years more enjoyable. For additional information on attaining a retirement mortgage, reach out to one of our trusted advisers to review the benefits and to find a plan that will suit your needs.