17th May 2016

Borrowing Into Retirement Just Got Easier

For quite some time, the mature borrower has been restricted in their ability to have a mortgage either to buy a home or to raise capital for things like home improvements.

Although it has been possible to borrow up to age 75 with most lenders, the problem has been mortgage regulation insisting on a method of repaying the money back at the end of the term. Without being able to demonstrate this, you would have to pay back the capital along in with the monthly interest, known as a repayment mortgage. If you were 60, then the maximum term would have been 15 years making it very expensive to repay the capital in such a short term.

Nationwide is raising its age limit for people paying off mortgages by 10 years to 85. This would mean a person age 60 would be able to elect to pay for a mortgage over 25 years rather than being restricted to 15 years. The difference in monthly repayments between the two term lengths is around £220 per month based on a mortgage of £100,000 using Nationwide’s 2 year fixed rate of 2.29%.

The building society has said the increase was due to "growing demand" from this age group. It does still means that you have to prove you can afford the repayments in these years of your life such as a pension income. Halifax have already increased its age limits from 75 to 80 from Monday, but may well react to Nationwide’s offer in coming weeks.

The Equity Release option…

If you can’t demonstrate affordability to repay a mortgage and you want to unlock capital from your home, there is the option of Equity Release. This has the flexibility of allowing you to repay the interest back each month or let the interest element build up and eventually die with you. If you elect for the later, then the remaining mortgage will simply be deducted from your Estate. Because of life expectancy nowadays, this is only really feasible if you are over 65.

Although most family member would welcome you releasing your capital to enjoy your twilight years, we always recommend you discuss Equity Release options with your immediate family as they are likely to receive a reduced inheritance because of your decision. As a company we welcome family members attending meetings so they also fully understand the implications.

If you would like further information on any of the information given, please call us on 01603 750000 or email us at: ask@pfgmail.co.uk

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