Retirement should not be a barrier to getting a mortgage

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Retirement should not be a barrier to getting a mortgage

There are various reasons why people might seek a mortgage during retirement. They may want to boost pension income, to repay an existing Interest Only mortgage, to help family with a property purchase, or to manage their inheritance tax liabilities and maximise wealth transfer.

Fuelled by changing demographics and significant amounts of equity built up in many residential properties from years of increasing property values, the equity release market has grown rapidly in the last 20 years.

Broadly, the options are:

Lifetime Mortgages: the most established form of later life lending. Borrowers are not required to make monthly payments and the debt increases over the mortgage term.

Retirement Interest Only Mortgages: borrowers must be able to demonstrate they can afford monthly payments of interest only, until the property is sold.

Helping borrowers in their later years

Many retired people fall outside the algorithm-driven lending specifications of the mainstream banks, perhaps because they retired at a later age or because their income sources don’t fit the tick-box format of digital applications.

At Hampden & Co, we already lend to a number of clients over the age of 70 on the basis that their income, whether it be from earnings, investments or retirement/pension income, is sufficient to meet the affordability of the loans.

Our Retirement Mortgage service allows clients aged 55 and over to borrow against their home for an indefinite term. Only interest on the mortgage is paid monthly, and the capital is repaid when they sell the property, or when the last surviving borrower moves into long-term residential care or passes away.

The flexibility offered by this service allows them to release equity from their home without taking an equity release loan where the cost of interest rolls up, therefore reducing the equity in their property to be passed on. The Retirement Mortgage ensures that the amount of capital outstanding remains the same for the term of the loan. However, there is also an option for clients to make capital reductions if they wish, meaning that equity in the property can be passed on as an inheritance or to meet the costs of long-term care.

This flexibility enables clients to help children or grandchildren onto the property ladder, make home renovations to suit their retirement lifestyle, or fund other plans such as travel adventures.

Click here for more information on our Retirement Mortgage service.