With more product choice in the Equity Release market, mortgage options for the over 55s have grown increasingly flexible. Helen Barnes, a Senior Adviser in our Later Life Finance team, explores options available, and the importance of seeking professional advice to help you find the right product for your requirements.
What is ‘Later Life Finance’?
We use the term to describe any borrowing or property related product that might be appropriate for a homeowner over the age of 55. This is an area of the mortgage market that is growing rapidly, and now includes;
Unlike a normal mortgage, this has no fixed term. Instead the loan runs until the borrower(s) passes away or moves permanently into care. At that point the property is sold, and the mortgage repaid. Interest is charged in the same way as any other mortgage, but with a Lifetime Mortgage the borrower can choose to let it roll up on top of the loan, pay some or all of it each month, or make ad hoc repayments. The amount you can borrow is based on your age and the value of your property.
- Retirement Interest Only Mortgages
Often called RIO Mortgages, these too have no fixed term. The loan runs until the borrower(s) passes away or moves permanently into care. The borrower pays the interest every month.
The term ‘Hybrid’ is often used to describe mortgage products that look like a regular mortgage, but allow you to transition into a Lifetime Mortgage or other product at a later date.
It used to be that mortgage lenders would draw the line at lending to clients who reach a certain age. An increasing number of lenders are reviewing and extending their criteria, and some now allow for older borrowers or have removed their age limits completely.
- Bridging Loans and second charges
In some scenarios, access to short-term borrowing can be a huge advantage. For example, if you are downsizing but want or need to move into your new home before your current one is sold, a bridging loan with retained interest (so there are no monthly payments) can give you time.
- How do I get advice on what’s best?
These products can be complex to understand, as many are designed for the long term and will have additional features, benefits and risks to consider. Careful, professional advice will help you protect your assets and achieve your objectives in the best way possible. Our Later Life advisers will, of course, consider your immediate wants and needs, but they will also make sure you’ve considered a much broader picture. This means we will discuss:
1. The alternatives
Have you thought about whether there’s a different or better way of raising the money you need? At Knight Frank Finance we have strong relationships with private banks, specialist lenders and the ‘niche’ finance providers, so we can look across the alternatives to make sure you take out the right product.
2. The timing
Is now the right time to borrow, or could a different approach be better? Borrowing money costs money, so we always take the time to understand your circumstances and, if you can meet your goals without borrowing, we will advise you accordingly.
3. The impacts
Our advisers will explore the broader impact of raising money from your property, including the long and short term impact it may have on your overall wealth, family, entitlement to benefits, income and tax position.
4. The future
What might life look like in the long term? For older homeowners, this might mean looking at the Inheritance Tax liability, thinking about unpleasant or difficult situations such as a decline in health and the need for care, or the cost of a funeral. Our advisers will sensitively consider these issues with you, even if it’s a little uncomfortable, so you’ve got a clear road map for the years to come.
If you would like a no obligation conversation about your borrowing options, get in touch with Helen. We have access to over 200 lenders, and can help find the most suitable and cost-effective mortgage for you.