Lending into Retirement
Posted on 27 June 2012
I am 59 and I own my own home worth £120,000. I have no mortgage. I would like to move area and am looking at property worth £140-150,000. I aim to continue working past retirement age but if for some reason I cannot, my pension will be about £12,000 per year (inc. of state pension) at best. Would it be sensible to take out a mortgage for £25- £30k at my age and would I be able to get one if I had to retire on £12,000 (or less) pa. If so, could I take out an interest only mortgage indefinitely? I have no-one to leave my property to so I am not worried about it going the lender when I pass on.
Would it be sensible to take out a mortgage of £25-£30k aged 59 knowing that on retirement your income will be £12,000? Certainly there are a few lenders who given the size of the loan and the amount of equity would consider a mortgage that runs until age 75, but do you want to commit yourself to a situation where you either have to pay the capital and interest over 15 years, around £225 per month at today's prices or pay only the interest, £106pm and then have to find a way to repay the original debt?
The alternative might be attractive in your situation as you have no dependents and are not too bothered about what happens when you die. A lifetime equity release mortgage would allow you to either borrow the amount you want and make monthly interest payments until you move home, go into permanent care or die or not make any payments and let the interest roll up and be added to the loan until it had to be repaid for any of the same reasons. Alternatively, you can look at Home Reversion Equity Release mortgages whereby you sell part or all of the property to the mortgage company in return for a lump sum and the right to live in the property as if you owned it until you die.
There is an awful lot for you to consider and I strongly suggest that you look at the following leaflets/guides on the subject before arranging to speak to a professional independent advisor:
Once you have read these I believe we can help you and that you would benefit from speaking to one of our independent mortgage advisers. Please call 0844 346 3672 and tell the consultant the date and title of your question, they will then be able to help you find the right solution for your situation.
Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.
We recommend you seek professional advice with regard to any of these topics where appropriate.