Later Life Mortgage Solutions – Flexible Payment Options for Over 55s
In this article, we will be discussing how Later Life mortgages can help those over 55 manage their funds at a time when the cost of living is having a detrimental impact on their livelihoods.
The UK has endured a cost-of-living crisis since 2021. During this time, mortgage rates, along with the price of everyday items and household bills, have all skyrocketed. For example, household energy prices soared by 54% in April of last year and were due to rise to an increase of 80% in October 2022 before government intervention.
Meanwhile, an ongoing labour shortage meant that farms in the UK and abroad were understaffed — potentially more than 500,000 job vacancies. Labour shortages in this sector also caused supermarkets to sell out of items due to lower-than-normal stock-levels. As such, supermarkets across the country began to implement maximum purchase limits on certain items.
In addition to labour and stock shortages, the UK’s food price inflation was also among the highest across G7 economies in March 2023, second only to Germany.
With all of the above considered, the House of Commons, in their June 2nd research briefing, rising cost of living in the UK, admitted that the cost of living has “increased sharply” across the UK during 2021 and 2022, with the annual rate of inflation reaching as high as 11.1% back in October 2022. This figure marked a 41-year-high for inflation rates and drastically impacted millions throughout the country.
Prepare for uncertainty
It is typically considered good practice to keep cash reserves in the event of any care-related or family-emergency expenses. However, according to research sponsored by the Department for Work and Pensions, 11.5 million people have less than £100 in savings to fall back on.
Meanwhile, a reported 22 million people in the UK say that they don’t know enough to plan for their retirement.
Maintaining long-term financial reserves can allow you to “ride the storm” of the current economic uncertainty and help cover any rising or higher-than-expected bills, but for many this is not an option.
The benefits of a Later Life mortgage
There are many potential benefits to accessing the value (equity) built-up in your home. Depending on your personal circumstances or needs, a Later Life mortgage may be the best option for you to borrow money in your later years, but it is important to discuss all the options available with a specialist adviser before making any decisions.
We have highlighted some of the major benefits that a Later Life mortgage can offer below.
Unlock the value of your property
With some Later Life mortgages you could borrow up to 75% of your property’s value if it is affordable. These Retirement Interest Only mortgages offer a lump sum which can be a great option if you have an immediate use for all the funds.
However, if you have no immediate use for all the money at once, rather than paying interest on funds sitting idle, there is an alternative called a Lifetime mortgage (equity release). You take a small initial lump sum (from £10,000) and can have funds in a drawdown reserve to draw as required, meaning you only pay interest on the funds that you have received. The interest rate is fixed at the time you draw it, offering you flexibility to release further equity when you choose.
You’ll never owe more than your home is worth
With Equity Release Council-approved Lifetime mortgages, there is a ‘no negative-equity guarantee’ in place.
In example, if the proceeds from the sale of your property do not cover the outstanding loan (plus fees and charges), the Lifetime mortgage lender will write off any shortfall, as long as you have kept to their terms and conditions. This is irrespective of any voluntary payments being made.
This means that you’ll never owe more than the value of your home and will not pass on the debt to your estate.
Optional monthly payments
Later Life mortgage products are constantly evolving, with increasing flexibility and innovative features.
Some mortgages are based on affordability and require monthly payments of interest. There are other mortgages available that do not depend on income and allow for flexible, voluntary payments towards the interest cost.
In practice, this means that depending on the type of Later Life mortgage you choose, you may not be required to make monthly payments at all.
Instead of using the money for monthly payments, you can use the money saved to cover any rising costs and prepare for unexpected events. When the economic situation stabilises, you can then choose to make flexible, voluntary payments.
However, while monthly payments with certain Later Life products are voluntary, it’s important to understand that not making monthly payments means any unpaid interest is added to your loan and the interest will roll up. This will leave you with less equity in your home, which is especially important when anticipating care costs, and it will also reduce the value of your estate for your beneficiaries.
Prepare for Later Life with Henry Dannell
Later Life mortgages can offer a way of realising your dreams and helping you to achieve your goals in later years.
Discussing your Later Life mortgage options with Henry Dannell is free. Should you apply and complete on a mortgage, we charge a one-time-only advice fee of £1,295 that is payable on completion of your loan.
Advice fees can vary greatly and our advice fee is a one-off payment, meaning that if life changes and you have exhausted your funds, our Later Life advice will be available to you again at any time, with no additional cost. Should you wish to release additional funds or remortgage, you can do so without paying for our advice again.
At Henry Dannell, we advise on a wide range of Later Life products, so it’s worth speaking with one of our specialists to explore your options and learn more.
Please note: Later Life mortgage options include Retirement Interest Only and Lifetime mortgages. To understand the features and risks, always obtain a personalised illustration.