You’ve reached your 65th birthday. For many of us, therefore, we qualify for a state pension. But even at its full rate, that pays just £185.15 per week (at the time of writing in October 2022).
Whatever your lifestyle, surviving on a state pension alone is likely to be a struggle. Everything has become increasingly expensive. So, if you are a homeowner, you might consider raising extra cash by unlocking some of the equityThe difference between the value of the property and the amo... tied up in the property you own.
A new mortgage at the age of 65
At age 65, your life is just beginning to take its second wind. You will now have the time and inclination to take up all those sports, pastimes, and hobbies you’d always intended. You might also want to refurbish or alter the home you live in or help your children to buy one of their own.
What is an over 65s lifetime mortgage?
These are all quite normal plans and ambitions for those beginning what is likely to be a lengthy period of retirement. Dreams and plans might include splashing out on a new car or a round-the-world cruise.
Conventionally, the most likely way of raising the cash you need against your home security is through a second mortgage. If you are over 65, you may also have the option of arranging a special equity release lifetime mortgage.
Equity release mortgages for the over 65s may be a great way to unlock any additional, tax-free funds you may need in retirement. There are many such later-life mortgages on the market – and the range of products is growing all the time.
Lifetime mortgages for the over 65s are like a regular mortgage only in so far as the loan is secured against the home you own. What makes them so different, however, is that there is no capital – or, if you so choose, interest – to repay towards the mortgage, which lasts for the rest of your life (until you pass away or move into long-term residential care. Throughout that mortgage, you retain the right to live in the home you continue to own.
Monthly interest payments can be rolled over until the end of the mortgage when your home is sold, and the interest and capital are repaid. If you prefer, most plans let you reduce the accumulation of interest by making repayments – or at least partial payments – each month.
Can I get equity release mortgages for over 65s?
The popularity of equity release has mushroomed in recent years. According to a story in the financial pages of the Daily Mail on the 3rd of October 2022, last year saw homeowners unlock a massive total of £4.8 billion through equity release plans.
In response to this significant market demand, there has been a recent expansion in the range of products granting equity release for the over 65s. This may make it all the more important to seek independent professional advice – from experts such as us here at NeedingAdvice.co.uk – so that you choose the equity release lifetime mortgage suitable for your particular needs and circumstances.
How much equity can I unlock with an over 65s lifetime equity mortgage?
Of course, you’ll want to know just how much cash any equity release plan may send your way. The answer depends on a range of factors since the sum released will depend on:
- the current market value of your home;
- the age of the property; and
- your health status – some equity release lenders, for example, may grant a proportionately larger lifetime mortgage if you have a health condition such as high cholesterol, high blood pressure, diabetes, or a history as a smoker.
This is yet another reason for seeking professional advice about your eligibility for particular lifetime mortgages and those that might suit you and your circumstances. Some lenders have devised their own online equity release calculators to get you started with an approximate idea of how much equity release you might secure.
Will I still own my home if I take an over-65 equity release lifetime mortgage?
Any plan that has been approved by the industry’s self-regulator the Equity Release Council will incorporate a guarantee of your right to continue living in your home throughout the lifetime mortgage.
So, you continue to own your home and have the right to live there until you pass away, or you move into long-term residential care. After the loan is paid back (plus any interest and fees) the balance is returned to you or your loved ones.
Will I owe more than my home is worth if it goes into negative equity?
In the same way that an equity release lifetime mortgage approved by the Equity Release Council guarantees your right to live in your home throughout the agreement, it also comes with the assurance that you will never owe more in terms of the repayments due than the market value of your home at the time.
In other words, plans come with a “no negative equityA situation where the value of the property is less than the... guarantee” – so that even if there is a general decline in house prices during your lifetime mortgage, you will still not have to repay more than the house is worth when it is sold.
What are the disadvantages of lifetime mortgages for the over 65s?
There are many benefits to lifetime mortgages for the over 65s. Beware, though, that they are not necessarily for everyone. There are drawbacks and disadvantages as well as benefits – and to help you weigh up those respective advantages and disadvantages, you will need to consult an independent financial adviser on issues particularly associated with:
- repayment of the mortgage including the capital loan and any accumulated interest – if you have chosen to allow monthly interest payments to roll over until the end of the agreement, that accumulated interest is likely to be substantial;
- repayment of both capital and interest reducing the inheritance available to pass on to your loved ones;
- if you are on means-tested benefits, these may be affected.
You can read more about Equity release pros and cons here.
Make no bones about it, equity release mortgages for the over 65s are a serious business – to which you will need to give very serious consideration.
To help you weigh up the advantages and disadvantages, you might want to draw on the experience of experts such as us here at NeedingAdvice.co.uk.
By consolidating your debts into a mortgage, you may be required to pay more over the entire term than you would with your existing debt.
Equity release will reduce the value of your estate and can affect your eligibility for means tested benefits.