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Retirement mortgages: a new way to borrow in later life

 
StepChange Financial Solutions

Retirement mortgage. A flexible way to access equity in your home.

The retirement mortgage is a new type of lifetime mortgage. Designed to bridge the gap between a residential mortgage and an equity release plan it offers you an extremely flexible way to access the equity in your home.

As a result of managing the mortgage interest via monthly repayments the amount you borrow will not increase. The amount you can release is based on your retirement income so that you can be sure the repayments are affordable.

The retirement mortgage is secured against your home so you retain full ownership of your property. Unlike a conventional residential mortgage it's not linked to a specific term but is instead repaid only when your property is sold.

 

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Differences between a retirement mortgage and equity release

The interest rate on a retirement mortgage is more competitive than that available via an equity release mortgage, but rather than being fixed for life, it's fixed for 5 years. At this point you can repay the mortgage without penalty, fix your interest rate for another 5 years or perhaps consider switching to an equity release plan.

A retirement mortgage also offers two key protections usually only available via an equity release arrangement:

  • A 'no negative equity guarantee'
  • An option to switch to a lifetime mortgage when the policy has been running five years and the youngest borrower reaches 80 years of age

A 'no negative equity' guarantee

A 'no negative equity' guarantee means that even if the eventual sale proceeds are insufficient to repay the capital amount you'll not be liable for the shortfall.

A flexible approach to payments

Once the plan has been in place for five years and the youngest borrower reaches 80 years of age you can elect to switch to a lifetime mortgage that does not require repayments. The interest rate applied would be the lifetime rate available at that time from the provider. This interest rate could be higher but this feature ensures that later in retirement you can remain in your home even if payments become unaffordable.

Your advisor will discuss all of the options suitable for you before making a specific recommendation based on your individual circumstances and objectives.

This is a lifetime mortgage, to understand the features and risks, please ask for a personalised illustration. Your home may be repossessed if you do not keep up repayments on your mortgage.

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Fantastic service, always helpful, knowledgeable and friendly. Very glad we used StepChange. We will be in touch in 3 years to remortgage."

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Foundation for Credit Counselling Wade House, Merrion Centre, Leeds, LS2 8NG trading as StepChange Debt Charity and StepChange Debt Charity Scotland. A registered charity no.1016630 and SC046263. It is a limited company registered in England and Wales (company no:2757055). Authorised and regulated by the Financial Conduct Authority.

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