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Taking out a mortgage after 50: the ‘who’, ‘why’, and ‘how’


retirement mortgages image

For many homeowners, achieving mortgage freedom has always been a huge tick on the list of lifetime achievements, however, the tables seem to be turning. New research conducted by Ipswich Building Society reveals that over a third of participants (37%) expect to have a mortgage after 50 due to reasons other than not having reached the end of their term.

“The perceptions of having a mortgage later in life are changing,” said Richard Norrington, CEO of Ipswich Building Society. “Whereas previously achieving ‘mortgage free status’ has been a significant life goal amongst mature homeowners, many older borrowers are now making an active decision to take out a mortgage in order to facilitate lifestyle changes or provide financial assistance to family members.”

Reasons for holding a mortgage after 50

The top reasons respondents gave for holding a mortgage after 50 years of age were:

To cover living expenses: 15% of respondents believed that they would need to hold a mortgage simply to cover the cost of living, however, few providers would be willing to lend on this basis, so choices would be considerably limited.

To free up funds to spend on holidays, car, boat etc: Perhaps you’ve always wanted to take a cruise around the Mediterranean, or invest in a campervan and explore Europe’s countryside?

To invest in a new property: Whether your children have flown the nest and you’d like to downsize to a more manageable property, or you’d like to sell up and move away from the hustle and bustle to a more rural retreat, remortgaging can help free up the capital to help you make this dream a reality.

To extend or make changes to current home: You may not be ready to say goodbye to your family home, but may need to release funds in order to make some futureproof adjustments, such as a downstairs bathroom or improved access. You could also add further value to your property through an extension or renovation project.

Changes in employment status/career: Retiring often leaves us with a lot of free time on our hands, so for many it’s the perfect opportunity to turn a hobby into a source of income, or try a new career that maybe wasn’t an option before.

To give inheritance to children/grandchildren: Buying a property in today’s climate seems an unachievable pipe dream to many young people. In fact, recent research from the IFS shows that some 44% of first time buyers couldn’t have made it onto the property ladder without a helping handout from the ‘Bank of Mum and Dad’.

To cover the expense of looking after parents in old age: Professional care can cost a pretty penny, so releasing some capital from within your home can provide much needed financial relief, particularly if you’re part of the ‘sandwich generation’ caring for elderly parents and younger dependents at the same time.

Mortgage options for over 50s

Historically, the range of mortgage options for those over 50 has been almost non-existent, however, lenders are becoming increasingly aware that older borrowers are a diverse group, and are therefore enhancing their variety of later life products to meet their needs.

In March 2018, the Financial Conduct Authority (FCA) reclassified retirement-interest only (RIO) mortgages, and now considers them as standard mortgage options. Previously, retirement-interest only (RIO) mortgages sat under the same category as ‘equity release’ products, yet RIO loans are far more akin to mainstream mortgage products than equity release:

  • Applicants are required to pass affordability checks and make on-going monthly interest payments, unlike equity release customers
  • As a RIO mortgage customer, you won’t have to worry about interest ‘rolling up’ and being added onto the outstanding loan, you can simply pay as you go in regular installments
  • Equity release products can only be sold by advisors with specialist qualifications, whereas RIO products are available through any mainstream mortgage broker or lender, making them a far more accessible option

The main similarity between RIO and equity release products is that both options require full payment when the mortgage owner passes away or moves into a care home.

Up until now, building societies have been the main champions behind later life mortgage products, however a high street lender has recently expanded its offering for older borrowers to include RIO, repayment, and equity release products, so it may only be a matter of time before more of the big high street players follow suit.

When looking for a mortgage later in life it is important to choose a product which suits your circumstances and requirements, both now and in the future, so you should take time to carefully consider what is right for you. You may wish to speak to an independent financial adviser or mortgage intermediary to explore the options available.

 

This post was sponsored by Ipswich Building Society

 

Ceri Wheeldon

Ceri is Founder and Editor of Fabafterfifty.co.uk She is a frequent speaker at events and in the media on topics related to women over 50 , including style and living agelessly. With 20+ years experience as a headhunter Ceri also now helps support those looking to extend their working lives.

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