What is a Retirement Mortgage?
A Retirement Mortgage is a form of Lifetime Mortgage that allows you to borrow money before or after you retire. The terms of the Retirement Mortgage mean that you are responsible for paying the monthly costs of the interest (like an Interest Only Lifetime Mortgage) until whichever is latest of the following events:
- you, or your spouse/partner (whomever is youngest) reach the age of 80, or
- after 5 years of the mortgage.
When one of these events has taken place, you can:
- continue paying the monthly interest payments.
- stop paying the monthly interest payments them and allow the interest on the loan to roll up. If you choose this option, you Retirement Mortgage will be the same as a Lifetime Mortgage.
Affordability of Retirement Mortgages
The amount of equity you can release from your property will be determined by the amount you can afford to pay each month. And, because a Retirement Mortgage requires monthly payments, it will only be suitable for you if you have sufficient income.
The loan will be 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.
Retirement Mortgage And Equity Release
Using a Retirement Mortgage for Equity Release means that you will benefit from a fixed monthly repayment rate for five years. This enables you to budget for this amount and know that you will need to decide what action to take when the five years have elapsed.
Features of A Retirement Mortgage
There are two key features to a Retirement Mortgage that are usually only available via an equity release arrangement:
Benefit from a No Negative Equity Guarantee
This means that if the eventual sale proceeds from your home are not sufficient to repay the capital your borrowed, you will not be liable for the shortfall.
Switch To A Lifetime Mortgage
After five years, or when you or your spouse/partner reach the age of 80, you will have the option of switching to a Lifetime Mortgage and rolling-up the interest on the loan until it is repaid.