Interest only lifetime mortgage

puzzledbiddy

Looking for some advice. As a recently divorced 63 year old pensioner, I'm looking to downsize and buy a new property. The mortgage on my current house is paid off. I need a maximum 25% interest only mortgage to make up the shortfall. Have read about Lifetime mortgages, which would be perfect. I'm aware that interest only mortgages are on the endangered list and have been advised that Interest Only Lifetime mortgages are now extinct. Is this the case or does anyone know different? or am I destined for an Equity Release scheme.:eek:

holly_hobby

True lifetime mortgages traditionally do not have a monthly repayment - the interest is simply rolled up onto the os debt - and is redeemed on sale of the property upon entry into long term care or death (which ever is sooner).

It sounds as though you are actually looking at a mainstream interest only mge, with monthly interest payable, and unrestricted age paramaters (ie - there is no upper maximum age, and you are only required to redeem the borrowings on disposal or death (subject to conduct)), with borrowings based upon your proven income in retirement. If this is the case, then as far as I am aware, there are no longer any providers in the market, who consider such lending - the primary one I am aware of servicing this market before withdrawal being Yorkshire BS - who pulled such a facility some time ago (Halifax RHP was a similar arrangement, orig available in branches, then via intermediary only and totally pulled 2011).

Accordingly any I/O mge you were now able to secure would certainly be time bound/have an upper age limit re the lenders max age at redemption, at v best (based of course on your source and level of income being acceptable to the lender) you would have around a 20 yr term permitted - probably less - at which point you're hopefully still around, and you'd either pay the lender the o/s mge, from savings or investments etc, or you would simply sell the property, redeem the mortgage and make plans for your next move. If this is your desire, speak to a whole of market mge broker who will source suitable providers and provducts for your requirements.

If you however wanted to avoid this scenerio, you would be looking at the equity release market, which variouss providers also provide in a purchase situation such as your own.

At 63 you have the option of a home revsion product (whereby the provider effectively purchases a % of the property), or a traditional lifetime mortgage arrangement as discussed above may achieved - the amount to be released will depend upon the property valuation of course and your age - the younger you are the less will be offered, as effectively the lender will have to wait longer (hopefully !) for their return on the arrangement.

Do have a read up on the subject with age concern http://www.ageuk.org.uk/

This is a specalist area of advice accordingly not all advisers are authorised/have chosen to advise in this area, and I can not stress enough that poor advice at this point of life, can be catastrophic to the indviduals financial security and often wellbeing.

To that end you may wish to go the extra step of considering an adviser whom is a member of the Society of later life advisers (SOLLA) http://www.societyoflaterlifeadvisers.co.uk/. The SOLLA site will give you a guide to advisers in your area, whom by virtue of becoming a member have chosen to be independently asssessed as to their proficiency on the subject, in addition to the standard professional qualifications reqd by all as a minimum - of course their fee may be higher than an individual who is not a member, so something to be aware of.

Obviously the nature of a lifetime mge arrangement, will effectively erode the free capital within your property, so its v important to discuss this with your nearest an dearest as to the implications it will have on your estate - to that end you should also have a look at the SHIP (safe home income plan) site http://www.ship-ltd.org/ , they are a voluntary member group of product providers who have a no negative equity gte, and have guides to products with assistance in directing you to a qualified broker whom may assist. As I say, it is imperative (if you wish to insulate your estate from mge debt on death), that ANY lifetime mge arrangement you enter into has a no-negative equity gte on redemption - so SHIP will provide valuable guidance to appropriate providers. Additionally for your protection, any adviser you choose to assist MUST hold an Equity Release qualification as a minimum - of which you should seek verification.

Although typically there are no monthly repayments on a lifetime mortgage, there is a provider who does offer the option to the mortgagor for them to pay all, or some of the applicable monthly interest, whereby you may effectively ringfence the original debt (ie - protect the free equity available on disposal) either wholly or partly depending on your chosen repayment schedule.

Admin and early exit costs of lifetime mortgages are typically higher than a mainstream loan and lender, but horses for courses - so its imperative that you do your research with a suitably qualified broker, and that this is absolutely the best solution to your circs and requirements.

If you are looking for such an arrangement due to a struggle with income and living costs, you should firstly ensure that you have investigated all available means and non-means tested benefits and social assistance that you may be entitled to - you may find in doing this that your income may increase to an extent that you no longer need to consider a lifetime arrangement at all !

I'll pop back if you need more info, but the above should give you an idea of what lifetime mges are about, and how to go about sourcing a professional to assist if you elect to pursue this route.

Hope this helps

Holly

yorkshiredreamer

We have an interest only lifetime mortgage with Halifax which was arranged for us last year by Equity Release Supermarket. Unfortunately that particular product was withdrawn last August but it would appear that there are others available. Check out the Equity Release Supermarket for details. We found them very helpful. Just email them with any questions. We felt that an interest only lifetime mortgage was preferable as with traditional equity release the interest rolls up and eats up a lot of the property's value. Only your pension income can be taken into account to decide whether you qualify for an interest only mortgage, but I'm not sure how they calculate it. The one we have is portable so we could move to another property with it if we wanted to (if the provider approves). I believe there is an early repayment charge for the first couple of years. Also you can pay off lump sums if you want to. This may not necessarily apply to the ones available now, they all have different terms and conditions, but worth checking them out, you may find something suitable for your circumstances. Good luck!:)

getmore4less

puzzledbiddy wrote: »

I'm looking to downsize and buy a new property. The mortgage on my current house is paid off. I need a maximum 25% interest only mortgage to make up the shortfall.

Can't you downsize to something cheaper.

Have you looked at renting and keeping the capital, how long would drawdown pay rent.

if you want to have the capital/house to give as an inheritance can they help with the cash needed.

Thrugelmir

puzzledbiddy wrote: »

Looking for some advice. As a recently divorced 63 year old pensioner, I'm looking to downsize and buy a new property. The mortgage on my current house is paid off. I need a maximum 25% interest only mortgage to make up the shortfall.

If you are downsizing why is there a shortfall?

Is the purpose of the equity release to repay unsecured debt?

holly_hobby

I'm guessing as he wants to keep some capital back for living costs/emergency fund etc - which would be advisable as a single retired individual and why I would encourage him to investigate all benefits and financial assistance that may be available (as discussed earlier)

An alternative to this would of course be renting - although it will not provide the security of being an owner occupier (of which shared ownership could also be considered) - unless the rental is via a housing associate/council whom are permitted to provide a lifetime tenancy.

H

Thrugelmir

holly_hobby wrote: »

I'm guessing as he wants to keep some capital back for living costs/emergency fund etc

I'm guessing that the assets have yet to be divided between the respective party's.