Is ER a good option for us ?

chipsmum

My husband and I are both 60 and own a property worth around £250k. We have £66k outstanding on our mortgage which has 5 years to run.

I have a chronic health condition and have been unable to work for the past two years which has halfed our joint income and this has been further reduced due to covid restrictions impacting my husband's job.

We are struggling monthly to pay the mortgage and other priority debts and have no money left for any luxuries or home comforts.

We have no wish to sell our home and downsize and have no children or family to leave the house to when we die.

Would ER raise enough to pay off the outstanding mortgage currently costing us £1300 a month ?  Would a lifetime mortgage or an interest only retirement mortgage be the best option ? We dont have a perfect credit history due to increased borrowing on credit cards etc. during the past couple of years since I became ill. Would this impact an application for ER ?

Obviously we will take advice from an IFA if we decide to proceed. It seems like a good option in our situation to make our later years a bit more comfortable but I read so many horror stories about ER that I also wonder if trying to struggle on for another 5 years until the mortgage is paid, would be more sensible.

tiddles

Hi chipsmum.

Perhaps if you were to post this on the Pensions, Annuities and Retirement Planning board you might get some answers?

missile

It costs you nothing to apply and see if you are eligeable for ER and / or a lifetime mortgage. You must take advice for ER, you do not have to for mortgage. 
What rate is your current mortgage?

QrizB

missile said:

What rate is your current mortgage?

That was going to be my question.

At face value, £66k / 5 years / £1300pm is a 7% interest rate. Remortgaging at 2% would bring that down to £1150, a small but useful saving. Extending the term by 2 years to State Pension Age of 67 makes the payment £840, albeit at an additional total cost of £1400 in interest.

Keep_pedalling

It seems to me the you are just the sort of people ER is very suitable for. You have no one to leave your estate to and you can’t take it with you so why not do it and free up your income to improve the quality of your life. 

chipsmum

missile said:short ter

It costs you nothing to apply and see if you are eligeable for ER and / or a lifetime mortgage. You must take advice for ER, you do not have to for mortgage. 
What rate is your current mortgage?

Current mortgage rate is 4.1% but we are paying a little extra just now due to covid payment holiday. We are with Heliodor (ex Northern Rock customer) and they are a closed book company so cant switch to a lower rate with them. We have thought about trying to move to another lender but not sure we would pass affordability checks now. Also,with a relatively short term remaining, monthly savings would have to be weighed up against any arrangement fees but guess it's worth consideration.

missile

My rough calculation gives £2,706 interest to pay over the remaining 5 year duration. Any mortgage advisor will be able to crunch the numbers and work out what the savings / cost would be to remortgage.

This would cost you nothing to find out what your options are. Good luck