Have I stuffed up my future retirement?

HHarry

Hopefuljoy said:

Some people have mentioned taking a mortgage into my retirement and I have done some figures on this.  On the face of it a mortgage term for 20 years from age 60 would be a reasonable idea and I did start looking into it seriously a few months ago.  At the typical interest rate today a repayment mortgage would work out at about £500 pcm which would look very comfortable.  HOWEVER, there is a problem here.  Banks are withdrawing from offering extended mortgages into retirement and I have discovered in the small print that they are allowing extensions up to 75 OR retirement date, whichever is sooner.  As I intend to retire from my main job at 65 I would be stuffed. The only mortgages being offered for elders are Retirement interest only most of which heavily penalise you for overpaying.

 No mortgage company is going to call in theloan if you decided to retire at 65, rather than 75.  Indeed how would they know if you gave up work.  Once you have the mortgage, as long as you keep paying there’s unlikely to be an issue.

 Some might say that applying for a mortgage to 75, knowing that you plan to retire at 65 would be fraudulent.  I’d say that anything could happen in the next 8-18 years, and any date you have in mind is an aspiration.

 Get to the end of your current fixed rate, and get a repayment mortgage for the longest term you can.  

Linton

Have you considered switching to a Retirement Interest Only mortgage (aka RIO) when the current loan is due to be repaid? 

The mortgage ends when you die or permenantly move out of your house and the outstanding loan is repaid from the proceeds of the sale of the house.  Interest rates can be fixed for the duration of the mortgage which avoids the risk of increasing interest rates.

Se https://www.legalandgeneral.com/retirement/retirement-interest-only-mortgage/ for example.  Not a recommendation for L&G, but they are one of the main players in the RIO market.

Bimbly

Might be worth talking to a mortgage broker. Just to explore what is possible, with no obligation.

You may be dismissing some options after a cursory internet investigation when they may warrant further consideration.

Gary1984

Yes, definitely talk to a couple of mortgage brokers/advisors about your situation. They'll have access to info and deals that won't appear with a Google search.

I find it strange you wouldn't be considered for a mortgage if your pensions adequately cover the repayments. Your pensions are much more secure than an income from employment.

OldBeanz

I would be taking advantage of your LGPS AVC option.
This allows you to pay in taxable income and withdraw it tax free - if done as one with the main benefits.
 So with a pension of £6k (you may be drawing early but presently contributing) this is notionally valued at twenty times that or £120k.
You could therefore build up a pot of £40k from taxable income and withdraw it tax free (25 of a total pot of £160k) as a lump sum. Overshooting allows you to buy extra pension so not a major issue either.
You can also buy extra pension which will increase your overall pension.
No issue with recycling either so you can funnel your TPS through to your LGPS.

RetSol

Bimbly said:

Might be worth talking to a mortgage broker. Just to explore what is possible, with no obligation.

You may be dismissing some options after a cursory internet investigation when they may warrant further consideration.

My thoughts exactly. 

I am 58, retired and in receipt of a db pension. Following a conversation with a broker, I remortgaged last Autumn with an offset mortgage which runs until I am 70.

Hopefuljoy

Thank you everyone for your comments about researching mortgages with lenders and brokers. I'm so glad I've asked for advice on this forum. My eyes have been opened. I have given myself the next four months to thoroughly investigate all my options and make a really well informed decision. I'm also going to look at the fine detail of my LGPS  scheme to understand AVC options better.

Please excuse any typos I had my second cataract operation today and my vision is settling down!