Mortgages in Retirement

DE_612183

Emmia said:

DE_612183 said:

MWT said:

What are you trying to do with the mortgage?

Are you trying to move house, remortgage from a current mortgage, release capital... ?

There are other options that might work better for you depending on the purpose.

Similarly, if you are planning on a joint net income of £36,000 that suggests the initial 5 years of drawing down from your SIPP is going to almost wipe it out, and that the Civil Service pension that you are waiting to draw in 5 years time is also quite small.

One of the issues you will have with retirement mortgages is that products like a RIO will assess affordability for you both individually, not as a combined total, so elements that die with either of you like the state pension, will not be counted in each other's affordability calculation. 

I suppose the real question to consider is can you really afford to retire at 62 if you still need a mortgage?

So the purpose of the mortgage is to downsize - but not fully, there will be a subsequent downsize within the 10 years that will then make us mortgage free.

You are correct the SIPP gets wiped within 5 years, then my SP kicks in.
Same with my wife.

We are happy that we can maintain take home income of £3,000 per month ( plus additional paid in by kids while they still live with us ) from the point of Retirement to kicking the bucket!

The actual income when we retire does not differ much from the income whilst working - the only difference is that the mortgage company will take account of my salary income, but not when the income comes from a draw down pot.

But in moving twice, you're incurring two lots of these costs, is it possible to only move once?

It is - but that is not the plan.

The first downsize is to reduce the mortgage but retain a similar sized property ( to cater for 4 adults ), the 2nd downsize is to be mortgage free and only cater for 2 adults.

DE_612183

MWT said:

DE_612183 said:

So the purpose of the mortgage is to downsize - but not fully, there will be a subsequent downsize within the 10 years that will then make us mortgage free.

Sounds like the plan is to make the final move once the kids have moved out?  ... is that most likely to be closer to the 10 year point than say 5 years?

DE_612183 said:
You are correct the SIPP gets wiped within 5 years, then my SP kicks in.
Same with my wife.

Are you both 62 at the moment? ... reason for asking is related to the possibility of suing a Lifetime Mortgage product to get you where you want to be, and that is dependent on the age of the youngest life.

DE_612183 said:

We are happy that we can maintain take home income of £3,000 per month ( plus additional paid in by kids while they still live with us ) from the point of Retirement to kicking the bucket!

Difficult to contemplate I know, but what would be the impact on that £3,000 take home if either of you were to die in 5 years time?

DE_612183 said:

The actual income when we retire does not differ much from the income whilst working - the only difference is that the mortgage company will take account of my salary income, but not when the income comes from a draw down pot.

You may want to consider using a Lifetime Mortgage product for this as they can typically be obtained based on the property value, not your income, and can be found with terms that have a reducing early repayment penalty over say a 10 year period.

The age of the youngest life determines the LTV percentage that can be obtained, hence the question above.

You can also opt to pay the interest each month so it does not roll-up, but keep that optional rather than contractual to give you flexibility to deal with circumstances that may arise.

You certainly need advice to go down this path but shop around the fees for equity release products can vary considerably...

 

@mwt all good points:

1. Final move - not sure which it will be closer to - totally dependant on kids - they are using the time @ home to save - but of course that could change if they meet someone and want to move out or to a different part of the country.

2. I'm 62 wife is 57 - that's what makes it a bit harder...

3. The 3k is in SIPPs and some DB - the DB bits my wife would get if I died first - we've also got life insurance in place for £250k - ironically the wife is better off the earlier I die!

Thanks for the info about the Lifetime mortgage product I'll take a look, and I'm in touch with a couple of brokers as well for advice.

MWT

Thanks for the additional details, it is going to be tricky to get 25% LTV with your wife only 57.

By a strange coincidence we did something similar when my wife was 57 (I was 63), and just under 20% was optimal to avoid higher interest rate, 20-21% would have been possible, but 25% would have been out of reach. 

Is there any version of the next few years that could see you still working for a while longer?

This would be a lot more achievable with only another 3 years or so, and maybe you would be clearer on your kids plans as well so only need to move once more instead of twice?

 

DE_612183

MWT said:

Thanks for the additional details, it is going to be tricky to get 25% LTV with your wife only 57.

By a strange coincidence we did something similar when my wife was 57 (I was 63), and just under 20% was optimal to avoid higher interest rate, 20-21% would have been possible, but 25% would have been out of reach. 

Is there any version of the next few years that could see you still working for a while longer?

This would be a lot more achievable with only another 3 years or so, and maybe you would be clearer on your kids plans as well so only need to move once more instead of twice?

 

Thanks - when I say 25% LTV - I mean our deposit = 75% of the purchase - is that the same way round that you meant?

As for working longer - yes I could but my health is starting to get worse - I could hang on but it's got to the point where it's not fun anymore, and a downright pain.

I started work at 16 - so have worked 46 years now ( apart from 1 year off ) - that's enough for me!

MWT

DE_612183 said:

Thanks - when I say 25% LTV - I mean our deposit = 75% of the purchase - is that the same way round that you meant?

Yes, if you use a Lifetime Mortgage for a house purchase it has to be the only mortgage on the property and with your wife as young as she is, at normal rates you will probably not be able to reach 25% for the mortgage.

There are some lenders that will go to a higher percentage but the interest rates can be punitive.

Definitely talk to a broker/advisor that specialises in retirement products and see what they can find for you...

Once you know just how much you could fund with a Lifetime Mortgage product you could see if there is a way to cover the gap with a larger initial drawdown perhaps?

I checked back with my own numbers and just over 5 years ago we had options up to 23.5% without the interest rate being completely crazy. Now that may have changed since then, and the property itself does have to meet the lenders criteria, but it has to be worth exploring...