As with any financial commitment, major consideration must always be given to the longevity of the loan, particularly in the case of interest only mortgages for pensioners such as the Halifax Retirement Home Plan. Due to the nature of these plans, the interest only mortgage repayments are set to potentially run beyond the normal 25 year term of a conventional mortgage. Especially given the ages involved here and consideration of the deceased’s family, more thought should be placed upon mortgage protection as health issues are more likely to be prevalent.
However, as with most, there is no insistence placed by the Halifax Retirement Home Plan or from the remaining lifetime mortgage providers that any life cover be taken out. Nevertheless, common sense should prevail and in conjunction with your experienced financial adviser an overall strategy should be put in place. The Halifax Retirement Home Plan is no exception to this rule.
Should a person die on a jointly held mortgage, then the surviving partner still has the interest only mortgage to pay. If they are reliant on their partner’s pensions then this could cause much heartache emotionally and financially, even more so given their long term partner is now deceased.
The Halifax Retirement Home Plan still functions like a normal mortgage. As such, the monthly payments must be maintained otherwise the standard procedures for repossession could be enforced by the lifetime mortgage lender. Herein lies the danger.
But, before applying for a life assurance scheme, questions should initially be asked regarding the financial outcome should you or your partner die: -
Is one of you the main pension income recipient?
If so, how would the survivor manage financially on their remaining income alone?
Will they be in receipt of a percentage of their partner’s pension if widow�s benefits were included? Would they want to stay in the current residence or would they need to downsize to a more manageable property should either person die?
Answering Pertinent Questions
Depending on your answers to the above questions you may find that an assurance policy is not enough to cover the situation you are considering with the Halifax Retirement Home Plan. The interest-only portion of this plan requires monthly payments to be maintained and even with an assurance plan there may not be enough left to cover the person’s expenses after the main pensioner is gone.
Assurance plans need to cover any outstanding debt enabling the person left behind to survive on any retirement income they are able to receive. There is a case in which downsizing and selling the home is the best option for the remaining pensioner. It can be heartbreaking especially if the deceased maintained the property as a family home over several generations.
These little questions and your answers have to be used to determine your most affordable option well before you enter into a retirement plan that is also covered with an assurance policy.
Other Choices for Retirement
While lifetime mortgages are not an option, if you will end up selling the house in the future you may elect for a home reversion plan. In this situation you live in your home rent free until all parties named in the contract die or move to a care facility. This means a married couple over 65 years of age can sell a part or all of their home, to gain retirement funds. You obtain the funds you need to live on, but you have no repayment at the end. There again it does not work for everyone, especially if you want to try to save your home from being sold.
In the event you wish to keep your home, then you need to consider if a term or whole life assurance policy is your best option. A whole life policy has greater monthly payment amounts, but they are fixed to ensure you have the funds you require after the person named becomes deceased. A term policy is for a set period, so it could expire before using it. However, it is the most affordable option.
Your lifetime mortgage adviser should broach these kinds of issues with you to help you think about the different situations you may face. All these scenarios require careful consideration, not only with your partner, but we would suggest the children or beneficiaries should also have an input here. Everyone is going to be affected when the person named in the policy becomes deceased. This is why speaking with financial advisers and your family is imperative before you make a decision.
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