There are a number of reasons which can justify a mortgage even before one attains retirement age, for example health related issues, problems with employment among others. Mortgages exceeding into the retirement period are sometimes complicated in that they are not clear about their affordability and their life spans. Lenders will in most cases reject mortgages which are likely to run beyond the age of 75, giving many willing borrowers a lot of headache. You may believe that retirement mortgage is impossible or not for you - read on and discover why it could be.
The Answer to your Needs
What potential borrowers will wish to know is how they can be allowed to borrow even at their tired ages. Again, it all depends on how affordable it is and also how the mortgage will be managed. Some factors like retirement benefits as well as other available sources of income will be considered beforehand. Lenders fear that some borrowers cannot sustain retirement mortgage due to lack of resources, so they prefer not to take any risks.
Using State Pension Funds
State pension can be used to facilitate a mortgage, but it depends on the overall amount contributed as insurance over the borrower’s life at work. Basic pension is however way below what is looked at because a mortgage will need to be sustained fully for the period that it runs, so other sources of income must be produced. Besides state pension, individuals having sound company pension schemes can benefit highly especially if they’ve worked at an institution for many years.
Savings can by a Mortgage
Borrowers can freely use their savings interest to facilitate retirement mortgage. It does not matter their sources of income but if there is a stable saving scheme, they can utilize it for their own good. People have developed the habit of working beyond their retirement years, which can be helpful as well in the acquisition of mortgage. Businesses operating under their names provide a good source of income too and can help out big time but they must be passed to be stable.
Using savings means that you have essentially taken money away from your retirement in order to secure a loan that may not be as good as the initial savings you had. Of course if you have a mortgage to pay off that is a different matter.
Lifetime Mortgage Loans for Help
The outlook is bleak if you are heading into retirement and need a mortgage, until you discover there is an answer. The answer is called lifetime mortgage or lifetime equity release. This solution requires no monthly payment, but it does come with interest. The interest rate is fixed and compounds as an APR onto your principle loan amount. You only pay the full loan amount including interest at your death or if you decide to move from the current house. Some mortgage plans will go with you, but only if you buy a new home not if you go into a retirement home.
The solution to your retirement funding is that you have money to spend or at least you put off spending more than you can truly afford if you are cash poor, but equity rich. As you have money that you can access you simply use it to pay off your existing mortgage or have a dream holiday without worries.
When the house is sold there can even be inheritance left for the family. It depends on the lifetime mortgage you set up, but at least there is a potential for this while you get to remain in your home until you are ready to move on.
Another form of equity release is not a mortgage at all, which might satisfy your needs. Home reversion is a bit difficult to find nowadays, but it does exist. You can sell your home now in part and get a lump sum. This is tax free cash like the lifetime mortgage is. You can also use it as you see fit. The difference is the money has no interest charge and you do not pay the money back. This is an even better guarantee of inheritance as long as you do not sell the entire home while you are alive.
In simple terms, even after attaining or nearing the age of retirement, there is always a way out. Even though it may come as the last resort, equity release plans work too for individuals but they have peculiar consequences which may not be suitable for everyone. Seek a financial adviser if retirement mortgage might work for you.
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