If the three words mortgage in retirement send a chilling shudder right down the length of your spine, it may well be worth your while to read this article and find out how this can actually be a very welcome idea for people that have gone past the age of retirement.
You see, when we say mortgage in retirement, we do not mean that you will still be paying off the cost of your property when you get past the age of 65. No, instead, we mean that you could actually benefit from some income and this is borrowed against the equity that you hold in your property.
So, now that you are starting to relax a little more - read on to find out how this works. The proper term for this type of equity plan is a lifetime mortgage. This basically means that you can borrow a certain percentage of the equity of your property (varying with age) and not have to worry about it until the unfortunate time of your death.
Advantages of Lifetime Mortgages
The main advantage of any mortgage is to provide you with a home, but in this case a mortgage can be used to give back some of the money invested in your home. As you are in retirement and funds can run a little low due to pensions and annuities you might have, gaining a little cash to spend is helpful to your overall well being.
The cash is tax free and can be spent anyway you wish. This means home repairs, that dream holiday, and even on your grandchildren is how you can spend the money.
These various products are provided from the age of 55 and some are limited to your age of 75 meaning you cannot take out certain mortgages if you are older than 75.
You do want to be wise in how you spend it for there are drawbacks to this type of product.
Disadvantages of Equity Release
Of course, if you are planning to leave an inheritance to loved ones - this will very much be effected by your taking out such a plan - so do bear this in mind beforehand. However, if you are struggling to make ends meet in later years, the majority of relatives would not like to see you struggling and would much rather see you enjoying your time in retirement.
Inheritance is only going to be as large as the equity you leave in your home. If you use a large lump sum of equity and have a higher than average interest rate than these plans typically allow then it might become difficult to leave behind inheritance. In many situations the house is sold to pay the debt so the family home can be in question too. Of course your relatives do not want you to suffer and if your home is to be sold now or later, it is a good idea to take advantage of products that can help now in terms of money.
There are some products that lower the risk of inheritance being used up before you die. Interest only mortgages offer a low monthly payment of interest only, whereby the principle of the loan remains.
Home reversion is an option in which you sell a part of your London home, but get to live out your days happily in the home you worked to pay for. You get a lump sum of money to use as you wish. It is cash free too. The advantage is no pay off in the end. Your entire house is sold and the portion that belongs to your family is provided in inheritance.
For some it is not comfortable to sell their homes. You also have to be at least 65 to enter into this agreement. It is all above board and monitored by SHIP. SHIP is a regulatory agency that protects against real estate issues. It is also the authority that ensures you have a lifetime tenancy, rent free, agreement to remain in the house no matter the portion of home sold. Therefore, if a retirement mortgage is still scary after reading this article you have other options.
If this sounds like a good idea to you, do yourself a favour and seek professional financial advice before you go ahead with any such plan like mortgage in retirement. Some of these plans can work out to be very useful, but they will vary and not all plans will be the same.
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