Raising the money you need past retirement age can sometimes be difficult, so we have put together some helpful tips with the help of Shawbrook Bank, for what you should look out for:
1. The first thing to do is to speak with your existing mortgage lender or a mortgage adviser and discuss the options available to you. Some mortgage lenders may be able to offer you a remortgage, however, some mainstream lenders see age as a reason not to lend to those later in life, which means this option isn’t available to everybody. So, what happens now?
2. If you want to borrow less than £25,000 and don’t want to secure the loan on your home, the suitable option may be to take a personal loan, however what options are available to you if you wish to borrow more than this?
3. You could take a second charge mortgage. Here lenders can help you to borrow anywhere between £3,000 to £2.5 million, depending upon the value of your property. This is a good option if you want to leave your existing first charge mortgage in place, as the second charge mortgage sits independently to this. Great if you are on a particularly good deal you wouldn’t like to lose and you don’t want to pay early repayment charges on your first charge mortgage, which would happen if you remortgaged to raise the finance you need.
4. Another option could be to contact an equity release company. Here you can use a percentage of your property’s value to raise a lump sum of cash, plus use additional equity to give you a regular income in retirement. The amount released, plus the interest accrued is paid back upon a life event, usually upon death or moving into long term care. The drawback to this option is that you will not be able to give 100% of your property to your beneficiaries in your will.
5. Another option could be to use the money in your pension pot. In 2015 new pension freedoms were announced that mean that you can now access your pension savings, and withdraw the full amount if you so wish. According to a report by the Financial Conduct Authority (FCA) over 1 million pension pots have been accessed since the new pension freedoms were introduced, with 53% of those pots fully withdrawn. Whilst this is one way of raising finance, it is a risky move as you could potentially run out of savings later in life.
6. So is there another way, if you want to leave 100% of your property to your beneficiaries and you do not want to touch your pension savings? The answer is potentially yes. Some lenders, including Shawbrook Bank, now offer an interest-only mortgage to those aged 55 and over. This is a regular mortgage with a fixed term and not an equity release product. This means that at the end of the term (up to 15 years) you must either sell your property or use another payment method to repay the outstanding balance. What’s interesting about Shawbrook’s 55 and over product, however is that you can overpay the loan whenever you choose, reducing the outstanding balance and the interest you pay, or you can repay the full outstanding balance at any time without paying early repayment charges (a discharge fee applies). This means that should you need to raise finance now, but your savings are tied up, Shawbrook’s 55 Plus Mortgage could help you to raise the money you require and then you can repay it, without any charges, when your savings mature.
7. This type of mortgage deal could also be suitable for those who are coming to the end of their existing interest-only mortgage with an outstanding balance. Rather than having to downsize or use your savings to repay the outstanding amount, you can keep an interest-only mortgage in place and remain in your home for the term of the mortgage.
8. If you are looking to raise cash in your retirement the best place to start is to speak with a qualified mortgage adviser who can assess your circumstances and advise you of the best course of action. It’s also important to discuss any of your financial decisions with those who will be affected by them.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE