More and more people are still paying off mortgages into retirement, but there are options for those who don’t want the financial burden. Mark Gregory offers advice to a couple in this exact situation
The Question
My wife and I are both 64 and we are both coming up to retirement and looking forward to spending more time with our families and generally enjoying life a bit more. There’s one problem, however, which is that we have not paid off our mortgage.
Aside from the fact we will have less income in our pension to repay the mortgage, we are not sure we want this additional financial burden in our retirement. We wondered if we might qualify for equity release?
We bought our current house in 2004 for £210,000 and we believe it would now be worth in the region of £450,000 or may be even more. We have £80k left on the mortgage repay. Thanks for your help, in advance.
Mark’s Answer
Thank you for your enquiry and the simple answer is that you do qualify for equity release based on your age and the value of your home. The further good news is that you can raise capital from the equity in your home to replace your existing mortgage.
As you will notice, I have used the word replace because this is what you would be doing. There are options available to you including downsizing to release equity naturally, using any existing savings you may have and possibly securing a retirement interest-only mortgage, that could reduce your current mortgage payments if you currently have a capital repayment mortgage.
Alternatively, a popular way of raising capital to replace a mortgage is by using a Lifetime mortgage which can provide you with the capital that you need.
With a Lifetime mortgage you will secure a fixed interest rate for life, and the provider will add the interest to the loan, and it will increase with compounding interest, so it could reduce the amount you may want to leave to your beneficiaries.
However, the unique feature of a Lifetime mortgage is the flexibility with payments, which means that you can decide to make payments to service the interest and some of the capital, or you could make partial monthly or ad hoc payments to service the interest or make no payments at all.
How this works and what impact this makes to your estate is really important for you to understand, and here at Equity Release Supermarket we have the tools and equity release calculators to help guide you and see what options and choices you have. Our independent specialist adviser will listen to your requirements, and then make a recommendation based on your individual circumstances, and then they will provide you with a key-facts illustration containing everything you need to know including how much you can borrow the fixed interest rate and other key features of the plan.
They will also be able to provide you with a payment calculator where you can decide if you want to make payments or simply let the interest roll-up.
Payments are flexible, and voluntary, so you can increase, decrease, stop, and start them and rest assured, you have a guarantee to live in your home for the rest of your life, irrespective whether you make payments or not.
Meet our expert…
Mark Gregory, founder and CEO of Equity Release Supermarket, is here to answer your questions. Mark is an adviser himself with over 20 years equity release experience.
He launched Equity Release Supermarket 10 years ago and it has grown to become one of the UK’s leading equity release specialists.
Email kate.saines@emap.com to ask Mark a question
