Over 50 but too young for equity release – what are the options?
People over the age of 50 often find it difficult to get a mortgage because many lenders will not take future income, such as pensions, into account. But some lenders do, in particular those who offer retirement interest-only mortgages (RIOs).
Later life borrowers who find they cannot get a mainstream mortgage, often turn first to equity release. Many brokers are also trained to look at equity release as a first solution but, while it has a really valuable role to play, it may not always be the most appropriate option available for you.
Tempting as equity release might be with no monthly payments to make, there are many reasons why you may not qualify or why it simply is not the most suitable product for you. This is heightened if you’re only in your 50s.
Reasons could include age restricted properties; the construction type may not fit with the lender’s criteria, or you may prefer to retain a significant proportion of equity in your property and don’t want to run the risk of this being eroded. In each of these cases retirement interest-only may be a viable, affordable and the right option.
Retirement Interest-Only Mortgage Case Study
Mrs R
Mrs R has devoted her years in work – and in semi-retirement – to helping children and young adults who’ve endured challenging starts in life. But when it came to making home improvements and remortgaging her house, as a single woman in her 60s with multiple incomes, her financial advisor warned that options are more limited.
During her professional life in education and social care, Mrs R worked in some of the most difficult environments: areas suffering from riots and social unrest; deprived inner-city schools; and working with children whose lives had been continually disrupted due to their family circumstances.
Since semi-retirement, Mrs R’s commitment to vulnerable children hasn’t waned either through her work with charities and support groups.
“All the way through my life, I’ve only ever been looking for ways that I can make a difference to children,” she says. “And I was never happier than when I was actually teaching.”
However, Mrs R was to find her own circumstances challenging as she approached the end of her fixed-rate mortgage. Having moved from one of the cheaper areas of the country to one of the most expensive, to be near her family, she was looking for some financial assistance to make home improvements.
“I wanted the back of my house to be a beautiful liveable space – it’s south facing so I wanted to sit and look out at my garden as opposed to looking out at the road in front,” she explains.
“I needed additional money to do that, but even though I didn’t have any other debt and a good credit profile, my existing lender wanted me to take out a second mortgage on top of my first. It just felt messy.”
Mrs R’s issue was that her high street lender had a somewhat blinkered view of her income streams and her affordability and suggested she would have to move to a repayment mortgage before they would give her the extra capital.
“I don’t see the need to own my house outright so I wanted to stay interest-only,” she continues.
“The other problem is that most lenders will only take into account two income streams, but I have five – my pensions and two incomes from part-time and self-employment. In a couple of years’ time, when I start getting my state pension, I’ll have six.
“Individually, none of these are sufficiently large to service a mortgage of the size I was asking for but, when you add them all up, it’s a fairly decent income.”
Mrs R sought the help of a financial advisor, who put her in touch with LiveMore, where everyone’s circumstances are appraised according to their own merits instead of applying rigid rules and criteria.
“[This is what] a lot of people are looking for now. [As a society] we’re moving away from everybody having one job.
“I’ve not had one job – I’ve reinvented myself and I’m still doing it now.”
Through a more detailed exploration of her income streams, Mrs R was able to obtain a five-year fixed-rate mortgage on a payment plan that worked for her, which also released enough funds to create the open plan living space she’d always wanted and give her the freedom she desired.
“It’s enabled me to have the value of my own roof, my own front door and my security on my own terms,” she beams. “For me, that’s a wonderful place to be.”
A great reward after a working life spent giving to others.
Your home or property may be repossessed if you do not keep up repayments on your mortgage. You may be charged a fee for mortgage advice.