Senior Mortgages
Being in your dotage means you own your home outright. This is the dream we have all been raised on. The white picket fence , the comfy couch, grey hair and no mortgage. Sadly, this is no longer the case for many pensioners. 600,000 pensioners are still paying house loans, and even more scary, 20,000 of those will still be making repayments into their 80’s.
Additionally, Prudential has released information which states that one quarter of these folk do not have enough funds to cover their retirement. Pensioners forced to find funds to cover the mortgage repayments out of a fixed income are left with no option but to skimp on some other cost of living.
Most pensioners would be thrilled to have a fixed income, as long as the income was fixed at a point related to the cost of living. The harsh reality of fixed incomes which are increased annually, is that the tiny increase does not keep up with increased costs (particularly council taxes), thereby making the fixed income is a reducing income.
The other nasty culprit is inflation. While inflation is low currently, even 2.5% per annum, reduces the spending power of the fixed income by approximately 25% in nine years. What to do? There are several choices out there, but none of them may seem very agreeable.
One solution is equity release. Equity release allows the homeowner to stay in their current home. Prior to an agreement being reached conditions have to be met. Firstly, normally the person will have to be over a minimum age. Learn about the legal pitfalls about arranging a mortgage before jumping in.
Secondly, the house has to be worth a minimum value. You need to keep in mind that the amount of the equity release is only a percentage of the worth of your home. Some people find the amount available to be released disappointing. However, you will retain ownership of a significant portion of your home, which will enable you to leave money in your estate.
Another choice is to remortgage using your home as security. These loans are available up to the age of 75 and can be used to allow cash flow for cost of living expenses. The disadvantage to these types of loans is that the interest rates are high. However, extra competetion in the market for these loans has meant that there are many more available options available. Lifetime mortgages may be more acceptable than they sound, and numerous pensioners select them when they perceive themselves as having no other choice. The upside of these loans is that you do not have to move house. Here’s one place where you can get some mortgage help and before I forget, there’s another at the end of this article.
15% of pensioners take on a boarder or lodger as a solution to their cash flow problems. Taking on a lodger can work very well, but ultimately, the successfulness will depend on the lodger themselves. When you are older and set in your ways, it may be difficult to share the space of your home. Compromises will need to be made. Research the lodger option carefully. The extra money could effect your benefits, and also consider the extra tax you are required to pay on the additional income.
If you do not own your home outright, you must get the approval of the lender or insurer before embarking on the above pensioner loans. The Citizen’s Advice Bureau gives wise advice, and can steer you to the correct organizations for further information.
If you are under pensioner age, you should be planning your dotage seriously. Do not put it off. Time moves along quickly and if you are not prepared, you could easily end up in the above financial situation. Save hard and start now. Seek advice from a financial planner to ensure a quality retirement. There have been ways created to help people gain advantage from their existing mortgage; one is by improving their equity - this is a good example here. However, if you’re simply searching for a lender after reading the above, we did think this lending service was good.
Copyright 2007 www.loans-only.com
Tag: mortgages
August 29th, 2007 at 8:24 pm
[…] Sadly, there are disreputable lenders out there who have aggressive and abusive practices of lending money. If you are thinking about getting a mortgage in your senior years, you should read this article on senior mortgages. […]