Well, if you read The Express you might think so. After all, in a recent news article on mortgages for over 50s, it reported on how a warning has been issued on the back of statistics highlighting that searches for short-term mortgages for over 50s are on the up.
According to The Financial Conduct Authority’s Chief Operating Officer, Emily Shepperd, the proportion of mortgage holders over 67 is currently less than 2 per cent of loans. However, this is set to rise to 5 per cent by 2040 and 10 per cent by 2050.
As a Maidenhead mortgage broker and equity release specialist (although we’ll be referring to equity release mortgages as lifetime mortgages in this piece), we have seen interest in short-term mortgages from over 50s increase.
And, as a responsible mortgage broker, we do urge caution when it comes to those of certain age taking out mortgages of a certain length; if mortgages are still outstanding at a point in someone’s life when they’re earning less, then there is a clear risk.
So, what’s the alternative?
Lifetime mortgages for over 50s
Unlike standard mortgages – whether they’re short-term mortgages or long-term mortgages – where you borrow money over a defined period, Lifetime Mortgages enable homeowners to borrow money without having to repay the sum until they die or go into long-term care.
Not only that, but because the money has been borrowed against the value of the property – effectively freeing up property wealth that the homeowner has accrued over the years – the person taking out a lifetime mortgage can still live in their property.
At the point of death, or if the person needs to move into care, the property is then sold and the loan repaid. It’s important to note here that the person applying for a lifetime mortgage must be at least 55 years old.
In the context of The Express article, this approach has two benefits. Firstly, it alleviates the stress that an older demographic can face when applying for a mortgage when you’re over 50. And secondly, it takes away the risk associated with older people having too high a mortgage at the point of retirement and beyond.
How does a lifetime mortgage work?
This is a question our team of Berkshire mortgage brokers are regularly asked. And the answer is quite simple.
To begin with, there are two types of lifetime mortgage: interest roll-up lifetime mortgages and interest-paying lifetime mortgages.
An interest roll-up mortgage sees the homeowner repaying the loan plus the interest accrued over the term in one go – no payments are made between taking out the loan and repaying it. Whereas an interest-paying loan sees the homeowner effectively chipping away at the interest on the loan through payments as and when suits them.
The latter option means that the homeowner will still have to think about making repayments over the term of the loan, with the payoff being that as they’ve made payments towards it, the final balance will be lower than if they’d never made a payment. The former option means that the homeowner doesn’t have to think about repayments – ever. However, the downside is that compound interest means that the final balance will be higher.
What lifetime mortgage is right for me?
Only a specialist lifetime mortgage broker can really help you answer this question. The reason for this is that it depends on a number of factors including appetite for risk, personal circumstances and the applicant’s financial position.
Whilst lifetime mortgages can be lifechanging for many – and certainly provide an alternative to the approach that The Express has issued a stark warning about – our team of Maidenhead mortgage advisers strongly recommend that this type of mortgage application is handled by a specialist.
It is a long-term commitment and there are many elements to consider. So, if you’re considering applying for a lifetime mortgage, contact our team of lifetime mortgage specialists in Berkshire today.
Over 55 and considering exploring your options when it comes to mortgages? If so, contact our team of Maidenhead mortgage advisers on 01628 560820 or by emailing enquiries@altonmortgages.co.uk.