Later life mortgages.

A later life mortgage is simply a term which covers anyone borrowing into, or in, retirement.

Sometimes these are referred to as mortgages for over 50s, or mortgages for over 60s, which seems a long stretch to be calling someone an older borrower! This just means when the mortgage ends the borrower will most likely be retired.

Having a mortgage into retirement means changing sources of income and lifestyle, which mortgage lenders need to take into account when assessing a later life mortgage application.

You may have heard of a Retirement Interest Only (RIO) mortgage. With a RIO mortgage borrowers pay a monthly interest payment and there’s no set end date. The mortgage continues until the last-named borrower dies or moves into long-term care, at which point the property is sold to repay the loan. Because of the monthly interest payments there’s no compound interest added to the loan, so the mortgage balance at the start of the loan will be the same amount at the end (plus any added fees or additional interest, and as long as all monthly interest payments have been made in full and on time). We do not currently offer Retirement Interest Only (RIO) mortgages.

There’s no set maximum age to get a mortgage and this will depend on the criteria of the mortgage lender. At Suffolk Building Society we have no maximum age on mortgages taken on a capital and interest repayment basis, or on our interest only mortgages.

This will vary from lender to lender, so it’s best to check around to make sure you find a solution that suits you. At Suffolk Building Society we have a maximum term of 40 years, even when the borrower is already in retirement, unless it is a buy to let mortgage which is a maximum of 25 years.

Later life mortgages could simply be used to continue an existing mortgage, or we find common reasons to get a mortgage in later life could be:

1. For a ‘sale & downsize’ – borrowers are planning to buy and prepare their perfect home ready for retirement, then sell their existing property once they’ve settled in (using the sale proceeds to clear the mortgage).
2. Adapting the home for later life – some homeowners need to extend, renovate or adapt their home due to changing lifestyles, such as installing a ground floor wetroom.
3. To become a family benefactor – enabling a child or grandchild to get onto the property ladder thanks to a gifted deposit.
4. To fund a significant leisure purchase – such as a static caravan or motorhome.

Usually you won’t be able to use a later life mortgage to fund everyday living expenses or a big holiday. As with all financial decisions you’ll need to carefully consider what option is right for you depending on your individual circumstances.

If you are looking for a mortgage that will end when you are retired then a lender will need to ensure you have sufficient income to sustain your payments. You may be able to use multiple income sources in addition to any employment or self employment, such as property income, investment income and pension income.

At Suffolk Building Society we will require all applicants who are aged over 75 at the time of application to seek independent legal advice, as a condition of our mortgage offer. The advice can be provided after the mortgage offer is issued but must be before the funds are released. We also recommend anyone borrowing beyond 75 to have registered a lasting power of attorney for property and financial affairs.

No. There are vast differences between standard residential mortgages taken in later life and equity release mortgages. These differences include:

• Standard residential mortgage interest rates are typically lower than equity release rates as a whole, which can make thousands of pounds difference to the borrower.
• A later life mortgage is an agreement for a selected term, and applicants can choose how long to borrow the money over, rather than being tied in ad infinitum.
• By remortgaging later life borrowers may be able to switch between later life mortgage deals and providers.
• Should later life mortgage borrowers come into a lump sum of funds or an inheritance, they may be able to make overpayments or repay their loan (subject to the terms of their mortgage). Equity release products are designed for the remainder of life, so providers can make it more difficult and more expensive to arrange repayments.
• Later life borrowers can choose to make interest only or capital & interest repayments, which means that the interest doesn’t compound or roll up as it can do with equity release (which can then potentially impact the remaining equity in the property).
• Whilst it is possible to move house under an equity release scheme, the homeowner will need to get approval the new property meets the provider’s criteria. With later life mortgages, the homeowner remains in complete control of their estate and can opt to move or downsize if they wish.

Another alternative could be a Retirement Interest Only mortgage, known as RIO, which is where monthly repayments are made on an interest only basis and the loan is not repaid until a significant life event such as the death of the last remaining borrower or if they go into long-term care. For more information see our Retirement Interest Only page.

It’s best to do some thorough financial planning to decide what’s right for you, and you may wish to consider seeking the help of an independent financial advisor.

There are no set limits and you’ll need to research different lenders to find one which suits your needs. At Suffolk Building Society our standard range of mortgage products are available for older borrowers, and we may lend up to 75% loan to value for applicants borrowing into retirement. For applicants who are already retired, we’ll consider up to 70% loan to value, or a maximum of 50% if any element of the mortgage is interest only.

Yes, although this will be subject to the terms of your existing equity release agreement.

You will need to carefully check the terms and conditions of your equity release and factor in any fees and charges which may apply – you may wish to consider seeking the help of an independent financial advisor.