You might feel like there aren’t many options available to you if you are trying to secure a residential mortgage while you are already in retirement. It can be hard to secure one given that your income might not be the same it was when you were employed. However, if this scenario applies to you, there is still a great option available. With our help, you may be able to secure a retirement mortgage, which can help you release equity from your home so you can enjoy some financial freedom.
Functionality of a Retirement Mortgage
A retirement mortgage begins either when you are about to retire or during your retirement. With this type of equity release plan, you need to make repayments against the loan balance in accordance with the terms of your product. For example, you might need to make pay repayments for a certain number of years or it could be for the rest of your lifetime.
Similar to other lifetime mortgage products, you repay the full debt owed to the lender when your home is sold. That sale takes place either when the youngest borrower either passes away or moves into long term care. Any proceeds that are left over from the sale are returned to your estate and can be used as an inheritance for your loved ones.
One key aspect of this type of scheme to keep in mind is if you will borrow on a single or joint basis. While it might seem to make sense to borrow jointly, that is not necessarily the case with a retirement mortgage. That is because given that repayments have to be made, you need to prove you can afford those repayments. If you borrow jointly, the lender will want to see that the repayments are still affordable even after one of the homeowners has passed away. So, if you borrow jointly, you will still need to prove that both you and your partner are able to make the payments individually.
Who should get a retirement mortgage?
If you need additional income during your retirement or you just want to experience more financial freedom, a retirement mortgage can be a great option. Many homeowners who choose to take out a retirement mortgage do so because they are moving closer to their children, have to make a final payment on their existing mortgage, want to make improvements in the home, or hope to help their children or grandchildren. In addition, you may want to take out a retirement mortgage simply because you want more money to make a big purchase for yourself. Perhaps it is a new car you’ve always wanted or a holiday you were never able to take in the past.
Affordability needs to be proven to qualify for a retirement mortgage. As such, you will need to provide documentation that shows your income. If borrowing jointly, you and your partner will both have to provide income documentation.
If you are self-employed, you will need to provide your P60’s, any and all occupation scheme pension forecasts and your state pension forecast. If you are self-employed, you will need to show your pension forecast and your trading accounts. Typically, it is three years’ worth of trading accounts that are required. In addition, you might also have to provide your SA302’s if you are self-employed.
If you are already receiving your pension, you’ll need to show your P60’s, last three months’ worth of your bank statements, and the last annual Department of Work and Pensions (DWP) State Pension letter you received.
You might also need to show any investment income and drawdown funds you receive.
Choosing the Right Plan
If you think a retirement mortgage might be a good fit for you, we are happy to offer you free specialized advice to determine if this is the best plan for you and your needs. In addition, we can review whether you should borrow on a single or joint basis if you decide a retirement mortgage is right for you. Reach out to us today to get started on your application, or to just review plan options. We are happy to talk with you in person, over the phone, through email or even via our live chat option.