Spoilt for Choice, Options for Borrowing in Retirement
By Tipton Building Society
With the average age of first time buyers growing(1) and lifestyles changing, more people are looking to borrow into their retirement. Recent ONS data suggests that the UK population is aging(2), in response to this, an increasing number of lenders are beginning to consider later life lending. However, with strict rules on affordability and a need to be a responsible lender, some lenders are still hesitant to enter the later life market.
A recent survey by Best Advice showed that 44% of mortgage advisers are active in the later life mortgage market, with a further 31% expecting to start advising in the area over the next 24 months.
In March 2018, the Financial Conduct Authority (FCA) reclassified Retirement Interest Only (RIO) mortgages as standard mortgages, rather than the previous lifetime mortgage classification they fell under(3).
In response to the changes in the market, RIO mortgages are becoming increasingly available. But, with later life lending and RIO mortgages now available in the market, where do you start?
At The Tipton, there are multiple options available for your clients looking to borrow in later life, dependent on their needs and circumstances. So, what’s the difference?
Later Life Lending
Everyone’s needs and circumstances can be different. With The Tipton’s standard later life lending products, your clients can borrow up until their 95th birthday. This means that your clients are able to borrow into their retirement, if necessary and if they’re already retired.
The Tipton’s later life products work to a set mortgage term. Your client can opt to repay the mortgage on a repayment basis, or interest only.
With their standard later life products, if both applicants are retired but cannot prove affordability in sole name, applications will be considered where there is enough equity available to downsize to a two bedroom flat/house within 5 miles of the mortgaged property.
The Tipton’s RIO product range allows your client to use the sale of their home as their repayment strategy (provided they are receiving pension income and have a minimum of 40% equity in the property).
In contrast to standard later life lending products, The Tipton’s RIO mortgages have no fixed term, and can run until a life changing event occurs.
Joint applications for a RIO mortgage can be considered when both applicants are aged 55 or over, and can satisfy affordability checks individually.
To further enhance the offering, unlike some other lenders, The Tipton can look to help your clients who are looking to purchase a purpose-built retirement property.
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