Retirement mortgage - "good idea"?
Discussion
While exploring options to pay for an extension to make enough room in one house for two households, I came across a product that I hadn't heard of before - interest-only retirement mortgages.
Having seen the effect of rolling-up interest on an equity release mortgage, I would never consider one of those, but paying the interest every month seems to be a relatively sensible option.
House worth £400k, mortgage-free, deeds in my name only. Want to borrow £100k to extend and do a few alterations.
I'm 65 next week, company pension and self-employment income around £20k.
My housemate is 57, and she earns £28k, but has an IVA which expires next year.
I have no kids, both of her kids work in the City, so nobody really relying on an inheritance. The thought of potentially giving almost everything away to an equity release mortgage company (as happened to my mum when she moved after dad died) stops me going down that route.
My thoughts are, make an application for a joint retirement mortgage. Payments should be under £300 a month.
Once the building work is completed, my sister and her family would take over the upstairs of the house, and take out a repayment mortgage to pay off the retirement mortgage, or simply cover the costs as rent. Her family have a combined income of £50k+, but can't get a mortgage while still paying rent on their Housing Association property.
If it all goes pear-shaped, and my sister doesn't move in, we could rent out the upstairs as a summer holiday let (or under the rent a room scheme) to more than cover the retirement mortgage interest.
Thoughts please?
Having seen the effect of rolling-up interest on an equity release mortgage, I would never consider one of those, but paying the interest every month seems to be a relatively sensible option.
House worth £400k, mortgage-free, deeds in my name only. Want to borrow £100k to extend and do a few alterations.
I'm 65 next week, company pension and self-employment income around £20k.
My housemate is 57, and she earns £28k, but has an IVA which expires next year.
I have no kids, both of her kids work in the City, so nobody really relying on an inheritance. The thought of potentially giving almost everything away to an equity release mortgage company (as happened to my mum when she moved after dad died) stops me going down that route.
My thoughts are, make an application for a joint retirement mortgage. Payments should be under £300 a month.
Once the building work is completed, my sister and her family would take over the upstairs of the house, and take out a repayment mortgage to pay off the retirement mortgage, or simply cover the costs as rent. Her family have a combined income of £50k+, but can't get a mortgage while still paying rent on their Housing Association property.
If it all goes pear-shaped, and my sister doesn't move in, we could rent out the upstairs as a summer holiday let (or under the rent a room scheme) to more than cover the retirement mortgage interest.
Thoughts please?
BoRED S2upid said:
That your sister and family can’t take a mortgage on your property or half of it unless the alteration were changing it to 2 flats which it doesn’t sound like they are.
Paying you rent isn’t a problem or the rent a room idea.
It's a dormer bungalow, 2 smallish bedrooms and a shower room upstairs. I'm currently using the upstairs for my self-employment.Paying you rent isn’t a problem or the rent a room idea.
The extension would for a larger kitchen/diner, a second lounge/sunroom, and to extend a bedroom. The alterations would be to turn the existing (smallish) kitchen diner into a utility room, workshop/study for me, and a second downstairs loo.
It'll be kept as a single dwelling (shared kitchen, lounge) to avoid the "granny annexe" council tax implications, so if my sister got a mortgage it would be jointly with me, with her paying, along with a share of the bills.
I guess it might be simpler (and more flexible in the future) to just stick with the retirement mortgage - if these work like I think they do?
You do realise that you can pay the interest every month on an equity release too - don't you?
It all comes down to which product(s) you're eligible for, how much money they will lend you via that product in your specific circumstances and what the associated interest rates are.
From what I found out, a Retirement Interest Only Mortgage has some extremely strict eligibility criteria, and those need to be met by everyone "living" in the house - i.e. your wife / girlfriend still needs to meet the eligibility criteria if you die.
Am I eligible?
How much will they lend me?
What's the interest rate?
However, if you don't trust yourself to make the interest payments when no-one is forcing you to, then maybe you should ignore the above.
It all comes down to which product(s) you're eligible for, how much money they will lend you via that product in your specific circumstances and what the associated interest rates are.
From what I found out, a Retirement Interest Only Mortgage has some extremely strict eligibility criteria, and those need to be met by everyone "living" in the house - i.e. your wife / girlfriend still needs to meet the eligibility criteria if you die.
Am I eligible?
How much will they lend me?
What's the interest rate?
However, if you don't trust yourself to make the interest payments when no-one is forcing you to, then maybe you should ignore the above.
omniflow said:
You do realise that you can pay the interest every month on an equity release too - don't you?
It all comes down to which product(s) you're eligible for, how much money they will lend you via that product in your specific circumstances and what the associated interest rates are.
From what I found out, a Retirement Interest Only Mortgage has some extremely strict eligibility criteria, and those need to be met by everyone "living" in the house - i.e. your wife / girlfriend still needs to meet the eligibility criteria if you die.
Am I eligible?
How much will they lend me?
What's the interest rate?
However, if you don't trust yourself to make the interest payments when no-one is forcing you to, then maybe you should ignore the above.
I didn't know that you could pay the interest on an equity release mortgage. I was under the impression that the whole point of equity release was that it was basically "free" for the borrower, and the estate picked up the tab when the house was sold.It all comes down to which product(s) you're eligible for, how much money they will lend you via that product in your specific circumstances and what the associated interest rates are.
From what I found out, a Retirement Interest Only Mortgage has some extremely strict eligibility criteria, and those need to be met by everyone "living" in the house - i.e. your wife / girlfriend still needs to meet the eligibility criteria if you die.
Am I eligible?
How much will they lend me?
What's the interest rate?
However, if you don't trust yourself to make the interest payments when no-one is forcing you to, then maybe you should ignore the above.
If you can pay the interest on an equity release mortgage, how is it any different to an interest-only retirement mortgage?
I know that the amount one can borrow (LTV) on equity release is basically determined by the age of the youngest householder. I figured this was to minimise the risk to the lender of the loan amount getting close to the value of the house as the interest is rolled up. From what I've read on a couple of websites, the eligibility criteria for a retirement mortgage is over 55 and drawing a pension. I haven't seen the eligibility requirements for a joint applicant though.
clockworks said:
I didn't know that you could pay the interest on an equity release mortgage. I was under the impression that the whole point of equity release was that it was basically "free" for the borrower, and the estate picked up the tab when the house was sold.
If you can pay the interest on an equity release mortgage, how is it any different to an interest-only retirement mortgage?
I know that the amount one can borrow (LTV) on equity release is basically determined by the age of the youngest householder. I figured this was to minimise the risk to the lender of the loan amount getting close to the value of the house as the interest is rolled up. From what I've read on a couple of websites, the eligibility criteria for a retirement mortgage is over 55 and drawing a pension. I haven't seen the eligibility requirements for a joint applicant though.
In equity release does the 'lender' own a % share of the equity rather than having a fixed £££ claim on the property? If you can pay the interest on an equity release mortgage, how is it any different to an interest-only retirement mortgage?
I know that the amount one can borrow (LTV) on equity release is basically determined by the age of the youngest householder. I figured this was to minimise the risk to the lender of the loan amount getting close to the value of the house as the interest is rolled up. From what I've read on a couple of websites, the eligibility criteria for a retirement mortgage is over 55 and drawing a pension. I haven't seen the eligibility requirements for a joint applicant though.
clockworks said:
While exploring options to pay for an extension to make enough room in one house for two households, I came across a product that I hadn't heard of before - interest-only retirement mortgages.
Having seen the effect of rolling-up interest on an equity release mortgage, I would never consider one of those, but paying the interest every month seems to be a relatively sensible option.
House worth £400k, mortgage-free, deeds in my name only. Want to borrow £100k to extend and do a few alterations.
I'm 65 next week, company pension and self-employment income around £20k.
My housemate is 57, and she earns £28k, but has an IVA which expires next year.
I have no kids, both of her kids work in the City, so nobody really relying on an inheritance. The thought of potentially giving almost everything away to an equity release mortgage company (as happened to my mum when she moved after dad died) stops me going down that route.
My thoughts are, make an application for a joint retirement mortgage. Payments should be under £300 a month.
Once the building work is completed, my sister and her family would take over the upstairs of the house, and take out a repayment mortgage to pay off the retirement mortgage, or simply cover the costs as rent. Her family have a combined income of £50k+, but can't get a mortgage while still paying rent on their Housing Association property.
If it all goes pear-shaped, and my sister doesn't move in, we could rent out the upstairs as a summer holiday let (or under the rent a room scheme) to more than cover the retirement mortgage interest.
Thoughts please?
What happens to the HA property?Having seen the effect of rolling-up interest on an equity release mortgage, I would never consider one of those, but paying the interest every month seems to be a relatively sensible option.
House worth £400k, mortgage-free, deeds in my name only. Want to borrow £100k to extend and do a few alterations.
I'm 65 next week, company pension and self-employment income around £20k.
My housemate is 57, and she earns £28k, but has an IVA which expires next year.
I have no kids, both of her kids work in the City, so nobody really relying on an inheritance. The thought of potentially giving almost everything away to an equity release mortgage company (as happened to my mum when she moved after dad died) stops me going down that route.
My thoughts are, make an application for a joint retirement mortgage. Payments should be under £300 a month.
Once the building work is completed, my sister and her family would take over the upstairs of the house, and take out a repayment mortgage to pay off the retirement mortgage, or simply cover the costs as rent. Her family have a combined income of £50k+, but can't get a mortgage while still paying rent on their Housing Association property.
If it all goes pear-shaped, and my sister doesn't move in, we could rent out the upstairs as a summer holiday let (or under the rent a room scheme) to more than cover the retirement mortgage interest.
Thoughts please?
£100k sounds like a high income multiple.
how do you know what interest rates will do over the next 20 years?
Last time I wanted to borrow £100k, they were asking questions about paying it off before I retired.
Obviously policies have changed, but how do you know what lenders will want in a few years' time?
Are they offering a deal you're prepared to be trapped in?
If your sister takes out a mortgage where you're living, she will be stuck. Unable to get a place of her own.
Frankly, it sounds barking.
Convoluted finance involving family members, I'd advise getting your ideas straight about all combinations of divorce/marriage/death/jobs and whatever with agreed exit strategies.
OutInTheShed said:
What happens to the HA property?
£100k sounds like a high income multiple.
how do you know what interest rates will do over the next 20 years?
Last time I wanted to borrow £100k, they were asking questions about paying it off before I retired.
Obviously policies have changed, but how do you know what lenders will want in a few years' time?
Are they offering a deal you're prepared to be trapped in?
If your sister takes out a mortgage where you're living, she will be stuck. Unable to get a place of her own.
Frankly, it sounds barking.
Convoluted finance involving family members, I'd advise getting your ideas straight about all combinations of divorce/marriage/death/jobs and whatever with agreed exit strategies.
My sister is planning on doing a house swap, from her current 4 bed house to a 2 bed flat, putting her son on the tenancy agreement, then giving up her tenancy. She's pretty clued up on these things, having traded up twice.£100k sounds like a high income multiple.
how do you know what interest rates will do over the next 20 years?
Last time I wanted to borrow £100k, they were asking questions about paying it off before I retired.
Obviously policies have changed, but how do you know what lenders will want in a few years' time?
Are they offering a deal you're prepared to be trapped in?
If your sister takes out a mortgage where you're living, she will be stuck. Unable to get a place of her own.
Frankly, it sounds barking.
Convoluted finance involving family members, I'd advise getting your ideas straight about all combinations of divorce/marriage/death/jobs and whatever with agreed exit strategies.
Nationwide appear to be offering a 10 year fixed rate of less than 4%, so interest payments of around £300 a month.
My current income is at least £1700 a month after tax, total outgoings around £1000. Scope to reduce outgoings by dropping to one car if necessary. My income will go up next year when I get my state pension. My self employment will continue as long as my health allows - clockmakers tend to die "at the bench".
I agree that it would get financially complicated if my sister borrowed to buy into a share of my house. However, the vast majority of my estate will end up going to my 2 younger sisters (aged 44 and 42), so she'd just be increasing her share now. She wants to move back to the area, as she grew up less than a mile from where I live. She's tried to do a house swap to no avail, and local prices means she has zero chance of buying on her own. She's in a 20 year same sex relationship, and I get on very well with both of them. I'll be well looked after as I get older.
It seems like a much safer bet than me doing something silly like getting married again.
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