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Mortgage Advice for Pensioners

Previously, lenders have rejected mortgage applications from people over the age of 65/ 70, however now it is rare that a maximum age limit exists. New mortgages in retirement are becoming more and more common.

There are a number of reasons for this:

  • Some pensioners continue to receive significant incomes through their retirement.

  • Lenders now offer equity release mortgages to allow pensioners to release money from the value of their property.

  • People are living longer and are therefore planning more for the future.

  • Many pensioners are still burdened by long term mortgages (1 in 6, according to the Scottish Widow Bank) and want to get a better mortgage deal.


If you already have a mortgage but would like to raise some money for home improvements, clearing outstanding debts or you simply want to boost your income in retirement then remortgaging your home is a sensible option for you.

I am a pensioner, why should I remortgage my home?

Buying a home and getting a mortgage is one of the biggest and most important decisions in your life and therefore should be made with much consideration. Due to the length of most standard mortgages and being a pensioner, it is likely that your financial situation and personal circumstances have changed significantly since signing your mortgage agreement all those years ago. This means that your current mortgage may not be the most suitable offer for you anymore. A mortgage no longer means a life-long commitment to one mortgage lender and many people in UK are taking control of their financial decisions and shopping around for better, more profitable deals. The result of this is that you can make huge savings leaving you with extra funds to spend as you choose.

Are there any mortgage types that specifically cater for pensioners?

Yes, an Equity Release mortgage or scheme is often a sensible and beneficial option for retired homeowners.

What is an Equity Release mortgage?

It means that you can use the value of your home to receive either a lump sum of cash or regular monthly installments.

Are there different types of Equity Release Mortgages?

Yes, there are two main types of equity release schemes, please read through the following descriptions:

Types of Equity Release Mortgage

Home Reversion Plans

Lifetime Mortgages

Homeowners agree to sell a share of their property in return for a lump sum.

Homeowners take out a loan on a property to raise a lump sum that they can spend as they choose.

When the homeowner or surviving spouse dies, the company receives the agreed proportion of the sale proceeds.

The interest accrued is repaid from the sale of the house when the surviving spouse or homeowner dies.

When the sale is made the company receives the exact share percentage agreed upon i.e. 50%, regardless of whether the property value increases or decreases.

Note that the interest is likely to be far higher than with an ordinary home loan and it is simply left to accumulate.


Is an Equity Release mortgage suitable for me?

This type of mortgage is generally suitable if you:

  • Are over 55;

  • Own a property worth at least £80,000; and

  • You want to remain in your current home rather than downsize the value of your property in order to release capital.

Are there any risks involved with releasing equity on my property?

Please refer to the table below for the Pros and Cons of Equity Release mortgages:

Pros and Cons of Equity Release mortgages

Pros

Cons

You can unlock cash tied up in the value of your home and spend it as you choose.

Taking out an equity release mortgage will reduce the size of the estate passed on to family.

You can choose to receive this cash in either a lump sum, in monthly installments or both.

People in receipt of means-tested state benefits should also be aware that a sudden injection of cash from an equity release arrangement could mean loss of benefits.

 

Some plans are complicated and offer poor value. Trading down to a smaller home may be a better alternative, financially.


Although Equity Release mortgages and remortgages can be extremely beneficial they can also carry extra risks, therefore please ensure that you consider you options carefully and choose the most suitable for you.

General tips when considering an equity release mortgage:

  • Speak to your family before deciding on an Equity Release mortgage as your decision may affect them.

  • Don’t underestimate how long you might live. The longer the homeowner lives, the higher the bill.

  • Help the Aged recommends that you talk to a specialist advisor before going ahead with your decision. http://www.helptheaged.org.uk/en-gb



Get a Quote from multiple Equity Release Remortgage companies:

  • Fill out the simple – no obligation form

  • Wait for qualified advisors to get in touch and discuss your personal circumstances.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.  YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

The actual rate will depend upon your circumstances.  Ask for a personalised illustration.  There will be a fee for mortgage advice.  The fee will normally be 2% of the mortgage advance, minimum of £950 and a maximum of £3000.The fee can usually be added to the mortgage amount.

Enable Finance Ltd. is authorised and regulated by the Financial Services Authority for mortgages and non-investment insurance.  Buy-to-Let mortgages are not normally regulated by the Financial Services Authority.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE