Other Solutions - The Lifetime Mortgage – A New Flexible Mortgage Tool for the Older Generation

In many ways the new Lifetime Mortgages provide the sort of flexibility that was a feature of mortgage borrowing many years ago.

The level of borrowing is determined in most cases not by affordability calculations, but by just the borrower’s age and value of the property. The older you are and the more the property is worth, the more you can borrow.

This can provide an escape from an older interest-only mortgage arrangement. It can also open the door for using the value in the property for any other reason – whether it is for one’s own projects or to help family with problems they may have. The Lifetime Mortgage interest rates have also been inching downwards in the last few years as competition has increased. Past credit problems also usually do not present a barrier.

Mortgage Problems

As one gets older, one can hit various problems with mortgages. The older you get, usually the more difficult it is to take out a mortgage. One of the common problems we are often asked to assist with is interest-only mortgages – particularly those reaching the end of their term. Ultimately one can sell their property and downsize or go into rented accommodation, but as one gets older it becomes more and more undesirable to leave the home and area one has lived in for so long and which have become such an important part of their lives. Another option is to seek advice from an independent mortgage broker such as ourselves, as there are a number of niche lenders who provide special terms for older borrowers.

The Inertia Tax!

Those with residential mortgages that stay on their lenders’ Standard Variable Rate are effectively suffering a voluntary tax by not taking advantage of their lender’s special deals. Shifting over to the lender’s special deals, such as a fixed rate for two or three years, can save hundreds or even thousands of pounds over those couple of years. Simply contact your lender and ask them what is

available. This same principle applies for those who have buy-to-let mortgages on investment properties.

Pension Bits and Pieces

The older of us have often worked in many jobs and often with each job came some sort of pension arrangement.


When approaching age 55 or older, it is worth gathering all of these pieces and working out how you want to use them. Where such bits and pieces go back quite a ways in time, the Government can help you locate them through their free Pension Tracing Service(0345 600 2537). If you are not sure when your State Pension comes into effect, you can find out by searching “Check Your State Pension Age.gov.uk”, and for your State Pension Forecast search “Check Your State Pension.gov.uk”.

 

Pension Freedoms

The majority of pensions now basically consist of a pot of money. The current rules allow a person aged 55 or older to take 25% of the value of this pot tax-free. The rest can be used to set up an income for life or to draw down lump sums when needed. Any of these remaining funds that are taken out or turned into income are taxable. They are treated the same way as any other earned income in the year they are taken.

While the majority of people we see have the relatively simple type of pension described above, there are some complications with older pensions where there are certain guaranteed benefits built into the plan. It is worth having such plans looked at by a professional to ensure you are not missing out.

There are also many people who still will be able to benefit from better pension schemes termed

“defined benefit or final salary pensions” as they guarantee an income based on years of service and salary. We are available for assistance with such matters. Just give us a ring.