Q I’m a 64-year-old man in full-time employment earning around £55,000 a year. My wife is 59 years old and a self-employed beauty therapist, earning around £7,000 a year. I already receive two pensions from previous employment which gives me about £7,500 a year before tax and, if I retire in July next year, I am due a further pre-tax pension of about £5,000 a year. I do, however, have the option to carry on working. We have a £190,000 deposit to buy a house but require another £90,000 to complete the purchase. Is it possible to get a lifetime mortgage to cover the extra we need, or is this type of mortgage just for existing homeowners? If it is, are there any alternative lending schemes on the market?
GR
A Yes, it is possible to take out a lifetime mortgage – a form of equity release – to cover the extra £90,000 you need. And you don’t have to be an existing homeowner to be eligible for a lifetime mortgage (where the mortgage carries on until your death or the point at which you move into a care home). However, a lifetime mortgage may not be the best option. According to independent mortgage brokers, Clifton Private Finance, you’re a bit young to be considering a lifetime mortgage. And you could save money by opting for a retirement interest-only (RIO) mortgage instead. Designed “to keep repayment costs down for older borrowers on pension income”, says Clifton Private Finance, RIO mortgages mean that your monthly mortgage payments are repayments of interest only with no repayment of capital. If you went with “one building society which is offering a RIO mortgage at 2.79% interest per month, your monthly payments [on a £90,000 loan] would be an affordable £209 a month”. You would also have the option to repay up to 5% of the amount you borrowed each year should you find that you have cash to spare. Compared to equity release borrowing – in the form of a lifetime mortgage – the building society’s RIO mortgage deal “would be roughly half the cost”.
