The idea of taking out a mortgage in the later years of life may have seemed like an alien concept at one time, but there is a growing need for this type of product.
As a result, it is highly likely advisers will start to get queries about the options for older homeowners, if they have not already seen a growing number of enquiries.
A raft of innovation in the sector has led to a number of equity release products coming to the market, aimed at making borrowing possible for the elderly.
At present, the minimum age to apply for most equity release products is 55.
Equity release is a way to free some of the value of the property and turn it into a cash lump sum, and is part of an array of mortgage products aimed at the older borrower.
What are the range of later life mortgage products that clients can choose from?
Lifetime mortgage
Lifetime mortgages are the most popular form of equity release products, according to Chris Buchanan, product and oversight director at L&G Home Finance.
Stuart Wilson, corporate marketing director at more2life, says: “Clients who need to borrow in later life have a variety of choices, including retirement interest-only mortgages, later life mortgages and equity release."
Depending on which specialist mortgage provider one chooses, the upper age limit can vary. In the case of specialist mortgage lender Aldermore, the maximum age for a new borrower applying for a lifetime mortgage is 85, and the mortgage can last up to the age of 99.
A lifetime mortgage is a form of equity release and is a loan secured on a residential home. The loan does not need to be repaid until the borrower dies or goes into long-term care.
It frees some of the wealth tied up in the home without having to move out of it.
Lifetime mortgages come in many different forms.
Mr Buchanan explains: “Lifetime mortgages come with the benefit of a fixed interest rate for life and customers also have guaranteed tenure, so they’ll never have to leave their home if they don’t want to.”
He adds: “Most lifetime mortgages also come with a 'no negative equity guarantee' that means the borrower will never owe more than the value of their home.”
With traditional lifetime mortgages, borrowers access part of their housing equity as a lump sum.
Different types of lifetime mortgages
Malcolm Wallace, director of Parsonage Financial Planning, suggests: "Alternatively, interest-only [lifetime] mortgages are available for those that wish to minimise their monthly outgoings.
"These mortgages require the interest to be paid each month and the capital is repaid at the end of the mortgage term.”
Mr Buchanan says: “Instead, interest is added to the amount they owe each month and so the amount owed will grow quickly. However, lenders are increasingly offering drawdown products that give customers the chance to take what they need now and withdraw more equity in the future as and when they need to.”
