In an era where financial possibilities are ever-expanding, age is no longer a barrier to the ambitions of property ownership. This rings especially true for pensioners eyeing the real estate market, whether for relocation, investment, or simply a change of scenery.
Upsizing in the Golden Years
Imagine being 75, comfortably settled in your home on the Isle of Wight, a property valued at £350,000. However, the heart tugs you towards London, where your children and grandchildren reside. There’s a catch, though: moving closer to family means needing a more costly home, surpassing the worth of your current residence. Naturally, the question arises: is it feasible to pursue a mortgage at this stage in life?
The answer is an encouraging “yes,” according to financial expert Mark Gregory, writing in What Mortgage . The concept might seem daunting, but opportunities exist, particularly through equity release schemes that many pensioners might not be aware they can leverage for ‘upsizing.’
Understanding Equity Release: A Gateway to Aspirations
Equity release refers to accessing the money tied up in your house, without having to move. Typically considered by retirees, it’s a way to secure a lump sum or steady stream of income using the value of your home, all while continuing to live there.
However, diving into equity release requires thorough advice and consideration. Options range from downsizing to naturally release equity, utilising existing savings and investments, or determining payment plans based on individual financial situations.
The path to releasing equity should be custom-built, reflecting personal circumstances and capital needs. Even if you’re not upscaling in terms of property size, moving to a higher-value area like London counts as ‘upsizing’ financially.
Bridging Financial Gaps with Equity Release
Here’s how equity release shines in bridging these monetary gaps. Using the scenario above, if you’re relocating and purchasing a new home, the capital from your current home’s sale (in this case, £350,000) serves as a significant part of your new property’s cost.
One prevalent form of equity release is the flexible Lifetime Mortgage. This option can be arranged on your existing home (a remortgage) or a new one (a purchase mortgage). Essentially, it allows you to secure a loan against your property, which doesn’t need to be repaid until the house is sold, usually when you pass away or move into long-term care.
For a £500,000 property in London, a senior could potentially secure a lifetime mortgage of up to £226,250, maybe even more, depending on health conditions. If you decide to use £300,000 from your previous home’s sale, you’d need a £200,000 mortgage to cover the shortfall. This sum, combined with the sale proceeds, would cover the purchase and any additional costs, like conveyancing.
Notably, lifetime mortgages don’t hinge on your income; instead, they’re based on your age and the property’s value, removing the need for affordability or income checks by the lender.
Exploring Other Mortgage Avenues
While lifetime mortgages offer numerous benefits, alternative solutions exist. Retirement Interest-only Mortgages or standard Retirement Mortgages over a fixed term are also viable, though they rely on your income and affordability. These alternatives should be part of your regulated advice process, ensuring you make informed decisions.
Age is Just a Number in Homeownership
In essence, advancing years needn’t dampen your aspirations, especially when it comes to homeownership. With proper guidance and a clear understanding of available options, the golden years can indeed be a time of fulfilling dreams and family proximity. So, if you’re a pensioner pondering a property shift, rest assured: the financial tools at your disposal are both accessible and varied.