Living for 20+ years beyond typical working age means needs are going to change. Retirement is typically viewed as a single monolithic event, but in reality it’s several stages, and for many retirees each phase is considerably different.
Your client may have specific needs at the time of their mortgage application. However, life events can affect affordability levels and risk appetite as circumstances change over time. Key to retirement planning is to understand that not all retirement is the same. Lifestyles will differ for each client along with expected income and spending plans.
Roger and Margaret Dempsey
Roger and Margaret live on the outskirts of Birmingham. Roger’s worked for a Confectionary Manufacturer his entire working life. Margaret’s a primary school teacher in Great Barr.
As they’re both in their 50’s (Roger is 68 and Margaret is 65), they’re looking forward to retirement and being able to enjoy time together. Their daughters have flown the nest and their longer term plan is to downsize. For now, they want to stay in the property, as the grandchildren come to stay regularly.
They bought the house in 1996 on 25 year interest-only mortgage from their bank. They planned to use savings and an endowment. With just three years left on the mortgage, their endowment policy is unlikely to cover the full outstanding loan on the house.
They’ve been to the bank to discuss what options they have and what they can do to keep their house. Downsizing to something cheaper is an option, but not a choice. The bank can’t help as the Dempseys don’t meet their lending criteria.
Taking a mortgage into retirement
Roger and Margaret met a mortgage adviser to review their options. The adviser reviewed the couple’s current and projected retirement income so affordability over the mortgage term could be checked, including events such as first death.
The Adviser confirmed that affordability was good, and recommended the 55+ Mortgage from Hodge Lifetime. A 20 year term was chosen to tie into the Dempseys longer term objective to downsize later.
9 years have passed when Roger spends a short time in hospital. Thankfully it was nothing serious, but it prompts the Dempseys to review their mortgage arrangements. They remain comfortable paying the interest each month, but they want to make sure that they have a fall back plan should their income drop.
Their adviser recommends the Retirement Mortgage from Hodge Lifetime. This interest-only lifetime mortgage allows Roger and Margaret to continue paying the interest each month as they have been doing, but gives them added safety from when Margaret turns 80 when the interest roll-up option becomes available. This means that they could choose to stop making mortgage payments after this point, giving added security if their income reduces.
The slow-go years
Another 8 years have passed. Roger’s arthritis is now affecting his mobility, and Margaret’s eyesight has begun deteriorating. Healthcare costs have impacted savings and pension income has become stretched so they exercised the roll-up option on their retirement mortgage a year ago.
The Dempseys have reluctantly concluded that now is the time to downsize to a smaller property. At the same time, they also want to pass on some of their equity to their daughters.
Their adviser recommends the Flexible Lifetime Mortgage offering an up-front cash sum and with an option of further withdrawals should it be needed. With cash in the bank, and the home secured for the future, Margaret and Roger are confident that they’ve made the right choice.
As a specialist lender, our comprehensive product suite accommodates changing circumstances through later life years. With many factors driving growth in later life lending, our flexible range can support the growing number of borrowers who will need mortgages into and through retirement.