Borrowing in Retirement

With the average age of first time buyers growing(1) and lifestyles changing, more people are looking to borrow into their retirement. Recent ONS data suggests that the UK population is aging(2), in response to this, an increasing number of lenders are beginning to consider later life lending. However, with strict rules on affordability and a need to be seen as a responsible lender, some lenders are still hesitant to enter the later life market.

In March 2018, the Financial Conduct Authority (FCA) reclassified Retirement Interest Only (RIO) mortgages as standard mortgages, rather than the previous lifetime mortgage classification they fell under(3).

In response to the changes in the market, RIO mortgages are becoming increasingly available. But, with later life lending and RIO mortgages now available in the market, where do you start?

At The Tipton, there are multiple options available for your clients looking to borrow in later life, dependent on their needs and circumstances. So, what’s the difference?

Later Life Lending

Everyone’s needs and circumstances can be different. With The Tipton’s standard later life lending products, there is no upper age limit for your client. This means that your clients are able to borrow into their retirement, if necessary and if they’re already retired.

The Tipton’s later life products work to a set mortgage term. Your client can opt to repay the mortgage on a repayment basis, or interest only.

RIO Mortgages
The Tipton’s RIO product range allows your client to use the sale of their home as their repayment strategy (provided they are receiving pension income and have a minimum of 40% equity in the property).

In contrast to standard later life lending products, The Tipton’s RIO mortgages have no fixed term, and can run until a life changing event occurs.
Joint applications for a RIO mortgage can be considered when both applicants are aged 55 or over, and can satisfy affordability checks individually.

The further enhance the offering, unlike some other lenders, The Tipton can look to help your clients who are looking to purchase a purpose-built retirement property.

Sources

(1)https://www.thetimes.co.uk/article/the-rise-of-the-middle-aged-first-time-buyer-w0mzz38cs#

(2)https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/ageing/articles/livinglongerhowourpopulationischangingandwhyitmatters/2019-03-15

(3)https://www.bankrate.com/uk/mortgages/retirement-interest-only-mortgages/