A GUIDE TOBORROW ING IN LATER LIFE

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

Everything you need to know about taking out a mortgage if you’re aged 50 or over

We recommend you seek advice from an Independent

Financial Advisor before making any decisions.

You could also consider an equity release mortgage where you can release some of the money tied up in your home without making a monthly mortgage payment - this means that compound interest ‘rolls up’ and is due to be paid along with the capital once the mortgage is redeemed.

Mortgages made easy if you’re aged 50 or overOlder borrowers continue to face significant challenges when accessing the mortgage market. In 2014 new legislation led many banks and building societies to restrict lending to borrowers where the term (the length of the mortgage) would take the borrower over the age of 65.

A stronger emphasis was placed on affordability, which means lenders must now look even more closely at the income and outgoings of mortgage applicants during the life of their mortgage. This often leaves borrowers in their fifties and above with a reduced choice of mortgage products - but some banks and building societies are trying to find new ways to help.

A range of options for unique circumstancesLater life mortgages are typically available to sole or joint applicants aged 50 or over. Later life mortgages are different to other mortgages because they include specific lending criteria and products suited to later life borrowers. Later life mortgages are also suitable for applicants looking to borrow into retirement or those already in retirement who want to continue with their current mortgage. Borrowers don’t need to be employed but may need a regular source of income.

Types of later life mortgagesYou may consider a residential mortgage on an interest-only basis from a provider who will lend to older borrowers. This is where you release funds from your home and only pay the interest due on the loan. You must demonstrate your ability to repay the capital with a repayment vehicle.

Or, you could choose a residential mortgage on a capital & interest basis where you pay off the loan as well as the interest due. Or, you may consider Retirement Interest Only (RIO) which is similar to an interest only mortgage but differs in that there is no fixed end date. Read more about RIO opposite.

Retirement Interest Only (RIO)

If you’re considering a later life mortgage, a RIO mortgage could be an option to look into. RIO mortgages are available to applicants aged 55+ and enable a borrower to pay a monthly interest payment with no set end date, continuing until the last remaining borrower dies or moves into long term care. At this point the loan is repaid by way of the property being sold.

How is a RIO mortgage different to a standard mortgage?

Because RIO does not have a set end date, borrowers do not need to have a repayment vehicle in place – they are utilising their property as repayment of the original loan amount. Secondly, by paying the interest off each month borrowers are not adding to the mortgage balance or attracting compound interest. The capital remains unchanged and will be repaid from the sale of the property.

Because RIO borrowers are maintaining a monthly interest payment, the loan is assessed on the interest payment alone rather than a capital & interest repayment. Of course, residential mortgages are also available on an interest only basis so it is well worth researching the different available options and seeking professional advice.

So, isn’t RIO a form of equity release? (Hint: NO!)

A RIO mortgage is different from both a residential interest only mortgage and a Lifetime Equity Release mortgage.

With a RIO mortgage you can be more certain of the amount of inheritance which will be left behind once the loan is redeemed as interest is paid monthly, unlike some forms of Equity Release where no payments are made and compound interest accumulates on the loan - meaning that a potentially hefty lump sum of interest will be payable when the loan is redeemed. This leaves less money available for any beneficiaries from the sale of the property.

And remember, with a standard residential or RIO mortgage there is always a monthly repayment, unlike a Lifetime Equity Release option which does not require repayments on the mortgage.

What type of later life borrower are you?Are you living in the home you to wish to spend your retirement in?

Are you looking to for a like-for-like remortgage, transferring

your existing balance?

Are you seeking to purchase your next or final home now,

in addition to your current property, and then sell your

property once you are ready to move into your new home?

Savvy Swapper

LeisureInvestor

Do-erUpper

FamilyBenefactor

Cash Seeker

Final Home Prepper

Are you borrowing additional funds to improve

or extend your home?

Are you releasing funds to help children or

grandchildren with a lump sum, such as to get them on the property ladder?

YES

YES

Are you looking to release funds for a significant

leisure purchase?

Do you just want to free up some cash?

NO

NO

NO

NO NO

NO

NO

YES

YES

YES

YES

YES

Looks like you’re another type of later life

borrower!

Family BenefactorYou may be aware of the term ‘Bank of Mum and Dad’ and be keen to use the funds in your home to help children or grandchildren onto the property ladder.

Final Home PrepperYou’ve found your ideal retirement home and will probably be selling your current property to pay off all or part of the mortgage on your new home.

Do-er UpperYou’re living in your ideal retirement home but want to make a few changes - perhaps creating your dream kitchen or adding a wetroom or downstairs bedroom.

Leisure InvestorYou’ve worked all your life and it’s time to enjoy yourself! You may be looking to borrow funds to make a leisure purchase such as a motorhome or static caravan.

Savvy SwapperYou’re looking to switch your existing mortgage balance to a new provider or product in order to get the best deal to suit your requirements.

Are you a cash seeker?If you’re looking to release a pot of cash to cover daily living expenses, many mortgage lenders will be unable to lend on this basis. It may be worth consulting an Independent Financial Advisor to see whether any

other options, such as equity release, may be more suitable.

Things to consider before taking out a later life mortgage

Will my children’s inheritance be affected?Which type of later

life mortgage is best for me?

How would getting a mortgage affect my retirement?

In 10 years’ time will my current

home still meet my needs?

Should I release equity in my home

to purchase a second property?

Could I support a repayment or interest only mortgage

payment?

Do I need to changemy will?

Do I want to help my children onto the property ladder?

How will my benefits or pension be

affected?

Do I have a lump sum or savings I can use to repay the capital on my

mortgage?

Frequently Asked QuestionsWhat is a later life mortgage?A range of specialist products or lending criteria aimed at helping people aged over 50 and those in retirement to get a mortgage.

How old do you have to be for a later life mortgage?Most lenders set the minimum age for later life at 50 or over. The Financial Conduct Authority sets the age limit for RIO as aged 55 and over.

Are Equity Release mortgages the same as later life mortgages?No - while there are some similarities, standard residential and RIO mortgages are not the same as Equity Release. Equity Release often comes without monthly repayments, meaning compound interest accumulates on the property whereas RIO and standard residential mortgages always have a monthly repayment where the interest is paid.

Do I need to be a homeowner to be eligible for later life?No, you don’t need to currently own your home to qualify for later life. As long as at least one applicant is aged 50 or over, you would be eligible.

Do later life mortgages have monthly repayments?Residential mortgages on any repayment basis and RIO mortgages will require a monthly mortgage payment. Some forms of Equity Release do not require monthly payments.

Do I need to get independent legal advice before taking out a mortgage in retirement?Some mortgage lenders will require you to seek independent legal advice before taking out a later life mortgage. Even if you don’t need to, it’s always a good idea to get impartial advice from a legal professional so you fully understand the implications of taking out a mortgage into retirement.

Still have questions?Give us a call on

0330 123 0773

Mortgage Type RIO Residential

Equity Release

Lifetime Mortgage Home Reversion

DetailsFor older consumers where the lender

will not seek repayment of the loan until a specified life event

A standard mortgage product for the purchase of a new home or remortgage of

an existing property

Designed to convert accumulated equity into regular income, drawdowns and/or

initial lump sum

A tax free lump sum or regular income received in exchange for a portion of the home, below market

value and repaid on sale of the property

Affordability Checks Yes None None

Age For borrowers aged 55+, no maximum ageMinimum and maximum age set by

mortgage lendersFor borrowers aged 55+, no maximum age 65+

PaymentTerms

Fully paid when the last person named on the mortgage dies/sells/goes into care.

No fixed date by which you’re expected to repay (life event i.e. death/long-term care)

Maximum term set by mortgage lenderFully paid off when the last person living in the

property dies, sells the home or goes into care. No fixed date by which you’re expected to repay

No repayments to make, borrower stays in the home as a tenant. Lender reclaims their portion

of the property when the home is sold

Make monthly interest payments for life or redeem the loan by repaying the capital

and any oustanding interest

Can choose to repay capital & interest, interest only or part & part

Not committed to regular mortgage payments for life, but compound interest applies (where interest is calculated on the loan amount plus

the interest already added)

House cannot be sold / reclaimed by lender until the borrower dies or moves into care

Pay interest on the loan monthly (like standard interest-only mortgages)

If interest only, a repayment vehicle must be in place

Option to pay all/some interest, or pay off interest and capital

Borrower receives below market value for the sale of the share, between 20% and 60%. Can be

taken as a lump sum or regular income

Risk of repossession for default on repaymentsExisting mortgage/secured loans on your property

must be repaidOwnership of the property transferred to the home

reversion provider for the portion sold

Interest Rate Fixed and variable rates available Fixed rates apply for the life of the loan

Not applicableProduct

SwitchingCan be switched to new product and provider

(subject to the lender’s affordability criteria)

Largely not designed for consumers to switch to another mortgage a few years after origination (i.e.

once an introductory period ends)

Sold by? General Mortgage Brokers

Specialist Advisors An equity release mortgage advisor must consider important aspects such as the consumer’s health

and life expectancy, preferences for their estate, impacts on their tax position and alternativemethods of raising the funds

Consumer advice

required?Can take out on advised basis with a recommendation from a sales advisor

or on a non-advised basisYes - FCA rules require all consumers to take advice, though a consumer can choose to

reject any advice they have been given

Monthly interest payment

Monthly interest payments to be madeMonthly payment to be made, can choose from capital & repayment, interest only or

part & part

Can choose to pay some, all or no monthly interest payments

No interest rate payable as not a loan

Money Advice Service says...

Generally cheaper when compared to most Lifetime Mortgages, but you will need to pass the mortgage affordability checks to prove you can afford the interest only

repayments

Lenders want proof that you will be able to keep up repayments if interest rates rise.

They might refuse to offer you a mortgage if they don’t think you’ll be able to afford it

It might affect what you leave as an inheritance. With an interest roll-up mortgage the total amount

you owe can grow quicklyTypically seen as a last resort for home owners

Later life mortgages compared

Mortgage Type RIO Residential

Equity Release

Lifetime Mortgage Home Reversion

DetailsFor older consumers where the lender

will not seek repayment of the loan until a specified life event

A standard mortgage product for the purchase of a new home or remortgage of

an existing property

Designed to convert accumulated equity into regular income, drawdowns and/or

initial lump sum

A tax free lump sum or regular income received in exchange for a portion of the home, below market

value and repaid on sale of the property

Affordability Checks Yes None None

Age For borrowers aged 55+, no maximum ageMinimum and maximum age set by

mortgage lendersFor borrowers aged 55+, no maximum age 65+

PaymentTerms

Fully paid when the last person named on the mortgage dies/sells/goes into care.

No fixed date by which you’re expected to repay (life event i.e. death/long-term care)

Maximum term set by mortgage lenderFully paid off when the last person living in the

property dies, sells the home or goes into care. No fixed date by which you’re expected to repay

No repayments to make, borrower stays in the home as a tenant. Lender reclaims their portion

of the property when the home is sold

Make monthly interest payments for life or redeem the loan by repaying the capital

and any oustanding interest

Can choose to repay capital & interest, interest only or part & part

Not committed to regular mortgage payments for life, but compound interest applies (where interest is calculated on the loan amount plus

the interest already added)

House cannot be sold / reclaimed by lender until the borrower dies or moves into care

Pay interest on the loan monthly (like standard interest-only mortgages)

If interest only, a repayment vehicle must be in place

Option to pay all/some interest, or pay off interest and capital

Borrower receives below market value for the sale of the share, between 20% and 60%. Can be

taken as a lump sum or regular income

Risk of repossession for default on repaymentsExisting mortgage/secured loans on your property

must be repaidOwnership of the property transferred to the home

reversion provider for the portion sold

Interest Rate Fixed and variable rates available Fixed rates apply for the life of the loan

Not applicableProduct

SwitchingCan be switched to new product and provider

(subject to the lender’s affordability criteria)

Largely not designed for consumers to switch to another mortgage a few years after origination (i.e.

once an introductory period ends)

Sold by? General Mortgage Brokers

Specialist Advisors An equity release mortgage advisor must consider important aspects such as the consumer’s health

and life expectancy, preferences for their estate, impacts on their tax position and alternativemethods of raising the funds

Consumer advice

required?Can take out on advised basis with a recommendation from a sales advisor

or on a non-advised basisYes - FCA rules require all consumers to take advice, though a consumer can choose to

reject any advice they have been given

Monthly interest payment

Monthly interest payments to be madeMonthly payment to be made, can choose from capital & repayment, interest only or

part & part

Can choose to pay some, all or no monthly interest payments

No interest rate payable as not a loan

Money Advice Service says...

Generally cheaper when compared to most Lifetime Mortgages, but you will need to pass the mortgage affordability checks to prove you can afford the interest only

repayments

Lenders want proof that you will be able to keep up repayments if interest rates rise.

They might refuse to offer you a mortgage if they don’t think you’ll be able to afford it

It might affect what you leave as an inheritance. With an interest roll-up mortgage the total amount

you owe can grow quicklyTypically seen as a last resort for home owners

Wills and LPAs - all you need to know

• Your financial assets, property and possessions (including any pensions, insurance policies and shares)• Your beneficiaries and what they should receive• Your executors – these are the people who will be carrying out your wishes, commonly two are chosen but you can have up to four

There is no legal requirement to involve a solicitor in the making of a will, if it is relatively straightforward and the correct process has been followed. However, it is recommended that all wills are checked by a solicitor for any errors which may create problems with carrying out your wishes after you die.

There is a charge for using a solicitor but they will be able to give you advice about their fees before commencing any work; alternatively many are involved with Free Wills month each year or may have special offers from time to time.

Why is a will important?

A Will or a Lasting Power of Attorney is important if you’re considering taking out a mortgage in later life as it makes it easier for your affairs to be managed when you die or if you become mentally incapacitated.

Things to consider when making your will

For more information on wills, visit:Citizens Advice: www.citizensadvice.org.uk/family/death-and-willsUK Government: www.gov.uk/wills-probate-inheritanceMoneySavingExpert: www.moneysavingexpert.com/family/free-cheap-wills

LAST W ILL

AND

TESTAMENT

Many people may think having a will is only important if you have significant possessions or a large amount of money. However, this is not the case. Having a will means this will dictate the ways in which your possessions and estate will be allocated and to whom.

If you have made a will it is important to regularly review this so that it continues to represent your wishes. You can make changes to your will at any time.

You can decide in your LPA how your attorneys will make decisions for you – for example, that they all have to agree on particularly important decisions (say, selling a property) but can make others independently.

The law provides for crystal clear instructions on how an LPA can be used and allows the holder to maintain control of their affairs even if they have lost their mental capacity to make decisions.

The law says attorneys must follow one rule above all: to make all decisions in your best interests, not their own or anyone else’s.

What is a Lasting Power of Attorney (LPA)?An LPA lets you choose people to look after your affairs if you lose mental capacity. There are two types of LPA: property and financial affairs; and health and welfare. If you’re seeking a later life mortgage you’ll usually need to take out a property and financial affairs LPA.

You don’t have to make both types of LPA at the same time and could choose to only have one. Anyone over 18 can make an LPA, but it must be made whilst you are still capable of making decisions for yourself. The LPA must be registered before it can be used. The people you choose to make decisions for you in an LPA are called ‘attorneys’ and you are called a ‘donor’.

Who can you appoint as your attorney?You can have more than one attorney. There are no qualifications to be an attorney; anyone who’s over 18 can be one, with some exceptions. Many people choose family or close friends as their attorneys. Some people choose professionals such as a solicitor or accountant.

Attorneys and decision-makingMost people want the option of help with decision-making while they still have mental capacity. If that’s the case, your attorneys must act solely on your instructions and you can cancel your LPA at any time.

Even when you lose mental capacity, your attorneys must involve you as much as possible in decision-making. You can also include instructions in your LPA about the kinds of financial or health and welfare decisions your attorneys can make on your behalf – and those they can’t.

How do I get an LPA?

You can either use a solicitor to help you create an LPA or make one using the government’s online service on GOV.UK. Because an LPA is a very important document, whilst you don’t need to use a solicitor, some people do prefer to involve a legal expert to ensure that their wishes are correctly reflected.

Once your LPA is complete, in order for it to become active it will need to be registered with the Office of the Public Guardian (OPG), the government body that manages LPAs. You can activate it at any time. There is a charge to process each type of LPA application and this fee doesn’t include the cost of paying a solicitor to help create your LPA, if you use one.

If the LPA has been correctly completed and there are no objections to the registration after people have been notified, the Public Guardian must register it. They must do this after three weeks.

For more information on LPAs, visit:UK Government: www.gov.uk/power-of-attorneyAge UK: www.ageuk.org.uk/information-advice/money-legal/legal-issues/power-of-attorneyOffice of the Public Guardian: https://publicguardian.blog.gov.uk/category/lpa/

What safeguards are in place?

Some people opt for an additional LPA Certificate, which is when the LPA is countersigned by an independent person chosen by the LPA donor (the person granting the LPA) to safeguard against abuse, such as that the donor understands the LPA and they are not under duress or have been tricked into making it.

And remember, your attorney(s) cannot act without your express permission and you can clearly indicate what decisions they can make on your behalf.

Glossary of termsERC (EARLY REPAYMENT CHARGE)This is a fee payable if you exceed any overpayment terms on your mortgage. Most mortgages come with a set percentage of how much extra you can repay on your mortgage.

EQUITY RELEASEEquity release is a type of later life mortgage. It describes the process of releasing a set amount of equity in your property as a lump sum of cash. You then either pay the interest each month or let the interest ‘roll-up’ while you pay nothing - this leads to compound interest accumulating on the loan and the total balance payable increasing over time.

LATER LIFELater life is a range of mortgages and/or lending criteria suited to applicants aged 50 or over, though this age varies according to different lenders.

LPA (LASTING POWER OF ATTORNEY)An LPA lets you choose people to look after your affairs if you lose mental capacity. Anyone over 18 can make an LPA, but it must be made whilst you are still capable of making decisions for yourself and the LPA must be registered before it can be used.

LTV (LOAN TO VALUE)The amount of deposit put down on a property compared to the purchase price. For example, for a mortgage application where the value of the property is £200,000 and the applicant has a deposit of £20,000, the Loan to Value would be 90%. LTV is one of many factors used by lenders to determine what products you may eligible for.

RIO (RETIREMENT INTEREST ONLY)A RIO mortgage is a specialist type of mortgage designed for borrowers over the age of 55. It is essentially an interest-only mortgage where, after releasing an amount of equity in the property, the borrower pays the interest due on their mortgage on a monthly basis for an indefinite period until death or a move into long term care of the last remaining borrower - at which point the property is sold to repay the mortgage.

How we enable borrowing into later life

No maximum age limitWe don’t have any age restrictions on our mortgages - whether you’re 55 or 105, we’ll treat you the same.

Pension income acceptedWhen assessing your application, we’ll take into account all pension income and 75% of any investment income.

Flexible overpaymentsYou can overpay at least 50% of your original loan amount before incurring any early repayment penalties - and some variable rate deals come with unlimited fee free overpayments.

At Ipswich Building Society, we understand that people are still working well beyond their 50s, hold a healthy pension income, or have investments or inheritance that could be used to repay a mortgage.

We welcome applications from later life borrowers - all applications are considered in-house by our expert team, who’ll take the time to get to know you personally so we can take a common sense view of your situation.

How our later life mortgages could help

You’re individual - we are tooOur friendly mortgage consultants can help you find the perfect mortgage. We offer free, no-obligation advice if you’re searching for a mortgage that meets your needs.

By applying a manual approach to underwriting, we can look at all applications individually and take your personal circumstances into account.

Give us a call today on 0330 123 0773Mel & Paul

Mortgage Consultants

Help and further informationGetting a mortgage in later life is a significant decision that may affect your financial situation in retirement.

Solicitors for the Elderly

A national association of independent lawyers who specialise in older client law.

Tel: 0844 567 6173

Web: www.sfe.legal/find-a-lawyer

Tax Help for Older People

A service from the charity Tax Volunteers providing free, independent and expert help and advice for older people on lower incomes.

Tel: 01308 488066

Web: www.taxvol.org.uk

The Society of Later Life Advisers

A not for profit organisation dedicated to higher standards and accessibility to regulated financial advice for older people and their families.

Tel: 0333 2020 454

Web: www.societyoflaterlifeadvisers.co.uk

Age UK A charity dedicated to helping older people when they need it the most. Help includes information and advice, health and care, wellbeing and more.

Tel: 0800 055 6112

Web: www.ageuk.org.uk

Money Advice Service

Free and impartial money advice, with online guides on a wide range of topics including financial advice and help in later life.

Tel: 0800 138 7777

Web: www moneyadviceservice.org.uk

For help and advice you may wish to contact:

THIS INFORMATION IS INTENDED FOR GUIDANCE ONLY AND DOES NOT CONSTITUTE A RECOMMENDATION

We help all types of people with all types of mortgages,

throughout England and Wales.

We understand life doesn’t always come neatly packaged,

so we use real people to assess your situation and

offer a fully advised service on our mortgages, with no fees

for our advice.

PO Box 547 Ipswich IP3 9WZ0330 123 0773 mortgages@ibs.co.uk www.ibs.co.uk

Ipswich Building Society is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

Registered on the Financial Services Register, Firm Registration Number (FRN) 104875.

MOR50 04/19

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.