A third of over-55’s still paying off their mortgage
New research shows many homeowners still have a mortgage well into their fifties…
A study by equity release specialist, Bower Retirement Services, has revealed that 36% of equity release customers are still paying off their mortgage. Many of those who experience problems have interest-only mortgages, now finding it hard if not impossible to pay off their mortgage.
Downsizing considered by many but not followed through
One option older borrowers do have to pay off their mortgage is downsizing. Yet, although 23% of clients questioned considered this, many eventually decided against it due to factors such as wanting to stay near family or simply not finding a new home that was suitable.
Many of the problems older homeowners face today stem back to the 2000’s when interest-only mortgages were, before the credit crunch, at their height of popularity. These mortgages giving cheaper monthly repayments can cause problems in later years if the capital loaned still remains unpaid. It’s not only the borrower who can run into trouble with an interest-only mortgage but lenders too, which is why they’re far harder to find nowadays.
Additional ways to pay off that debt for older people include investment plans as well as the sale of the property. However, another issue arising was that homeowners found their home in later years was not worth as much as they thought. 18% of clients who proceeded with equity release, for example, found this to be the case.
Lifetime mortgages a possible solution in the future
A possible solution for older homeowners who wish to escape an interest-only mortgage is taking out a lifetime mortgage. This is a type of equity release where a long-term loan is secured against the property. Santander and Legal & General have recently joined together to offer lifetime mortgages to older borrowers who may be burdened with an interest-only loan without ever having a way to repay the entire loan amount.
The chief corporate officer at Bower Retirement Services, Andrea Rozario, says: “The launch of retirement lending is a significant move by Santander and Legal & General yet there’s still much more that needs to be done.
“A significant number of homeowners over 55 who are paying off mortgages just don’t have the options they require. Even if downsizing is one option, there are many who, for financial or emotional reasons, want to stay in their existing home. We feel that if it’s in their best interests then they should be able to do so.”