The Failure to Save and the Importance of Pensioner Mortgages
According to banking giant HSBC, the world is in the grip of an unrelenting pensions crisis. In its recent report, ‘The Future of Retirement: A New Reality1’, the firm surveyed more than 15,000 respondents from a total of 15 global markets, including the U.S. and the UK. The results were staggering, as they suggested that the majority of global citizens would exceed their state and occupational funds just two thirds into the duration of their retirement. This highlights the economic issues facing adults approaching retirement, and more specifically their inability to accumulate savings.
Understanding Pensioner Mortgages and Their Benefits
It is with this in mind that lenders have begun to offer pensioner mortgages, aimed directly at those approaching or entering into retirement. The key for applicants is fully understand this lending arrangement, and determine whether or not it is right for them. Consider the following:
- How are Pensioner Mortgages Calculated: While not all lenders offer pensioner mortgages, those with a broader appetite for risk are far more likely to do so. Rather like standard mortgages, they are calculated on the basis of annual income, although in this instance this consists of state and occupational pension funds rather than earnings. In order to determine whether you are eligible, lenders will ensure that there is a track record of pension or investment income and make an offer which reflects your level of capital. If you fall slightly short of the lenders criteria, you may still be able to apply for a mortgage with the aid of a guarantor.
- The Structure and Repayment Terms Available: If you are thinking of applying for a pensioner mortgage, you will also need to consider the various structures and repayment terms available. They can be offered on both capital or interest only repayment terms, for example, and these options each offer variable benefits to applicants. While the former requires both capital and interest to be paid concurrently, those with interest only mortgages are required to make smaller, nominal monthly repayments. While this is cheaper to fund on an annual basis, however, you must remember to repay a lump sum at the end of the agreement.
The Bottom Line
While not all lenders offer pensioner mortgages, those that do ensure that applicants have access to range of structures and repayment options. Choosing the right one is an extremely important decision, and you should solicit professional advice prior to making a commitment. With this in mind, consider Capital Fortune Pensioner Mortgages as your first port of call.
