While having the money to be able to retire comfortably should be a key aim for all employees, the reality can be very different. A lack of financial planning or outstanding of financial obligations, such as personal debt, outstanding mortgages, or the need to financially support dependents, such as children or elderly parents, can result in staff feeling their only option is to carry on working, even if they don’t want to. Others simply want to boost post-retirement income with extra cash but assume the only way is by selling or downsizing their home.
For most employees, their home will be their biggest asset. Some will have built up equity that they could release to help fund their retirement or meet their financial commitments. Others, who may have interest-only mortgages and be approaching retirement age, may be wondering how they are going to pay off their remaining mortgage debt, without selling their property or cashing in other retirement investments.
The trends fuelling lending into retirement
Many staff approaching retirement may simply assume their options are limited. Traditionally, mortgage terms expire at retirement age and many homeowners will look to repay their mortgages by the age of 60. Employees often either assume that they are unable to borrow beyond their retirement age, or that convention dictates that they shouldn’t.
Yet times are changing and lenders are responding with a wider range of options for those who may want to borrow into retirement.
Perceptions are changing too. Equity release is being recognised as an increasingly accepted option for those looking to boost retirement income, rather than simply sitting on a nest egg for their beneficiaries.
Such trends are fuelling a requirement for lending into retirement – a market which is expected to be the fastest-growing segment in the specialist mortgage market over the next two years, according to 80% of mortgage intermediaries.
Exploring the new options
Whilst traditional high street banks and lenders may have limited appetite in helping this market sector, there is a growing market of secondary lenders keen to support those looking for lending into retirement options, with terms up to age 90 and beyond, depending on circumstances.
Naturally, there are big decisions to be made and specialist advice is recommended.
Today, employees may no longer find that their only option is to sell up and downsize. More options are becoming available for those looking to remortgage later in life, as long as they have sufficient income. This can include pension income for mainstream lenders or rental or investment incomes for more specialist lenders in the market.
Those looking to purchase a property or release equity from an existing property, can also look at lifetime mortgages, a type of equity release mortgage that allows homeowners to take out a loan secured on their property, which doesn’t need to be repaid until they die or go into long-term care. Unlike some other equity release schemes in this instance, the homeowner retains ownership and responsibility for the property. Once the property is sold, the money from the sale pays off the loan and anything extra can be left for beneficiaries.
Funds generated from this type of mortgage can be taken as a monthly income, single lump sum or a combination of a smaller initial lump sum and a reserve amount available at a later date, giving those looking to retire more flexibility.
You can help
The right option for your staff will vary from employee to employee. Helping them to make the right decision, by providing expert advice, will help ease the stress of their finances as they approach retirement. Whether that’s allowing them to continue living in their dream home, supporting their dependents, or taking that once in a lifetime trip they’ve always promised themselves.
This article is provided by Charles Cameron & Associates.
