A new mortgage has been launched by the Family Building Society, which is designed to help people of retirement age who have property assets but a low income.
The mortgage has been launched to help pensioners boost their retirement lifestyle, by providing a monthly income rather than a cash lump sum up front. Borrowers pay interest on the amount borrowed, but as the loan is paid in monthly increments, the interest payments are lower than a traditional mortgage, where you pay interest on the whole amount.
The product has a number of criteria that must be met in order to qualify. The property that is currently owned has to be worth £240,000 or more, and the loan can only be taken out over 10 years or less.
For those who are aged between 60 and 79 years old, the product provides alternatives to traditional forms of lending. It is possible to borrow up to 25% of the equity owned in a property. The lender pays a monthly amount which is equivalent to the total borrowed over 10 years, or the relevant term.
The interest payments are much lower than an interest only mortgage or equity release, as the borrower isn’t receiving the whole amount up front. However, the new mortgage requires the borrower to repay the amount borrowed at the end of the term, which Family Building Society presume that most people will do by selling their home and downsizing.
Prior to applying for any type of mortgage, it is advisable to contact a mortgage adviser who has undertaken a CeMAP course to ensure they have knowledge of the various products available, and their costs.