Recent figures have shown that despite many people endeavouring to pay off a mortgage before hitting the age of retirement, around 12 per cent of people between the ages of 65 and 74 still have a mortgage. Aviva have confirmed that the average outstanding amount of these mortgages is around ?59,858.
Whilst lenders have made it easy for home owners to overpay their mortgage through permitting an overpayment of up to 10 per cent annually, some property owners have opted to enjoy their money rather then channel it straight into their mortgages repayments.
Some retired property owners are choosing to extend their mortgage to free up money in order to purchase holiday homes or for home improvements.
Another reason behind this practice is to allow ageing home owners to abate the insurance tax (IHT) paid by inheritors once they have passed away, through using the mortgage as a mode of estate planning. However, any gifts of money must be given at least seven years before the benefactor dies in order to be free from IHT, it would otherwise be counted as part of the value of the estate.
Although some lenders do not allow mortgages after retirement, some will permit regular loans until the age of 75 and others have no age limits at all.
Halifax even offers a Retirement Home Plan mortgage for the over 65 age bracket. This is not an equity release scheme but is a lifetime mortgage based on an interest-only product. The released money can be used however the home owners chooses.
