myth buster

Later Life Borrowing myths and misconceptions

The world of Later Life Borrowing is often not well-understood by consumers because the products involved are not ones used everyday or advertised widely and usually require specialist advice. One of our aims at Advice Guru is to help demistify this important area of financial planning with plain speaking and simple explanations.

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Demystifying later life loans

You might think that Later Life Borrowing is quite a recent, modern innovation. But in fact, lending products that have allowed homeowners to unlock the equity in their homes date back many decades.

As the market has grown and evolved, so have some of the myths and misconceptions about how they work. It can be quite a specialised area of financial planning so sometimes even financial advisers don’t understand how modern product solutions work.

Below, we have listed some of the most common misunderstandings about Later Life Borrowing that we hear from customers almost every day. But if there’s something you’d like to know that isn’t answered here, just get in touch using the button below.

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Common myths and misconceptions about Later Life Borrowing

While later life lending products can have higher interest rates than traditional mortgage loans, they serve a different purpose. These products, like equity release for example, are designed for older borrowers who may not have regular income to support full interest repayments. The costs reflect the added flexibility and unique features they offer, such as no monthly payments and the option to stay in your home for life. Also, most later life lending products offer fixed rates of interest for the lifetime of the loan, which compare very well to long-term fixed rates for residential mortgages.

With later life lending products like equity release, your family won’t be left with a huge debt. These products are typically repaid from the sale of your home after you pass away or move into long-term care. Importantly, they come with a “no negative equity” guarantee, meaning your family will never owe more than the value of your home, providing you abide by the terms and conditions of your loan. Any remaining equity after the loan is repaid goes to your estate. It’s essential to discuss your plans with your family to ensure everyone understands the impact.

That’s unlikely to be the case. Many lenders offer later life borrowing options specifically designed for older borrowers, with some products available to those well into their 80s or even 90s. The key factor is usually the value of your property, rather than your age (although the minimum age for these types of loans is usually 55). Lenders will also consider your ability to maintain the property and other criteria. Later life lending is tailored to suit the needs of older people, so don’t hesitate to explore your options.

A modest pension income doesn’t necessarily disqualify you from a later life mortgage. Many products, such as equity release, don’t require monthly repayments, so your income isn’t as critical. Instead, the loan is repaid from the value of your home when it’s sold, typically after you pass away or move into long-term care, and any payments you do decide to make towards repaying the interest or capital are purely voluntary. Some mortgages for older borrowers also have flexible repayment options tailored to your financial situation which means that even those with relatively modest incomes can enjoy the benefits. It’s important to explore the various products available and seek advice to find one that fits your needs and circumstances.

Many later life lending products are designed to allow you to stay in your home for life, without the risk of losing it. With these products, you continue to own your home, and the loan is repaid only when the property is sold, usually after you pass away or move into long-term care. However, some products do have a mandatory interest repayment element and, just like a traditional mortgage, with these loans your home can be at risk if you do not keep up repayments. It’s crucial to understand the different terms on offer and discuss your options with a specialist adviser.

With later life lending products like equity release, you don’t have to sell your house or give up ownership. You continue to own and live in your home for as long as you wish. The loan is repaid from the sale of the property only after you pass away or move into long-term care. This means you can benefit from the equity in your home without having to move out or lose ownership. It’s a way to access funds while maintaining your home and lifestyle.

It’s understandable to be concerned about leaving an inheritance, especially if your home is your main asset. There are products available that allow you to protect a portion of your home’s value, ensuring that some equity remains for your heirs no matter how big the debt you owe. Additionally, if property values rise, there may still be equity left after the loan is repaid. Discussing your priorities with a financial adviser can help you choose a product that balances your needs with your desire to leave an inheritance.

It’s common for family members to be concerned about later life lending, especially if they’re unfamiliar with how it works. Open communication is key. Explain your reasons for considering it and share how it can benefit your quality of life. At Advice Guru, we strongly advise our clients to include family members in meetings with their adviser, especially those who will be dealing with their estate after they die. This helps to address concerns and explain the protections in place, like the “no negative equity” guarantee. By making your family part of the decision-making process, you can help ease their worries and ensure that everyone understands the potential benefits and risks.

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To understand the features and risks of a lifetime mortgage, ask for a personalised illustration.

Think carefully before securing other debts against your home.

Some Buy to Let & Commercial mortgages are not regulated by the Financial Conduct Authority.

Your home may be repossessed if you do not keep up repayments on your mortgage.

A Protection plan will have no cash in value at any time, and will cease at the end of the term. If premiums are not maintained, then cover will lapse and you may not be covered if a claim is made

Advice Guru is a trading style of One Stop 4 Equity Release Ltd which is authorised and regulated by the Financial Conduct Authority (FCA). FCA No 952887. One Stop 4 Equity Release Ltd is a registered company in England and Wales with Company Registration Number 13452621. Registered Office: 14 North Street, Bourne, Lincolnshire, PE10 9AB.

Trademark Number: UKOP444255