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5 Тhings To Know About Mortgages for Pensioners in 2020

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Written by John Marmolejo

It is said that when you get to the point when you retire, you are supposed to have all your financial affairs in order. All of our lives, we are taught that we should save up for when we are 60 and older, but no one tells us that there are so many ups and downs during life, that that is almost impossible. Pensioners take for almost 20% of the population in the United States alone, and it is said that between 100 and 200 thousand people get retired each year. Even though when we retire, we continue getting some kind of payment, or the pension, that money is not enough if we want to purchase real estate or maybe a brand-new vehicle. Because of that, we need to get a mortgage to be able to afford the things we want.

The terms for taking out a mortgage depend on the age you are and your employment status, so when you retire, they usually change. In this article, we are going to tell you some things you need to know if you are older than 65 and want to take out a loan. Check out our article, and remember that these things can help you out with the whole process. Know that depending on your location and your specific situation, things may differ, so it is always better to consult with a financial advisor or talk to a bank agent so you know the exact terms for taking out a loan.

1.      1. Terms

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The terms when it comes to this type of loan is different than the traditional one. For example, when it comes to traditional loans, there are fixed terms, but this is not the case with a retirement mortgage. Here, it lasts until the death of the person who borrowed the money, or until they move to a place where they will get permanent care. The same goes for those who decide to borrow money that falls under the lifetime or interest roll-up loan.

Some users say that this is extremely beneficial for older citizens, but with the fact that even people who are under 55 can borrow money using this type of mortgage, it may be a little bit tricky.

           2. Type of interest

Now let’s compare the type of interest that you can get from a traditional loan, and those that you can choose when you take retirement, or lifetime loans. In the first case, you can choose if you want to pay the money off with the capital, or if you are choosing the interest-only conditions. If you choose the latter, then you will need a separate vehicle or a capital to pay off the money you owe.

On the other hand, when it comes to the interest of the loan for pensioners, you can only choose the roll-up option. This means that you will only pay off the interest, and the main sum will be taken from the capital – usually the real estate that will be left to the bank after your decease.

3      3. Payments

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When it comes to payments, you need to be aware of your options. With traditional types, you have to pay the money back every month until everything is paid off. On the other hand, with the retirement loan, you will have to pay the interest back every month until you reach the age of 80. There is another case, where you have to pay every month until at least 5 years pass by since the time you took out the loan. After those 5 years, or after you turn 80, you are allowed for the interest to roll-up.

The payments are different for the lifetime loans, and with them, you don’t have to pay anything until you move into permanent care, or until your death.

4     4. Risks

Now let’s talk about the risks that loans carry. With the traditional types, you risk losing your property unless you pay every month. The same rule goes when it comes to loans for pensioners. However, if you choose to go with a lifetime loan, then you don’t carry any risks. As we mentioned before, you are not required to pay anything, and you don’t have to worry about paying the mortgage back. The capital will be used for all the payments when the term of the loan is due.

5      5. Amount

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Last, but not least, we are going to talk about the amount you are allowed to borrow. With traditional types, that amount is calculated depending on the value of the capital, as well as your employment status and credit score. It is said that with this type, you will be able to get the biggest amount of money. With the retirement plan, pretty much the same rules apply. The amount will be calculated depending on the value of your property, your income as a pensioner, and it will depend on how much money you spend per month.

When it comes to the lifetime plan, the amount is calculated depending on your age, as well as the value of the real estate you own.

These are the main things you should know before you decide on the type of loan you want to get. It is said that depending on your specific case, sometimes it is better to choose the roll-up plan, instead of the one that is for pensioners, but it is up to you to make that decision.

Know that not all banks give out these loans, so you need to do your research before you make the final choice. Some places require bigger interest rates than others, so make sure you have offers from different places. In most cases, talking to an advisor can help you out with your decision, and they will be able to offer you conditions depending on your specific case.

In some cases, your credit score may make a difference to how much money you are allowed to borrow, so if possible, make sure you have an as good score as possible before you think about getting a loan.

About the author

John Marmolejo