Why are Customers aged 60 and over Switching their Standard Mortgage to a Lifetime Loan?

By David Brady, Director, Spry Finance

At Spry Finance, we know our customers take out a Lifetime Loan for lots of different reasons and we understand that all our customers’ circumstances are different.

Our role is to provide information, help and guidance to ensure our customers understand how a Lifetime Loan (also known as a Lifetime Mortgage) works and whether it is a suitable financial choice for them.

Spry Finance Switching your mortgage to a Lifetime Loan blog

Simply put, a Lifetime Loan is a mortgage secured against your home. You borrow a lump sum using your house as security and can then use the money as required without the requirement to make regular monthly payments unless you want to. We typically see our customers using a Lifetime Loan for four main reasons:

    • Home improvements
    • Cash fund for lifestyle enhancements
    • Living inheritance – gifting to family
    • Refinancing existing mortgage loans and other debts

Currently, we are seeing an increase in customers enquiring whether they can switch their existing mortgage to a Lifetime Loan as a way of matching their mortgage requirements to their current and future financial needs.

Recent Central Bank of Ireland data shows that around 82,000 customers currently hold mortgages with Credit Servicers or Non-Lending Retail Credit Firms. Many of these customers are continuing to make repayments on tracker or standard variable rate loans, and up until the middle of last year, had been benefiting from historically low interest rates.

However, in 2023, the landscape for mortgage holders changed dramatically. The European Central Bank increased its base lending rate to 4.00%, making monthly repayments substantially more expensive for Irish mortgage holders with variable rate mortgages. According to the ECB further increases are very likely in July 2023.

This has resulted in a situation where variable rate mortgage customers, many of whom are paying in excess of 7%, have no certainty over their future mortgage costs.

Switching to a Lifetime Loan while not suitable for everyone, is a potential option for some as it can provide certainty over interest rates and help manage payments for those who are eligible. Eligibility is primarily based on a customer’s age (customers must be aged over 60), the value of their property and the equity remaining in their property. As payments are optional, the ability to make repayments and previous credit issues are not a barrier to Lifetime Loans in the same way as they may be for standard mortgages. With no upper age limit, Lifetime Loans provide real choice for those in later life.

Switching Your Mortgage to a Lifetime Loan

All customers should seek independent financial advice and/or talk to a mortgage broker for impartial advice, allowing them to understand what options are most suitable for their individual circumstances.

For example, customers may consider selling their home and trading down, or renting a room in their property to increase income or raise additional funds to clear their mortgage. Where such options are not attractive or suitable, a Lifetime Loan could provide a workable, alternative solution.

The Lifetime Loan application process is transparent and comprehensive and, while it is by no means a “silver bullet” for all, it is a financial product that provides a real option for some later life customers to consider. Most importantly, a Spry Finance Lifetime Loan is designed to help customers to remain in their homes for as long as they wish, while retaining 100% ownership of their property and providing interest rate certainty for life.

Things to consider when seeking to switch to a Lifetime Loan

  • Your current financial circumstances – You need to understand what you are currently paying on your mortgage, what the remaining term is, whether you can afford these payments for the rest of the term, what your current interest rate is, whether it is a fixed or variable rate and what is the approximate value of your home.
  • Consider all your options – Take your time to consider what other options are available to you such as selling your home and trading down or renting a room to increase income or raise additional funds.
  • Get Financial Advice – Armed with all of the above information, talk to a Financial Advisor or a Mortgage Broker. We recommend picking a Broker who has relationships with all lenders as they will be able to give you independent advice on all the options available to you. If you decide to move forward with a Spry Finance Lifetime Loan, you will also need independent legal advice.
  • Age – Lifetime Loans from Spry Finance are only available to the over 60s. If you are a couple, the youngest person applying for a loan from Spry Finance must be over 60 years of age.
  • Interest Rate – All Spry Finance Lifetime Loans have fixed interest rates for the life of the loan, giving you certainty over the mortgage cost. Current rates (updated as of 1 January 204) are 6.50% for our Green Lifetime Loan and 6.70% for our standard Lifetime Loan.
  • Optional Payments – A unique feature of Spry Lifetime Loans is that repayments are optional. Lifetime Loans are designed to be repaid from the sale of your property by your estate or when you move to permanent care. However, a key feature of Spry Finance Lifetime Loans is that you can repay up to 10% of the original loan amount each year.
  • Loan Amount – How much you can borrow depends on your age. The maximum amount available is 15% of the value of the property for those aged 60, rising by 1% for every year of age up to a maximum of 40% for those aged 85 and older. You will also need to consider if the Lifetime Loan is enough to re-finance your existing mortgage as, like other lenders, Spry Finance will require a first charge against the property.
  • No Negative Equity Guarantee – No matter how long the loan lasts, the amount to be repaid will never be greater than the value of the property it is secured against, providing you with an additional layer of comfort.
  • Property Value – Your home must have a minimum value of €250,000 if in Dublin or €175,000 elsewhere in Ireland.

For more information on a Spry Lifetime Loan contact us on (01) 5822570 or [email protected]