Ever wondered what you will do after retirement?
Taking a cruise around the world, completing those home improvements you always intended to make or enjoy helping & seeing the grandchildren would be a few of the options that many of us have thought about. One thing that we need to consider is our financial situation and market volatility after we retire. The money earned from our pension is not usually always enough to live on.
We therefore need to look at how this pension income can be supplemented in a manner that can utilise one’s assets. An increasingly common method for retiree’s was opting for the Halifax Retirement Home plan which in its day proved to be a wise & life changing option for many.
So what was the Halifax Retirement Home Plan?
In essence the Retirement Home Plan was the forerunner to the Retirement Interest only Mortgage we have in the later life marketplace in 2024. It was essentially a way of providing some extra cash for pensioners. It provided low cost mortgage finance for people who have retired. In other words, it was different from equity release as it works in a similar way to an interest only mortgage scheme. Therefore, the terminology used to describe this product is an interest only lifetime mortgage.
The money release from the HRHP could be used for many purposes including making improvements to your home, or using the money to buy a new car. or purchase the holiday of your dreams. The Halifax Retirement Home Plan was an income based scheme, which includes income from pensions, disability benefits & in certain circumstances from rental income.
Even though the eligible age required to qualify for the scheme was 65 years, this age could be negotiated upon as the scheme was based on your method of income. Therefore, flexibility can be established if you were over 55 years old & retirement income was already being drawn. There was no upper age limit on the Halifax equity release scheme. In fact we completed an application for a client who was age 93 attained!
There was a minimum limit of £15,000 set on the amount which is released for the plan, but the maximum amount varied due to the affordability of an interest only mortgage calculation. The affordability calculator required the input of all retirement incomes for both parties in association with amount required & the applicants credit rating. The result provided accurate figures as to how much can be potentially borrowed on this scheme. The overall maximum would always still be 75% of the property value & this loan to value could never be exceeded, even if income would normally calculate beyond this.
Unlike equity release, the Halifax Retirement Home Plan required a regular monthly payment of interest. The balance usually always remains the same as long as the monthly payments were met on time. This compared favourably with equity release schemes where the balance increases over a period of time.
Halifax interest rates at the time started from as little as 2.44% on their 2 year tracker deal resulting in a Halifax Retirement Home Plan mortgage of £50,000 costing only £101.67pm (4.1% APR).
The Halifax Retirement Home Plan was a great way to obtain tax free capital that you have worked long & hard for thus resulting for many to a long & happy life.
Following the withdrawal of the plan in August 2011, it took the market many years to come up with alternative solution. Stonehaven equity release were the first of the modern innovators in this interest only space with the flexibility to choose how much of the interest to repay. These plans are now administered by Canada Life.
The modern version of the Halifax Retirement Plan are the current range of Retirement Interest Only Mortgages - RIO's as they are more commonly known. The start now from age 50, are still income based for affordability and run for the rest of your life. Rates do vary between lenders and there is now much more choice than back in the days of the Halifax Retirement Home Plan. To compare RIO mortgage rates visit our RIO comparison tables.
There were many lessons learned from the launch and subsequent withdrawal of the Halifax Retirement Home Plan, but it did prove to be the forerunner to the RIO Mortgages we have available in the later life lending market today.
To find out if you qualify for a retirement interest only mortgage, please call us today on 0800 088 5937 or email [email protected].
