Why it’s time to consider remortgaging for the long-term

Nobody can predict whether interest rates will rise or fall in the future, which can choose from picking a two- or five-year fixed rate product akin to a guessing game. Mortgage rates might be at historically low levels, but there are no guarantees how long these favourable conditions will last. Because of this unpredictability, knowing how long to fix for – with two, three, five, or even 10-years can be a real challenge.

However, consumers picking a shorter fix today could face a much more expensive mortgage market when their fixed-rate term expires, and they seek a new deal. Even those taking out the cheapest mortgages today may find themselves paying significantly more two or five years from now if interest rates rise.

Escape the remortgage cycle

Perenna is creating an alternative that removes the guesswork around mortgage refinancing by giving borrowers complete certainty over their monthly repayments for the long-term. Perenna’s fixed for life mortgages will enable borrowers to lock in their rate for up to 30 years – far longer than even the closest alternative currently available. This new approach will allow borrowers to capitalise on the current cheap mortgage rates while removing the risk of rising repayments in the future.

There are other benefits to Perenna’s fixed-for-life mortgages. Borrowers do not need to undertake the time-consuming and potentially expensive remortgage process time and time again. Mortgage brokers can charge hundreds of pounds for their services, and banks may also charge product fees to customers switching their loan, which can cost thousands over the lifetime of a mortgage.

To add yet more stress to borrowers, remortgages can also take weeks to complete, require new valuations of the property, and create avoidable stress. This is a particular issue at present because the coronavirus crisis has caused delay-inducing disruption for mortgage lenders, estate agents and conveyancers.

Who should consider a Fixed for life mortgage?

Is a fixed-for-life mortgage right for everyone? There are reasons why borrowers of all ages could benefit from these mortgages. Older borrowers stand to gain from the certainty of knowing what their payments will be in retirement rather than potentially facing rising repayment costs in later life. Retirees with pension income linked to inflation also stand to see the cost of their mortgage decrease in relative terms as their earnings continue to rise against their repayments.

This stability is also beneficial for younger homeowners too, particularly in today’s fast-changing world. By eliminating the risk of repayments rising, Perenna’s mortgages provide more security to first-time buyers who have smaller amounts of equity in their homes. And when they move, they can take their mortgage with them if they want to – it’s fully portable.

The unique way Perenna loans are structured also means that borrowers can more effectively satisfy the strict affordability tests applied to mortgage applicants. Customers are always asked to prove if they can afford their predicted monthly repayments, but those taking out a long-term fixed-rate product from Perenna will not face the same harsh stress tests applied to customers taking out shorter-term fixed-rate loans. This means that customers don’t have to settle for a smaller than desired loan amount, putting them in a better position to afford the home they really want.

Full flexibility low lock-in

And if the idea of locking into a mortgage rate for three decades raises eyebrows, there is flexibility too. Although the mortgage interest rate is fixed for life, borrowers are still free to move to another deal if they find one that offers a more competitive interest rate. All Perenna’s mortgages are free to switch from after five years, just the same way you could a traditional mortgage plan. That’s why it’s worth considering a long-term fixed-rate mortgage from Perenna that removes the stress from homeownership and offers fair, stable repayments for years to come. So, to be the first to hear more, sign up to our waiting list via the link: Join Waitlist.

 

 

You can’t eat bricks but a mortgage might help

Paying off your mortgage is one of the biggest financial milestones in your lifetime. Being mortgage-free is something that most of us will have been working towards since we first stepped on the ladder. For some, it might even be synonymous with the idea of having the financial freedom to enjoy the retirement we want whether that’s renovating the kitchen, building an extension or taking a once-in-a-lifetime holiday.

Working towards paying off your mortgage is certainly no bad thing, but the borrowing landscape has now changed dramatically. Having debt in later life doesn’t have to mean you can’t live the retirement you want.  In fact, a mortgage in later life could actually give you the means to live your best retirement.

New opportunities due to low interest rates

Today, interest rates are sat near record low levels and borrowing is cheaper than ever – particularly when it comes to mortgages. At the same time, house prices have risen substantially in recent decades. According to the Office for National Statistics, prices increased by 4.7% in the year to September to reach an average of £245,000. If you’re a homeowner who has spent those decades steadily paying off the mortgage, it’s likely you’ll now have much more of your wealth tied up in the property you own – and you certainly won’t be alone in that regard.

Unlocking that housing wealth in later life through a mortgage could help you to access the funds you need to enjoy the retirement you’ve always wanted. But how can you make that wealth work to your advantage?

Making your property wealth work for you

Long-term fixed-rate mortgages, which will be launched soon by Perenna, can provide a viable option, whether you’re looking to help your children onto the ladder or enjoy your best retirement. Given the low interest rates at present, this could be a cost-effective way to release equity and, because rates are fixed, you’ll know exactly what you’ll need to pay in the future.

With a long-term fix like those Perenna will soon offer, you can use the freed-up funds to achieve the lifestyle in retirement you want, or alternatively to carry out home improvements and even pay for holidays.

Long-term mortgages are not equity release plans. They do not have compounded interest rates where the debt you owe grows quickly and which could leave you with little to pass on as inheritance to your loved ones.

The Bank of Mum and Dad

What about helping your kids too? High house prices are not just an issue that affects older generations – they can also make it difficult for younger people to save enough money for a deposit to step onto the ladder. It’s not surprising then that a growing number of first-time buyers are relying on the so-called Bank of Mum and Dad to help make their own property dreams a reality. A report published earlier this year by Legal & General found that 23% of property transactions are now supported by money gifted from friends or family. But if you have no readily-accessible cash after paying off your mortgage, this can leave your children with limited options.

Downsizing into a smaller, less expensive property is one way of releasing these funds, or you could take out an equity release mortgage. Both can be expensive though, and from the hassle of moving to equity release eating into inheritance, there are also other drawbacks. Likewise, high-interest borrowing such as credit cards can potentially undo a lifetime’s good work of paying back your mortgage debt.

A route onto the ladder too

Taking out a long-term fix could even reduce or remove the need for you to act as the Bank of Mum and Dad for your children too. One of the greatest challenges facing younger buyers today is passing strict affordability tests when it comes to getting a mortgage. Borrowers must prove they can meet repayments if interest rates were much higher, in some cases up to 7%. This has led to first-time buyers being told they cannot afford a mortgage, even if their monthly repayments would be much lower than what they are currently paying for their rent. Yet, by taking out a long-term mortgage with a fixed interest rate, your children wouldn’t have to pass the same level of stress testing, making it easier for them to achieve their dream of homeownership without having to draw on the finances you need to rely on in later life.

If you’re interested to hear more about how a long-term fix from Perenna join the waitlist and be first to get updates: Join Waitlist