What’s the difference between lending in retirement and lending into retirement?

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  1. Lending in and Lending into Retirement
  2. What’s the difference between lending in retirement and lending into retirement?

1. Lending in and Lending into Retirement

Lending in retirement

 ‘Lending in retirement’ occurs when the applicant(s) / borrower(s) are retired at the inception of the mortgage contract.

Retirement is not linked to age but is linked to income.  If the majority of an applicant(s) / borrower(s) income is from pension income at the inception of the mortgage, then they are considered to be retired.

The maximum age for applicant(s) at the end of the mortgage term is 75 years.

The maximum LTV for ‘lending in retirement’ is 70%.

Where there are multiple parties to a mortgage with a mix of incomes it is important for the Society to understand and assess the source of income. Where the majority of income is derived from one party or parties ‘in retirement’ then the entire mortgage will be categorised as ‘in retirement’.

Loans to applicant(s) / borrower(s) ‘in retirement’, which is either on a variable rate or short-term fixed rate increases the possibility that the borrower(s) may be unable to afford higher monthly payments should rates rise significantly. Consequently, the Society will carefully consider the level of retirement earnings and we will seek appropriate information and assurances about the level of retirement income that will be available to meet continuing mortgage payments.

 

Lending into retirement

‘Lending into retirement’ i.e. to applicant(s) / borrower(s) who are currently in employment, but may have or will have retired before the term is scheduled to end.

Retirement is linked to age.  At the point of inception of the loan the age of the applicant(s) / borrower(s) at the end of the scheduled loan term will be noted.  If the term takes the applicant(s) / borrower(s) past the age of retirement i.e. the age the applicant(s) / borrower(s) have told the Society they plan to retire or age 70, the loan is considered to be ‘into retirement’.  Even if the applicant(s) / borrower(s) have stated they intend to work past the age of 70, once they have passed their anticipated retirement age or age 70 the loan is considered ‘into retirement’.

The maximum age for applicant(s) at the end of the mortgage term is 75 years.

The maximum LTV for ‘lending into retirement’ is 75%.

Where there are multiple parties to a mortgage with a mix of incomes it is important for the Society to understand and assess the source of income. Where the majority of income is derived from one party or parties falling into the definition of ‘into retirement’ then the entire mortgage will be categorised as ‘into retirement’.

Where a loan is defined as ‘into retirement’ then an assessment of affordability following retirement should also be made referencing income after the applicant(s) / borrower(s) are past their ‘into retirement’ age limit.  Both affordability assessments should reflect the full amount of the loan, since the mortgage payment should remain the same.

Loans to applicant(s) / borrower(s) who will be retired before the end of the mortgage term that are on either a variable rate or short-term fixed rate increases the possibility that the borrower may be unable to afford higher monthly payments when they retire should rates rise significantly. Consequently, the Society will carefully consider retirement earnings prospects and we will seek appropriate information and assurances about the level of retirement income that will be available to meet continuing mortgage payments.

This type of Mortgage Application should be submitted to your local Progressive branch using a paper application and not online.

2. What’s the difference between lending in retirement and lending into retirement?

‘Lending in retirement’ occurs when the applicant(s) / borrower(s) are retired at inception of the mortgage contract and ‘Lending into retirement’ is when the term of the mortgage extends beyond the applicant(s) / borrower(s) anticipated retirement age (up to a maximum age of 70).

  • The maximum age at the end of the term is 75 years.
  • The maximum LTV for ‘Lending in retirement’ is 70%.
  • The maximum LTV for ‘Lending into retirement’ is 75%.

Confirmation of pension income will be required for both categories of lending.


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