Why might I choose a retirement interest only mortgage?
There are a number of reasons that you might choose a retirement interest only mortgage over a standard repayment or interest-only mortgage.
“I need to repay an existing interest-only mortgage deal”
For people with interest-only mortgages due to end soon, the prospect of repaying the loan can cause a great deal of worry. According to the Financial Conduct Authority, approximately 40,000 homeowners aged 65+ have interest-only mortgage terms maturing every single year. This trend is set to continue until 2032.
Worryingly, many people in this situation have no plan in place for repaying their outstanding loan when their term ends. This puts them in the difficult position of having to find a solution quickly or their home could be at risk.
If you can comfortably continue to afford the interest payments each month and are happy to commit to paying them for life, a RIO mortgage might be a good option for you.
“I’m concerned about passing affordability checks for other types of mortgage”
It can often be frustratingly difficult for older homeowners to pass the stringent affordability tests for a later life repayment mortgage, where you pay back the money you borrow in addition to making interest payments. But RIO mortgages can be easier for some people on lower incomes to arrange.
RIO mortgages are typically easier to be accepted for than conventional mortgages. So if you think your age or reduced retirement income might make it difficult to pass affordability checks for other mortgages or loans, a RIO mortgage may be a good alternative.
“I want to borrow a cash lump sum against the value of my home”
If you are thinking about unlocking some of the money from the value of your home, you could consider either a RIO mortgage or an equity release plan. Both of these options enable you to access a tax-free cash lump sum from your home to improve your financial situation. You can read more about the equity release option further down in this article.
“I want to purchase a home for my retirement”
If you are looking to purchase a bungalow, flat or other retirement property for your later years then you might need to arrange a mortgage to help finance the purchase. You may find that the properties you are looking at are more expensive than your current home, leaving you with a cash shortfall.
Alternatively, you might already have a small mortgage left on your home but have found that your lender cannot offer you a larger loan due to your age or income. A retirement interest only mortgage could enable you to afford the property that you want.