Retirement Interest only Mortgage
Many lenders do not like to lend past a certain age. This could be deemed discriminatory, but it is sadly a reality. So, what happens when someone gets to a certain age and a traditional mortgage is no longer a solution? This could be when you need to consider a Retirement Interest Only mortgage (RIO) but, how do Retirement Interest-Only mortgages work?
The first thing is NOT to panic, as solutions are available to you. Many customers enquire about an Equity Release mortgage, which is not suitable for many – albeit it does have a place in the market for some An alternative solution could be a Retirement Interest Only mortgage (RIO). This can be a perfect solution for many customers.
This mortgage doesn’t have an age expiry date, and you pay a contracted interest-only mortgage payment each month, which means the mortgage capital will stay the same – assuming you keep up mortgage payments.
However, to obtain a Retirement Interest Only mortgage, a borrower must demonstrate they have the ability to afford repayments under the lenders’ specific criteria. This can be a pension, investment, or earned income.
To check eligibility, please complete the form opposite or call us. We are a friendly bunch, and you won’t get any sales tactics or hounding to make a sale. We are a pleasure to do business with as we guarantee to be completely open and honest – this is how we have survived the past three decades, advising our clients transparently.
Retirement Interest Only
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What Is Retirement Interest-Only (RIO) Mortgage?
Retirement interest only mortgages are targeted at borrowers over fifty. Our advice is always to secure a traditional mortgage over a Later Life mortgage solution such as a RIO or a Lifetime Mortgage (a form of Equity Release). We recommend this because it is highly likely to be a cheaper solution in the long term.
Sadly, many borrowers over 50 have challenges getting a traditional mortgage, so a Later Life solution can be the only option available.
I Am 60, and My Existing Bank Will not Continue to Lend to Me. Why Is This, Is This Not Discrimination, and What Are My Options?
This is a question we have been asked several times. Traditional mortgage lenders, such as those we find on the high street, lend based on risk. When you get older, they conclude that you are heading into retirement and your income will reduce; this could make your mortgage unaffordable. Therefore if your retirement age is 65, they may only be willing to offer a five-year mortgage term before you need to repay the entire mortgage capital. If you wanted a Capital and Interest loan (a repayment mortgage), this could be cost-prohibitive, resulting in the lender declining your mortgage.
While this may seem discriminatory, lenders are accountable for ensuring the mortgage is affordable throughout the loan term.
If we were your Independent Mortgage Brokers, we would look at your pension income and ways to see if a traditional mortgage was affordable. We would look at repayment and Interest only if you have the means to repay the capital from another reliable source. If no conventional options were available, we would discuss Retirement Interest Only and Lifetime mortgages while highlighting other solutions, such as downsizing.
Why Would I Take a Retirement Interest Only Mortgage Over a Lifetime/Equity Release Mortgage?
Retirement Interest Only mortgages can generally be priced slightly cheaper than a Lifetime Mortgage and are more flexible if you need to move as their redemption penalties can be less. As you pay the Interest on the loan, the amount you borrow will be the same when it comes to repaying the capital.
A lifetime mortgage, while significantly improving, typically has a longer-term redemption penalty. They also allow the Interest to roll up, resulting in the interest compounding, reducing your estate value. The noteworthy point is that most Lifetime Mortgages do let Interest or overpayments that can stop compounding Interest.
So, Retirement Interest-Only Mortgages Are Better Than a Lifetime Mortgage?
Not necessarily. Our advice is to find an Independent Mortgage Broker who is qualified in both areas of expertise (Equity Release requires further qualification) and ask to compare both plans. An expert will highlight both plans’ benefits and negative points, allowing you to make an informed decision.
It is essential to be aware that, as you will be contracted to make an interest payment of a RIO, you must have the income available to ensure you have the way with all to make these payments. If you don’t pay Interest, your home can be repossessed. Whereas with a Lifetime Mortgage, if you opt to make an interest payment and can’t make it, you will not be repossessed, but the Interest will compound.
My Mortgage Broker Tells Me He Won’t Speak to Me About a Lifetime Mortgage and That My Only Solution Is a Retirement Interest Only Mortgage. Why Would This Be?
Any qualified mortgage broker can advise you on Retirement Interest Only mortgages, but they are not qualified to advise you on a Lifetime Mortgage because this requires further qualification.
If you are serious about a Later Life Mortgage Solution, you should always speak to an adviser who has both qualifications and offers you a holistic solution.
Would a Retirement Interest-Only Mortgage Be Cheaper Than a Lifetime Mortgage?
Like a conventional mortgage, this is not necessarily the case. It would help if you looked at the benefits offered on a RIO side-by-side with a Lifetime mortgage. Generally, it can be rate-driven, and rates change all the time.
Would a Retirement Interest-Only Mortgage Give Me a Fixed Rate for Life?
A significant difference between a RIO and a Lifetime mortgage is this. A RIO will offer a rate for a set period (i.e. 2 or 5 years fixed rate), then reverts to a variable rate, whereas a Lifetime Mortgage will give a Fixed Rate for the life of the mortgage (until you go into long-term care or pass away).
When Does a Retirement Interest-Only Mortgage Become Repayable?
Due to the nature of this mortgage, it is designed to take you into later life. Therefore these become repayable when you enter long-term care or pass away – the same as a lifetime Mortgage solution.
Can Conran Mortgages Give Impartial Advice Between My Two Major Options?
100% we do. A comprehensive approach to Later Life Lending is paramount. We will be impartial and review all solutions for you. We are independent local mortgage experts and rely solely on our referral business from existing clients – if we lose this, then we don’t have a business… it is that simple!
Furthermore, we are not a pushy salesforce. Our job is to advise and not push for a sale. We deal with many vulnerable older people and fully respect that they need well-given information and time to speak to trusted family and friends. We always welcome calls from these people who have their best interests at heart and welcome them to join our meetings with our client’s permission, of course.
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Take a look at what some of our customers have to say about working with us.
What customers say
Equity release – lifetime mortgages
- Conran Mortgages offer lifetime mortgages, which is a loan secured against your home. Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits.
- You should always think carefully before securing a loan against your home
- Our equity release advice relates to plans with an initial advance of £60,000 and above. For any advances lower than £60,000, our fixed advice fee of £699 is only payable on completion.
Later life mortgages
- A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage. You should always think carefully before securing a loan against your property