Is your lender asking you to repay the capital on an interest only mortgage?

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Retirement Interest Only Mortgages

A large number of borrowers who are close to reaching retirement and also nearing the end of their fixed-rate interest-only mortgage are finding out that their current lender is looking for the capital portion of their mortgage to be repaid.

With deadlines approaching, many borrowers will not have made adequate provision of sufficient capital assets to fall back on. This can prove to be both a very worrying and stressful time.

In recent years, clients have told us that some lenders are unwilling to extend or alter their mortgage to accommodate for this. And some clients have said their lender is not prepared to renew their interest-only mortgages, even if they can easily meet the monthly repayments.

However, there are lenders who now offer an alternative solution to this pressing and increasing problem in the form of a retirement interest-only mortgage or RIO.

So what’s different about a retirement interest-only mortgage and how will the capital eventually be repaid?

The main difference between retirement interest-only mortgages when compared with standard interest-only mortgages is the capital portion of your mortgage is usually only paid off when the first of these events occur;

  1. Following your death.
  2. A move into long term care.
  3. Selling your house. 

With a retirement interest-only mortgage you only pay the interest portion each month, and this means your monthly repayments are considerably lower than a standard capital and interest repayment mortgage.  And the best part about this is you only have to be able to prove you can afford the monthly interest payments!

Are you eligible for a retirement interest-only mortgage?

Not all lenders provide retirement interest only mortgages and where they are available, they may prove attractive to borrowers over the age of 55 or pensioners searching for an easier lending criteria than they usually apply to standard mortgages.

One such plan that has come to our notice is with Legal & General. They have recently launched a retirement interest-only (RIO) mortgage.

Legal & General’s RIO mortgage is available to over-55s* with a minimum property value of £100,000. The loan to value percentage is a maximum of 60% of the value of their property. Legal and General’s scheme offers more flexibility than some of the other lenders as it can be used to either replace an existing interest-only mortgage or as a new interest-only mortgage.

As always, Buckingham James is on hand to offer advice to guide you through the options and alternatives to ensure your requirements are matched with the most suitable lender and solution.

Call Buckingham James – your local mortgage and insurance broker based in Brentwood.

* subject to meeting lending requirements.

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