When we reach the age of 55 many of us find that our lives are starting to change. For those fortunate enough early retirement may beckon. Children may well be building independent lives and you could be considering your options. In the past this could often mean downsizing or taking out an expensive equity release. Now there is another option that may help you afford a loved long-term home into retirement.
A retirement interest-only mortgage is very similar to a standard interest-only mortgage, with two key differences. The loan is usually only paid off when you die, move into long term care or sell the house and if you are re-mortgaging to one of these new schemes you only need to prove you can afford the monthly interest repayments rather than a stricter affordability test. The minimum qualifying age is usually 55 and with a retirement interest-only mortgage, you should also be able to make overpayments which will reduce the amount you will owe at the point at which you need to pay it off. You may also be able to pay off your mortgage in full, without having to pay any penalty. These mortgages are not the same as equity release lifetime mortgages. The amount you can borrow with an equity release lifetime mortgage is not linked to your income, only to the value of your property and your age.
What this new type of mortgage offers is improved access to borrowing for older customers, which removes some of the barriers that previously existed. There is more focus than ever before on using housing equity to improve people’s standard of living in retirement and an increased drive to solve the problems faced by those with interest-only shortfalls. There are currently around 1.67 million full interest-only and part capital repayment mortgage customers, according to the Financial Conduct Authority (FCA). They represent 17.6 per cent of all outstanding mortgages and, over the next few years, increasing numbers will need to be repaid. The retirement interest-only option can help those borrowers who need extra time to repay their capital balance, or who want to use the sale of their home on either death or a move into long-term care to repay their loan.
Since the FCA approved retirement interest-only mortgages in March 2018 lenders have been quick to respond with a range of new options already available. Get in touch with Spot On Mortgages to discuss how they may benefit you.
Your property may be repossessed if you do not keep up repayments on your mortgage.