Introducing Retirement Interest Only Mortgages

Date written: 10/07/2024 

Retirement interest only mortgage products could be a useful way to borrow in later life.  

Retirement interest only mortgage is a mortgage product that has been designed for those approaching or in retirement that have a sufficient pension income to support a mortgage payment for the rest of their lives. 

With a retirement interest only mortgage. You make monthly payments that cover the interest due on the amount borrowed. If you only make these interest payments, you will still owe the full amount you borrowed. The loan is secured on your home. 

For those with surplus money each month. You can make voluntary overpayments to reduce the balance. The mortgage product you are on could restrict the amount you can overpay annually. 

To determine how much you can borrow. The mortgage lender will assess your lifetime affordability. 

Who a retirement interest only mortgage may be suitable for ?

  1. Existing interest only customers coming to the end of their mortgage term and are unable to repay the balance due to their current lender. 
  1. Those who want to release the money tied up in their homes to conduct home improvements or help their children or grandchildren to get onto the property ladder. 
  1. Those who are planning for their retirement that want to use their equity to fund their lifestyle choices such as retiring early. 

What makes a retirement interest only mortgage different to a standard interest only mortgage is that it is has no term or end date. A retirement interest only mortgage will continue until you decide to sell, downsize & pay off the mortgage, you move into residential care or you die.  In the case of joint mortgage holders. The loan will be repaid when the last person moves into residential care or dies. 

A retirement interest only mortgage differs from a lifetime mortgage or equity release mortgage because you agree to make payments each month to cover the interest due. You are committed to make the payments on time each month until the balance is repaid in full i.e. when you die. 

Before applying for this type of mortgage you should take advice on the tax position and entitlement to state benefits.

What are the risks.

There are risks with a retirement interest only mortgage such as the value of your home reducing. Or interest rates increasing which may affect your affordability. It is important that you fully understand these risks and the full terms of the mortgage contract.  

This type of mortgage will not suit everyone. It is really important to take advice from a professional adviser – that’s where we come in. For more information or to book an advice consultation, please contact us on 01455 63 61 63.

Your home may be repossessed if you do not keep up repayments on your mortgage. 

The information contained within this blog was correct at the time of publication (10/07/2024), and is subject to change. 



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