When reaching retirement, it may be difficult to renew an interest-only mortgage, even if you are comfortably meeting your monthly repayments.
Here we explain retirement interest-only mortgages and how they are repaid.
What is a retirement interest-only mortgage?
The main difference with a retirement interest-only mortgage when compared to a standard interest-only mortgage is the loan is usually only paid off when you die, move into long term care or sell the house.
You only have to be able to prove you can afford the monthly interest payments.
Typically, retirement interest-only mortgages are attractive to older borrowers, for example the over 55s, over 60s and pensioners who may find the qualifying criteria easier than for a typical interest-only mortgage.
For many borrowers reaching retirement and nearing the end of a fixed rate deal on interest only may find their current lender will be looking for the capital to be repaid and not prepared to extend or alter the loan to meet the criteria of a retirement interest-only mortgage. This can be very stressful for borrowers who have no capital assets at their disposal to fall back on.
With a retirement interest-only mortgage, you only pay interest each month, meaning your monthly repayments will be lower.
This means you are more likely to either leave something as an inheritance, or pay for long-term care.
How do you repay a retirement interest-only mortgage?
As with all mortgages there are two parts to paying off a retirement interest-only mortgage. They are the interest and the outstanding capital.
During the mortgage term, you only have to make monthly repayments covering the cost of the interest on your outstanding loan meaning; the capital will need to be repaid when you die, the house is sold or when you move into long-term care.
If you’re coming towards the end of your current interest-only mortgage and nearing retirement, talk to True Cost Mortgages in Liverpool about retirement interest-only mortgages.