If you're approaching retirement and still have an interest-only mortgage you're not sure how you'll pay off, you now have another option to consider – taking out an interest-only retirement (RIO) mortgage. A possible alternative to equity release and a way to clear your current mortgage debt without needing to downsize, a RIO mortgage works in a similar way to traditional interest-only deals and can be very helpful in obtaining a mortgage in retirement. So, is now the time to consider one?
RIO mortgages allow homeowners to remortgage their existing loan under similar terms to their current arrangement, meaning they only need to repay the interest for the term of the loan – which can be a lot more achievable for those on a pension income. Then, when the borrower dies or goes into care, the property will be sold, and the mortgage repaid with any additional value in the house forming part of your estate.
However, even within this area, providers are becoming increasingly flexible. In the months since such loans have been widely available – it was only in April last year that the regulator relaxed the rules and separated RIO mortgages from equity release, and widened the appeal of such loans in the process – numerous providers have got in on the action and are offering a wide range of options, with some allowing borrowers to repay part of the capital as well (thereby leaving more of an inheritance to loved ones) and others offering set repayment dates.
Many big-name lenders now offer these retirement mortgages, giving peace of mind to those who would prefer to borrow from a high street bank, building society or mutual.
Ultimately, RIO mortgages could be a great option for those unsure how they're going to repay their interest-only mortgage debt, but as with any mortgage decision, it’s important to get impartial expert advice from a financial advisor before committing yourself.
Getting the right independent advice is essential. You can speak to our preferred advisers at Premier Financial Group to get started and see if you should consider this later life borrowing solution.
Credit will be secured by a mortgage on your property. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. Written quotations are available from individual lenders. Loans are subject to status and valuation and are not available to persons under the age of 18. All rates are subject to change without notice. Please check all rates and terms with your lender or financial adviser before undertaking any borrowing.