sarah April 12, 2019 No Comments

Retirement Mortgages are back – and it’s not ‘equity release’

Wind the clock back a few years and the only way to enjoy any of the money tied up in your home was to apply for an ‘equity release’ mortgage.

Equity release mortgages can be expensive to arrange; with high set up costs and high interest rates charged. In some instances, the interest is ‘rolled up’ over time – leaving borrowers concerned about what equity might be left when their home needs to be sold, or when they die and want to pass it on to their loved ones.

Many people decided that selling and downsizing was a better option; offering more certainty over the numbers. Or….simply doing nothing at all.

Enter, the ‘Retirement Interest Only’ mortgage (RIO).

Can I benefit from it?

  • Yes, if you need to remortgage from a standard interest only mortgage, with your house sale as the repayment vehicle
  • Yes, if you want to release equity to make home improvements or enhance your retirement lifestyle.

How does it work?

  • Affordability

If you are retired and want to release equity from your home, you simply apply under the same basis as if you are working and need a mortgage. The mortgage is granted on your ability to repay the monthly payments, so is assessed using your retirement income.

  • Interest Only

A major benefit is that the mortgage is granted on an ‘interest only’ basis, which keeps the monthly payments lower. This also means that the amount borrowed doesn’t decrease, nor does it increase.

  • No set end date

Unlike a traditional mortgage, which is repaid after a specific term, the RIO mortgage is repaid if you move into sheltered accommodation, residential care, move home or when you pass away.

As long as you can service your interest only payments during the term of your mortgage, you won’t be asked to repay it until one of the above life events happens.

Key things to consider

There are terms and conditions that have to be met with a RIO mortgage, along with the lenders usual criteria:

  1. Many lenders will restrict the loan around 40% – 50% of the property value
  2. Minimum age at application of 55
  3. The property must be your residential home

 Is it for me?

If you have little in the way of savings and want to release money to give you a better retirement lifestyle then this could be a way of doing that. The money can be used for a variety of reasons; whether it’s a holiday of a lifetime or changes at home to make life more comfortable.

How do I find out more?

We don’t charge anything for an initial meeting to discuss your requirements and find out what your options are. We’ll go through your personal and financial circumstances to find out if you meet the eligibility requirements and then take things from there.

For more information please contact the team on 01332 416470 or email hello@hollybeckfinance.co.uk

 

 

 

 

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