Retirement Interest-only Mortgages
As an older borrower, it can be challenging to find a mortgage product that suits your circumstances. However, there is an option specifically for those in retirement who want to borrow money against their property.
Ask for advice
Simmonds Mortgage Services, mortgages for retirement
Retirement should be a time to enjoy the fruits of your working career without having to worry about finances. However, sometimes you might be asset-rich but cash-poor making it difficult to afford everyday living costs or larger purchases such as home improvements. At Simmonds Mortgage Services, we can help you achieve your dreams and release funds from your property.
What is a Retirement Interest-Only Mortgage (RIO)?
Retirement interest-only mortgages (RIOs) are a type of loan specifically designed for later-life borrowers who are looking to release funds or remortgage their property in retirement. Unlike standard mortgages, RIO mortgages allow borrowers to make interest-only payments each month.
The outstanding loan is repaid when the borrower dies or moves into long-term care. This means there is no fixed end date or fixed term for the loan secured against the property.
How do Interest-Only Mortgages Work?
Interest-only products work by allowing borrowers to make monthly payments without having to repay the capital. This means the outstanding mortgage remains the same throughout the mortgage term. It gives borrowers more flexibility in managing their finances during retirement because the monthly repayments are lower than standard repayment mortgages.
How Much Can You Borrow on a Retirement Mortgage?
The amount you can borrow on a RIO mortgage may depend on the value of your property, your age, your ability to make monthly payments and other factors within the lender’s criteria. Typically, lenders will consider the loan amount based on income and outgoings and similar affordability to a standard mortgage. It’s common to see a maximum loan to values of 50%. However, each lender may have different criteria, so check with the mortgage provider or broker for more information.
What is the Retirement Interest-Only Mortgage Application Process?
The retirement interest-only (rio) mortgage application process is similar to that of a standard mortgage. It usually involves the following steps:
- Seeking advice from a mortgage advisor who specialises in later-life mortgages can be beneficial to understanding the process and finding the best deal.
- Gather the necessary documents, including proof of income, bank statements, identification, and details of the property you wish to secure the mortgage against.
- Complete the application form, with help from a broker if needed, and submit it along with the required documents.
- The lender will conduct a valuation of the property to assess its value and determine whether it meets the lending criteria. They’ll also assess your financial situation and creditworthiness during the underwriting process.
- If your application is successful, you’ll receive a mortgage offer outlining the loan amount, interest rate, and other terms and conditions.
Retirement Mortgage Eligibility
The criteria may vary slightly between lenders but generally include the following:
- Most lenders set a minimum age of 55 or 60 to qualify for a retirement interest-only mortgage.
- There is often a minimum property value required, which can vary between lenders. This ensures that the property provides sufficient security for the loan.
- Lenders will assess your income and affordability to ensure you can meet the monthly interest payments. This may involve providing proof of pension income or other sources of retirement funds. If the application is on a joint basis, the lender will often base lending on the lower of the current income or any income the surviving spouse would receive, after the death of one of the applicants, for example, half of the pension if that is what would pass on after death.
- Some lenders may have specific requirements regarding the purpose of releasing equity. You may need to explain why you need to release equity, such as funding long-term care or making home improvements.
- Factors such as your credit history, affordability assessments, and restrictions on property types. Check carefully to ensure you meet the lender’s requirements.
It is worth noting that eligibility criteria and lending terms may vary among mortgage providers. Therefore, it is advisable to consult with different lenders or seek advice from a mortgage advisor who specialises in retirement mortgages to find the most suitable options based on your circumstances.
Do you have to be retired to get a RIO mortgage?
Whilst you may not be retired, you will need to be over the age of 55 for most lenders to consider lending to you on a rio mortgage.
What is the oldest retirement age for a mortgage?
Most lenders will make an offer to a borrower up to the age of 80 though criteria can vary between lenders so check with your mortgage broker for the best options for your circumstances.
Looking for retirement mortgage options? Get in touch today
A RIO mortgage can offer a flexible and practical solution for older borrowers seeking to release equity or remortgage their property during retirement. However, you must thoroughly understand the terms, conditions, and eligibility criteria associated with these mortgages. Contact Simmonds Mortgage Services on 01184 694037 for support with researching products and making your application.