Retirement Interest-only Mortgage Brokers
For those enjoying their retirement after decades of hard work, getting a typical mortgage can be difficult. Chiefly because you have no employment income as proof that you’re able to uphold your end of the deal, and pay the monthly repayments.
However, in recent years, a new type of mortgage has come about which is designed specifically for people who are retired, have a pension income, and want to find a deal on a property. This new type is called the Retirement Interest-only Mortgage (RIO for short).
Different from a standard mortgage, these retirement products are perfect for people who still want to enjoy the feeling of receiving keys to a brand new retirement property or releasing equity from their existing property. At Avail Mortgages, we can refer you to a specialist third party that offer suitable Retirement Interest-only Mortgages to help you secure a new house, no matter how old you are. After all, you’re only as old as you feel.
As for our mortgage brokers, we’re backed up by rigorous regulation too. As an independent broker, we work to the strict guides laid out in the Financial Conduct Authority’s Treating Customer’s Fairly Initiative*. This code ensures we have a duty of care to offer the best advice, spend real time discussing the details, and ensuring your personal circumstances are considered.
Operating in the market, in areas across the northwest such as York and Bradford, for decades has allowed us to help a range of people. And we look forward to helping you, whether that’s directly or via referral, depending on the product that you need. Our process is refined, as hassle-free as possible, and built with you, and your busy schedule, in mind. We have a cutting edge client portal and a handy mortgage calculator. Both of these allow you to upload and read documents, and set a budget so you know which house prices are in your range.
To learn more about how we can help you with the house purchase or equity release, contact us by phone on 01484 556245 or email us [email protected].
What Is A Retirement Interest-only Mortgage?
As we mentioned, this method of house purchasing is a relatively new product type and is in reaction to a greater demand by retired people to purchase a home. Essentially an RIO option allows eligible people to borrow against the property but only pay back the interest each month*, as opposed to paying back that money, and the loan itself. The interest-only option makes the repayment charges much more affordable, and more suited to people whose annual income is lower.
With an RIO deal type, you’ll repay the loan once when you pass away, or you go into long-term care. The value of the property can be used to pay off the loan, hence the need to only repay the interest while you’re living in it.
An interest-only deal such as this involves a much more relaxed affordability assessment. Rather than proving forms of income, you only have to prove that you can afford the interest fees. Also, some options and configurations can be found within retirement mortgages. For instance, you can opt to repay some of the loan to cut down on the overall size, if you can afford it.
Other features might be similar to a regular mortgage term. For instance, the loan deals may require you to pay the cost when you reach a certain age, or after a set number of years.
What’s The Difference Between An RIO And A Lifetime Mortgage?
Both RIO and Lifetime Mortgages are usually offered by brokers. We know that while they may appear similar, in that they are both a form of equity release, there are some important differences. Here are three of the most important distinctions:
- RIO’s always involve paying off the interest a month at a time (or, over an agreed period, such as quarterly). With Lifetime’s you can choose to pay it off monthly but generally, people will let the interest compound so they don’t have to pay anything, using their home as the security.
- An RIO is often available to people in their 50s, who are thinking of retiring soon. A Lifetime is only really available to people in their 60s and 70s.
- You can only take a Lifetime out if you own 100% of the equity in your property. Whereas with the other interest-only option, you can take it out to pay off a previous mortgage and use it as part of an equity release scheme.
This can all seem complicated and a little daunting if we’re being honest. Thankfully, our team of independent mortgage brokers have helped dozens of clients with RIO Mortgages by referring them to third party specialists, in areas such as Leeds. We’ll be on hand to answer all questions and concerns about this process too – just get in touch to learn more.
The Benefits Of An RIO
Now we’ve explained this mortgage term, let’s look at some of the benefits. They are wide-ranging and are just a few of the reasons why Retirement Interest-Only Mortgages are so popular among people who are heading into retirement.
- If you already have an interest-only deal in place, you can carry this on into retirement, in the form of an RIO.
- You don’t have to downsize to a new property to release money from your home. You can still enjoy the place you love, and the extra equity.
- Because it isn’t a fixed-rate deal, there is no pressure to repay the capital until you are ready to leave your home.
- The lack of interest roll-up means that the value of your home won’t be eroded. This will allow you to pass on more money to your family after you’ve passed away.
- On the whole, they are cheaper than Lifetime mortgages.
- You don’t need to demonstrate a plan to repay the mortgage.
- You can unlock equity to pay off outstanding debt.
How Do I Prove My Income?
Proving to a mortgage broker that you have the minimum income levels required will take the form of affordability checks. Tests such as these will vary between lenders but typical affordability calculations will involve examining annual income up until you turn 70. They could also involve providing a pension forecast, annuity statement, and state pension statement. The age at which you’ll retire is another factor. For instance, if your retirement is over 10 years away, your current income will be used as the affordability tests. Whereas if you intend to retire in under 10 years, you’ll need to prove anticipated retirement income.
How Much Can I Borrow?
Like a conventional mortgage, the amount you can borrow from this product type all depends on assessments, checks, and the overall value of your home. In general, a mortgage broker will be more reticent to lend the same amount as they would with a normal mortgage because the risk is high. The Loan-To-Value (LTV) ratio will also be considered and, if high, could result in higher interest rates and charges.
Personal and living expenses, along with factors that could impact your income and ability to make the monthly payments, will also be taken into account.
Who Offers Interest-only Retirement Mortgages?
House purchases can be stressful, even for normal mortgages, and for those that are on an interest-only basis, it’s important to be considered. The last thing you want to do is be worse off than you were beforehand. As a result of the popularity, a lot of brokers in the UK will offer this arrangement based on their personal circumstances. However, while we are biased, we think our referral process provides an unrivalled experience, as you can rest assured that you’re receiving advice from industry specialists.
How Do I Repay It?
Repaying this type of mortgage can be split into two parts – the interest, and the loan (capital) itself. The former, the interest, is the fee that you pay every month. The outstanding capital, which is the loan itself, is paid off by selling the house. This sales process occurs when you die, or go into long term care.
Why Choose Avail Mortgages?
Everyone who walks through our door to enquire about our mortgages gets the Avail Mortgages treatment. From Help To Buy, Expat, and High Net Worth mortgages, to a range of relevant insurance products such as Home Insurance and Income Protection Insurance – we have a comprehensive range of solutions.
So whether you are looking for the best Retirement Interest-only Mortgages, or something else, we’re positive we can help, whether that’s by providing a referral or directly providing advice. Here are just 3 ways Avail Mortgages can help:
- Help, when it suits you: As a mortgage provider, we know how stressful the process can be, especially when you throw in your already hectic life. That’s why we aim to make the process fit your schedule. We’ll schedule meetings and discussions at times that suit you so you always feel comfortable and in control.
- A host of policies and products: We offer many dozens of other mortgage and insurance policies – there are very few independent brokers nearby that can offer this incredible range.
- The latest independent mortgage broker technology: Our client portal allows you to access documents, upload files, and read over terms and conditions in those quieter moments when life isn’t going at 100 miles an hour.
We hope this guide to Interest-only Retirement Mortgages helped you understand a little more about the benefits and features of this popular product. From Huddersfield to Harrogate we can help people no matter where they are across the UK.