What Is A Retirement Interest Only Mortgage?

A retirement interest only mortgage is available for older people and enables you to continue to live in your home and only pay the interest each month rather than also repay the capital thus keeping your repayments at an affordable level.

Many interest only mortgage borrowers have experienced financial constraints in recent years resulting in some reaching retirement age and still being left with a significant amount owing on their residential mortgage as they have been unable to afford to switch to a capital and interest repayment mortgage during the term of the borrowing.

A retirement interest only mortgage can also be arranged with the funds being used to bolster retirement income or perhaps to help a family member get a foothold on the property ladder. It may also be used to clear other debt or perhaps buy a holiday home.

In years gone by, mortgage lenders wanted a conventional residential mortgage paid off by the time you retired as most people’s income tends to reduce once he or she retires. The lending guidelines vary between mortgage lenders. For instance, some may not have a maximum age when the borrowing should be repaid by whereas others may want the borrowing liquidated by say age 85. The mortgage could be cleared from the sale proceeds of the property should the occupant want to downsize, die or move into residential care. There will no doubt be a minimum age that someone can apply for such a mortgage.

There is likely to be a minimum and maximum amount that you can borrow but this could range from as little as say £1,000 up to as much as say £1.25 million.

The maximum loan to valuation (LTV) may also vary between lenders. For instance the maximum loan to valuation may vary from say 30% to 60%. Some lenders also insist on a minimum property value but there are a number that do not.

The interest rate will vary between lenders with some offering both variable and fixed rates of interest.

You may be able to make overpayments with some lenders being agreeable to you making an overpayment up to a maximum percentage each year without any early repayment charges.

You will need to be able to prove that you can afford to cover the interest payments each month. The criteria in this respect will differ between lenders. So, for instance, you may be required to provide copy bank statements showing the income you are receiving and/or details of your state pension income and company pension income.

A retirement interest only mortgage is available from quite a few lenders so it is worth shopping around to see which one is the most suitable for you. You can either do this research yourself or you could use the services of a mortgage broker.

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