For those who read my last article on interest only mortgages, then you’ll know that the interest only mortgage is, to a degree, back in vogue.
However, there is another interest-related mortgage that’s becoming a popular choice amongst a certain demographic, and that’s the interest only retirement mortgage.
What is it?
The retirement interest-only mortgage – or RIO mortgage – is similar to a standard interest-only mortgage in as much as it enables the homeowner to pay off the interest accrued on the home loan on a monthly basis. However, unlike standard interest only mortgages, there is no end date set by the lender.
How is the mortgage balance paid, then?
The key word here is ‘retirement’, and this essentially means that the balance is paid with the equity locked within the property when either the retiree dies, sells the property or moves into care.
Whilst the lack of an end date may sound counter-intuitive – and maybe even illogical – the Financial Conduct Authority is keen for more RIO mortgage loans to be issued in order to counteract the number of people who currently have an interest-only mortgage agreement in place without the means of paying it back when the end date arrives.
Why has the retirement interest only mortgage been launched?
It has been created to provide more routes to borrowing by older homeowners against the backdrop of an ageing population.
A recent ONS report* highlighted how retirees currently account for 18% of the UK’s population, which currently stands at 65.6 million and is expected to rise to 74 million by 2039. This would mean that there would be a staggering 13,320,000 retirees in the UK in just over two decades.
Who can apply for a retirement interest only mortgage?
Those aged 55 and over whose retirement income can support the payments.
I’m interested in finding out more. What shall I do now?
If you currently have a standard interest only mortgage that’s nearing its end date – or even if you’re on a standard repayment mortgage but are interested in switching to an RIO mortgage, then contact the team at Complete Mortgages on 01483 238280 or email firstname.lastname@example.org.
Remember, we also specialise in buy to let mortgages, commercial mortgages, adverse credit mortgages and limited company buy to let mortgages, too.
By Mark Finnegan, Director at Complete Mortgages