What are My Interest Only Mortgage Options at Retirement?

Well, if one wishes to retain their home, urgency and review of their interest only mortgage would be the key. Interest only mortgage customers have two main options, one of which is an equity release to clear the mortgage. However, there is a disadvantage of the interest roll-up scenario and consequences of ever increasing mortgage balance. The better alternative if one wishes to maintain a UK interest only mortgage is to look at lifetime mortgages with an interest only option which FCA authorised brokers offer.

Who can provide an interest only lifetime mortgage?
These options are provided by Halifax with their Halifax Retirement Home Plan which is only available via selective authorised brokers such as Equity Release Supermarket. The branch network has had their lifetime mortgage licenses revoked some time ago hence they are unable to offer advice or the product themselves. Therefore FCA authorised brokers such as Equity Release Supermarket who have the CeRER & CeMap qualifications can provide the best advice for your requirements.

Affordability is based on retirement income alone, hence there is no acceptance of any employment, self-employment or investment income. The Halifax Retirement Home Plan has an interest only mortgage calculator provided to authorised brokers such as Equity Release Supermarket who can then calculate how much can be borrowed.

The second option is the Stonehaven Interest Select product which is a hybrid equity release scheme with the option to make a ‘contribution’ towards the interest. This contribution can either be a minimum of £25pm or the full interest that is charged on a monthly basis. Therefore, you have the option to either completely repay the interest and maintain the balance at the same level or make a payment that meets one’s affordability levels with an element of roll-up (albeit the comparison to complete roll-up equity release schemes is not as attractive).

The Stonehaven Interest Select plan measures borrowing capacity on the same basis as its equity release counterparts; namely on the age of the youngest applicant and the valuation of the property.

The difference between the Halifax Retirement Home Plan & the Stonehaven Interest Select plan would be down to early repayment charges & the interest only interest rate. This can be said about any of the lifetime mortgage options you may elect.

Are Interest-Only Mortgages the Only Option?
Interest only mortgages have their benefits like the interest-only lifetime mortgage that allows you to pay the interest each month instead of letting it compound onto the principle of the loan. You have the endowment options too which pay interest on the mortgage to ensure the loan is nearly paid off before retirement. You have regular interest-only mortgages as another choice.

However, you do not have to seek an interest-only mortgage if you do not have the retirement income to support it. While it is the nicer option to afford your retirement, there are other choices in home reversion and other lifetime mortgage products which are also covered by FCA authorised brokers.

Other lifetime mortgages require you to pay the full amount including any compounded interest when you move to a retirement home or at your death. It usually requires the sale of your home to cover the costs since there is a protective negative equity clause in your contract. It means you do not pay more than the house value even if the loan and interest accrued to more.

With home reversion you do not have a mortgage at all. Instead, you have to sell a part or your entire home to gain money for your retirement. This is not ideal if you do not wish to turn ownership over to someone else; however, you retain the right to live in the home free of rent under the lifetime tenancy agreement. You also save your family from paying any mortgage after your death.

Whether interest-only mortgage options like the Halifax or Stonehaven products are what interest you or you are still looking for a better deal, it is always a good idea to compare products. Check with FCA authorised brokers to ensure you have the right product as well as one that is covered under SHIP programmes for your protection.

Speak with your family before you sign a contract too as they may have a different opinion on which interest only option to choose from FCA authorised brokers. Contact a specialist such as Equity Release Supermarket on their freephone number 0800 678 5159 to get the latest interest only mortgage rates & special deals they offer.