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Original poster

Interest only mortgage

13 replies

Mrsitsnotme · 27/02/2024 11:21

Hi there

I am very overwhelmed.

So, we have an interest only mortgage which ends in July.
House value - £260,000
Mortgage - £185,000

We are basically too old to remortgage on a standard mortgage, (63 + 56) and there isn't enough equity to do a lifetime mortgage.

I've wondered about shared ownership new houses, I suppose the rent you pay would equate to mortgage payments?

We do have a daughter who is 14, she is highly unlikely to leave home. Special Needs. I can't imagine this has any relevance, and it's not something I would want to use, even if it is. Mentioned for information only.

Any advice? Where's to start?

I could call a mortgage advisor but I wanted to get some opinions, advice ideas first!

OP posts:
Jmaho · 27/02/2024 12:07

What was the original plan when you took out an interest only mortgage?
There are lenders who would go to age 80 at end of term but not sure how affordable a 17 year term would be?
Not too sure about shared ownership to be honest.
How much would you need to buy a suitable property?

SlightlyLostOops · 14/03/2024 13:49

My parents dealt with a similar situation when they came to retire having taken an interest only mortgage in 2006 when they were giving them out with the rations! Best bet is to speak to a mortgage broker worth their salt, from how I understand it they got a mortgage sorted despite the equity hurdle. Happy to put you in touch with the gentleman they used?

Outnumbered99 · 14/03/2024 15:16

How long do you plan to work for? How much cash can you throw at the mortgage? You aren't necessarily too old, contact a good broker and talk your situation through with them.

Octopuslethargy · 14/03/2024 15:18

Commute lump sums from pensions- that is what many people do. 25% drawdown is tax free
It isnt a large amount- are you both still working full time- you must be able to throw a hefty chunk at it in the next 5 years

DeedlessIndeed · 14/03/2024 15:25

Look at mortgage calculators online.

You have a chunk of capital if you were to sell your current home.

Figure out how much you can afford to pay for housing costs out of your current budget. Work out what size of mortgage you can afford to pay back for the years until retirement.

Add that to your capital and search for any properties in that ball park.

Agree with PP, drawing down some capital from pensions may assist here.

decionsdecisions62 · 14/03/2024 15:42

Do they actually let people do this without endowments to pay them off? I don't understand what the plan would be to pay it off?

Hedgerow2 · 15/03/2024 18:22

I thought you could only get an interest only mortgage with a plan for how you will pay off the debt. This used to be an endowment insurance policy.

We have an interest only mortgage on a property we own. Our plan to pay off the mortgage when it ends is to sell the property. Nevertheless the mortgage company asks us regularly what our plan is to pay off the loan. Does your lender not do the same?

SnoozySuzie · 16/03/2024 17:56

Retirement Interest Only (RIO) mortgages are designed for borrowers over 55.
Usually they fixed interest rate (so monthly payments never increase) with no end term and last until end of life, or a move to into a care facility. So you would not need to plan for how to repay it, as this would be done by your heirs after the house is eventually sold as part of your estate.
You can borrow up to 70% of the value of the property.

Because you continue to pay interest on the loan, your capital in the house is protected and the amount you owe doesn't increase.

These products are offered by reputable banks and mutuals.
Best rate at the moment seems to be about 4.14% with Britannia Home Finance, though it is best to approach a specialist mortgage adviser.

This site gives some useful information
https://www.landc.co.uk/mortgages/retirement-interest-only-mortgages/

mondaytosunday · 16/03/2024 18:12

@Hedgerow2 I have an interest only buy to let mortgage and they've never asked me how I expect to pay it off. My plan is to pay off 10% of the capital every year and more as and when I can.

Jmaho · 16/03/2024 19:13

@mondaytosunday BTL is different. Almost always on IO basis with sale of property as repayment vehicle. They don't need to you on a BTL as its not your main residence

Hedgerow2 · 16/03/2024 20:15

mondaytosunday · 16/03/2024 18:12

@Hedgerow2 I have an interest only buy to let mortgage and they've never asked me how I expect to pay it off. My plan is to pay off 10% of the capital every year and more as and when I can.

Maybe they ask us because ours is only a 10 year mortgage and we're in our mid 60s - so they're more twitchy about us!

StedeBonnet · 16/03/2024 20:21

When are you planning to retire and what is your pension provision? What are your salaries currently? I think you could possible take out a ten year mortgage for the reminder of the 56 year old was till working and had an income to support it, which wouldn't need to be huge.

Jade020993 · 14/05/2024 11:11

I wouldn't say you are too old to remortgage as some lenders will go up to age 80, you would just need to be able to evidence that you can afford the mortgage on your pension incomes in the future and also be comfortable paying the mortgage until that point. You would likely be made to go on repayment to get a remortgage so you would see a significant increase in mortgage payments

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