Manage your Mortgage Payments as Inflation Grows | Later Life Mortgages
In years gone by, being 65 meant that it was time for you to relax and enjoy a well-earned retirement. However, as the Office for National Statistics reported, the increase in life expectancy in recent decades has meant that 70 is really the new 65.
In line with the rise in life expectancy, legislation has come into force, raising the retirement age to 66, which is set to increase to 68 in the near future.
As such, this means that most people are now working for longer and are more likely to be looking towards mortgage options in their later years. A Later Life mortgage can help to make your retirement ambitions a reality and give you the retirement that you have always dreamed of.
In this article, we will focus on a particular Later Life mortgage known as a Retirement Interest Only mortgage and highlight why it could be the key to financial freedom in your later years.
What is a Retirement Interest Only Mortgage?
A Retirement Interest Only mortgage (also known as a RIO) is a type of mortgage that is designed for those in the later years of their lives and offers a lump sum only.
As with other Later Life mortgages, a RIO is available to homeowners aged 55 and over, although some lenders now consider borrowers from age 50. Unlike a Lifetime mortgage, however, a RIO requires monthly payments. As the name suggests, the difference with a Retirement Interest Only mortgage is that you are only required to pay the interest every month, not the capital.
RIOs are a great way of borrowing money in your retirement and don’t involve you having to sell your home. A RIO offers a fantastic way to unlock the value in your home for a broad range of objectives as long as they aren’t considered investment.
With a RIO, making monthly payments of the full interest means the outstanding loan will remain as originally taken, but it’s important to understand that there is a risk of repossession if the monthly payments are not maintained.
Reasons why should you consider a Retirement Interest Only Mortgage
There are many reasons why taking out a RIO mortgage could help you achieve your objectives. Below we have broken down two of what we believe are the most compelling reasons why you might consider a RIO.
A cost-effective way to borrow in later life
A key benefit of a RIO is that you only pay back the interest, not the capital. This means that your monthly payments are considerably lower than a standard repayment mortgage. However, the trade-off with a RIO is that you will still need to repay the capital, usually from the sale of your property after you have vacated it.
A fixed-rate for life
In a world of economic uncertainty and fluctuating bank rates, a RIO could help you manage your outgoings and limit your committed expenditure. The interest rate for a RIO can be fixed, or there is a range of shorter-term rate options also available.
While inflation causes the cost of goods and services to increase, it can also bring an increase to your income. If your borrowing costs are fixed, this could allow you to use any increased income elsewhere, or to pay down your borrowing quicker with overpayments, if allowed.
As we highlighted above, there are several reasons why you may consider accessing the equity in your home. However, while it might be tempting to focus only on the benefits you will receive from the money you unlock from your property, it’s important to be mindful of the pitfalls. For instance, future house prices aren’t guaranteed and may fall, meaning there is no certainty that the value of your home will increase over time.
Additionally, reducing the equity in your property could also affect your financial options later on and the inheritance you ultimately leave for your beneficiaries.
Regardless of the reasons why you may choose to take out a Later Life mortgage, it’s important to speak to a qualified adviser before proceeding with any mortgage option.
The Henry Dannell difference
As previously mentioned, RIOs can offer a great way of realising your dreams and helping you achieve your objectives in your later years.
By choosing Henry Dannell as your mortgage adviser, you’ll be supported every step of the way by our specialists, who have over 45 years of combined experience in helping clients in their search for bespoke mortgage solutions. We understand that everyone has different needs and financial circumstances. As such, we provide a discrete and personalised service tailored to your objectives and circumstances.
In addition, at Henry Dannell we offer you a service whereby you only need to pay a one-time fee for Later Life advice of £1,295, payable on completion of your mortgage.
The advice fee is genuinely a one-time-only fee for life, meaning if your circumstances change and you have exhausted your available resources and wish to release additional funds or remortgage, our Later Life advice will be available to you at any time, with no additional advice fee payable.
We advise on a wide range of Later Life products, so it’s worth speaking with one of our specialists to explore your options and learn more.
Please note: Later Life product options include Retirement Interest Only and Lifetime mortgages. To understand the features and risks, always obtain a personalised illustration.