At 63, what are my options for paying back an interest-only mortgage?
Q Could you please advise me? I have a property on which I have an interest-only mortgage that ends in three years’ time. To be able to pay back the mortgage I will be forced to sell. I am 63. Are there any other options open to me apart from marrying a super-rich sugar daddy or robbing a bank?
SD
A Yes, there are other options open to you. According to Which?, 16 building societies* and three other lenders** have come up with mortgage deals specifically aimed at older borrowers. Referred to as retirement mortgages, they have been a big hit with older borrowers who, like you, need to raise cash to pay back a standard interest-only mortgage at the end of its term. So instead of having to sell your property, you switch from your current lender to one that offers a retirement mortgage and you don’t have to wait until your current deal comes to an end to make the switch.
With most retirement mortgages, you pay only interest each month and the mortgage is paid off when you sell the property, move into residential care or die. To be able to take out a retirement mortgage, you typically have to be older than 55 and be able to prove that you will be able to afford the interest payments once you are retired and so do not have income from employment.
If you can’t afford the interest payments, the alternative option is to go down the equity release route where you still take out a mortgage but don’t have to make interest payments each month. Instead, interest is added to the amount you borrow and repaid along with the original loan once the property is sold. The downside of equity release in comparison with a retirement mortgage is that, after repaying the loan, there is typically a lot less left over. However, if you’re not bothered about passing money on to your family, equity release has the advantage of not eating into your retirement income.
* Bath, Beverley, Family, Hanley Economic, Ipswich, Leeds, Loughborough, Marsden, Melton, Nationwide, Newbury, Nottingham, Saffron, Scottish, Tipton & Coseley and Vernon building societies.
** Hodge Lifetime, Post Office Money and Shawbrook Bank.
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