Retirement interest-only mortgages

Jay53

I am considering applying for a small RIO mortgage of approx £20,000.  I retired 2 years ago & am currently mortgage free.  Does anyone have experience of RIO's or any advice ?

Thrugelmir

Are you looking for some form of equity release ? 

MWT

I'd suggest you talk to 'Step Change' - https://www.stepchange.org/how-we-help/equity-release.aspx

You will need to take advice and they provide it free.

A RIO still has affordability criteria unlike most other forms of equity release, but it is a modest sum you are planning to borrow so hopefully the affordability will not be a challenge.

dunstonh

Are you looking specifically at RIO or other types of equity release as well?

Jay53

Thrugelmir said:

Are you looking for some form of equity release ? 

Yes but my understanding is that if I go for retirement interest-only option, I will make monthly payments, so when my property is sold the original amount of £20,000 will be repaid, leaving a lot more equity.

Jay53

dunstonh said:

Are you looking specifically at RIO or other types of equity release as well? 

Just RIO as don't want to lose majority of equity through interest charges. 

Jay53

Would I have to pay legal fees & a valuation fee ?

MWT

Jay53 said:

Would I have to pay legal fees & a valuation fee ?

Yes for legal fees, valuation depends on which lender you go with as does the application fee as some lenders will offer zero fee options.

Just make sure you understand the difference between a real 'free' offer and one where they simply add the fees on to the loan amount.

The biggest cost is usually the advice fee which is why I suggested StepChange as they provide equity release advice without a fee.

dunstonh

Just RIO as don't want to lose majority of equity through interest charges. 

Are you aware that many modern equity release schemes have interest rates comparable to mortgages and allow repayments?

MWT

Part of the advice process these days is to assess which of the different schemes best fits the needs and situation of the borrower so even if you go into it with a desire for a RIO, the advisor will help you determine if that is the best route or not...

With the RIO you are committed to making monthly payments to cover the interest, but with a lot of Life Time Mortgages permitting up to 10% repayments each year without the committent to do so it is certainly an option worth considering if the interest differential isn't too high.

amnblog

Yes, you can expect valuation and legal fees.
Your retirement income would need to support the lending and if there are two property owners either owner will also need to be able to support the lending as a widow(er).