Retirement Interest Only (RIO) mortgages

Newnoel

One of my neighbours is a man in his mid-60s with a large house - but with a substantial mortgage

He recently asked me about RIO mortgages - which I'd never heard of before.

I've had a look on-line but cant find much about them. Has anyone come across them? Any providers offering decent long term fixes?

Sandtree

Not seen the Which? article Retirement interest-only mortgages for older borrowers (RIOs) - Which?

Newnoel

Sandtree said:

Not seen the Which? article Retirement interest-only mortgages for older borrowers (RIOs) - Which?

I have seen that. Its a typical low brow Which explanation. It doesnt offer a best-buy table or even a list of providers.

Wh05apk

Rios are an interest only mortgage aimed at the "older" market, they tend to be quite expensive, depending on his circumstances a good broker may find him a "normal" interest only mortgage, or even a lifetime.
What is he trying to achieve? 

Newnoel

Wh05apk said:

Rios are an interest only mortgage aimed at the "older" market, they tend to be quite expensive, depending on his circumstances a good broker may find him a "normal" interest only mortgage, or even a lifetime.
What is he trying to achieve? 

He is looking to reduce his outgoings. As I understand it, he has a £250k mortgage on a £3-4m house, and wants to reduce his monthly mortgage payments in order to retire on a decent income and to reduce IHT liability for his kids. I don't know his pension income, but its likely to be £50-100k-ish, down from an income well over double that I would think.

dimbo61

I wonder what his plan was to pay off this mortgage debt.
Maybe now is the time to downsize and buy a smaller cheaper retirement home even if it means moving area.
Most people can't even dream of a £3/4 million pound home.
Asset rich and cash poor.
Lovely 2 bed over 55,s apartment and plenty of money to enjoy.

Newnoel

dimbo61 said:

I wonder what his plan was to pay off this mortgage debt.
Maybe now is the time to downsize and buy a smaller cheaper retirement home even if it means moving area.
Most people can't even dream of a £3/4 million pound home.
Asset rich and cash poor.
Lovely 2 bed over 55,s apartment and plenty of money to enjoy.

He doesnt want to downsize. I cant blame him - the thought of an over 55s apartment makes me shudder.

Annisele

Newnoel said:

He doesnt want to downsize. I cant blame him - the thought of an over 55s apartment makes me shudder.

There are other options!

I don't live in an over 55 apartment, but if your neighbour moved to property like mine he'd certainly be downsizing. It just means "sell up and buy somewhere cheaper"; it doesn't specifically mean move to a property marketed at older people.

He's probably a little young for equity release products. They would meet his goal of reducing IHT, but only by making his estate smaller - and if that's the plan, he can get rid of the IHT entirely by leaving his whole estate to charity.

Newnoel

Annisele said:

Newnoel said:

He doesnt want to downsize. I cant blame him - the thought of an over 55s apartment makes me shudder.

... he can get rid of the IHT entirely by leaving his whole estate to charity.

I suppose he could. 

Some one has to pay for the £500k+ pay packages being offered to some CEOs in the charideee sector:
Charity pay study 2019: the top earners, 1-100 | Third Sector

MWT

Annisele said:

He's probably a little young for equity release products. They would meet his goal of reducing IHT, but only by making his estate smaller - and if that's the plan, he can get rid of the IHT entirely by leaving his whole estate to charity.

'Mid-60s' is not too young, and if structured properly, equity release could be a good solution for him as it would give him the freedom to repay or not as his income and lifestyle allowed.

The interest rates are not terrible either on the very low LTV that he would be looking for.

He will need proper advice, but it is a route he should at least consider as it seems to be flexibility that he is looking for and this is probably the most flexible of the choices he has...

Thrugelmir

Newnoel said:

Wh05apk said:

Rios are an interest only mortgage aimed at the "older" market, they tend to be quite expensive, depending on his circumstances a good broker may find him a "normal" interest only mortgage, or even a lifetime.
What is he trying to achieve? 

He is looking to reduce his outgoings. 

Doesn't equate to someone living in a property too big for them with all the related outgoings. While having a £50k-£100k income. More to the tale than is being told. Taking on debt solves nothing if interest rates were to rise.