Retirement Interest Only (RIO) mortgages

steampowered

If he is living in a £3m property, he could downsize to a £2m property!!!!

That would pay off the mortgage, and free up a big chunk of cash to gift the kids or use to have a nice retirement.

I don't think an interest only mortgage is a very good idea. Interest only mortgages are more expensive than standard mortgages.

You also need a plan for paying off the debt. If using an equity release product (which again is more expensive than a standard mortgage) that would be eating into his estate more than the tax man would.

Malthusian

If the only housing options he has considered so far are "stay in my £3-4 million pile" and "move into an 'over 55s' retirement compound", he definitely needs to explore his options more fully before looking at equity release.

Paying loan interest only reduces an IHT bill because there is less money in your estate. 60% of something is better than 100% of nothing.

At his age he would only be able to borrow a small percentage of the value and the rolled-up interest could easily swallow up the entire house during his lifetime. And he won't be paying the interest to stop it rolling up if he's asset-rich and income-poor.

MWT

Malthusian said:

If the only housing options he has considered so far are "stay in my £3-4 million pile" and "move into an 'over 55s' retirement compound", he definitely needs to explore his options more fully before looking at equity release.

Paying loan interest only reduces an IHT bill because there is less money in your estate. 60% of something is better than 100% of nothing.

At his age he would only be able to borrow a small percentage of the value and the rolled-up interest could easily swallow up the entire house during his lifetime. And he won't be paying the interest to stop it rolling up if he's asset-rich and income-poor.

With respect, he also needs to get advice on Equity Release to understand the realities not the myths...

If he is 'mid-60's' he will easily be able to access at least 35% of the value which is far more than he would need to eliminate the mortgage and provide some extra cash to buffer his retirement income.

If he limits his release to say £500k or less then it is mathematically impossible for the rolled up interest to 'swallow up the entire house' even if you assume he pays nothing towards interest and there is zero house price inflation over the remaining years of his life. In fact you'd have to assume the property loses value at a rate of over 4 or 5% a year before that could happen.

Even so, I do agree that down-sizing makes more sense, but I also respect the wishes of people not to do that if they have a firm desire to remain in their property and want to understand all the options available to them...

Wh05apk

Given his age and income, I would forget about rios, they are too expensive, he could likely get a standard interest only mortgage to 75 y/o quite easily, repayments would be between £300-400pm. Other options could be lifetime, if he really doesn't want to make repayments. 

Wh05apk

Have to disagree with comments to downsize, if he traded down to a £2m House the stamp duty alone would be £153k, which would cover the interest on a £250k interest only mortgage for 20-30 yrs! If happy where he is, stay there, would then have the capital growth on a £3m property rather than a £2m property.