Retirement interest only mortgage

Ellalou

Hi everyone, 

looking for a bit of advice. 

My mum and dad currently have an interest only mortgage..approx £185k outstanding and will not be able to pay it off - they have 3 years left on their Halifax deal. They are making payments to the mortgage now and have been for a while so this will be reduced even further by the end of the term. 

They are both still working - aged 67 & 64. My mum started receiving her State pension this month. 

Their home is valued approx £300k. 

My question is I’ve been looking at retirement interest only mortgages - is this an option? 

I don’t know if they will just need to sell up and use the equity to buy a place (they are actually looking at lodges) but they do like living here and want to be close to grandkids so I want to start looking at options! 

Retirement wise my mum will have a private pension and state pension and my dad will have a state pension. 

Any advice would be appreciated! 

Thanks 

Snookie12cat

Interest only mortgages are really hard to get now and it's very unlikely that they are going to qualify, especially as they don't seem to have a repayment plan. 

MWT

Snookie12cat said:

Interest only mortgages are really hard to get now and it's very unlikely that they are going to qualify, especially as they don't seem to have a repayment plan. 

This isn't the case for a RIO product, you are thinking about traditional interest only mortgages.

Thrugelmir

Be wise to overpay the mortgage by whatever they can afford while planning the future. Building additional equity, i.e. improving the LTV may well improve their options if they do choose either a RIO mortgage or decide to move. 

A £185k is a millstone of a debt to carry for life. With the added burden that one of your parents is more than likely to outlive the other. 

MWT

Ellalou said:

Their home is valued approx £300k. 

My question is I’ve been looking at retirement interest only mortgages - is this an option? 

I don’t know if they will just need to sell up and use the equity to buy a place (they are actually looking at lodges) but they do like living here and want to be close to grandkids so I want to start looking at options! 

Best advice would probably be to down-size if that is a possibility for them...

... but if they really do not want to do that then a RIO product may work but it does depend how the numbers stack-up regarding the interest and their retirement income, both joint and individual, as they will be stress-tested on the ability to pay the interest if there is only one of them remaining.

Do you have a rough idea of how much they will still have left to pay at the point when the Halifax product ends?

Another option they might have is equity release, but without the outstanding mortgage reducing by a decent amount they are unlikely to get enough to clear the remaining balance with the value being around £300k...