Interest Only Mortgages and age restrictions.

silvercar

Every mortgage I've ever had has been interest only!

The first one was because I and OH were recent graduates with incomes expected to increase rapidly. Buying in London, so the repayments were only affordable on interest only. We had an endowment policy to cover future repayments. The second, it made sense to continue the endowment, so we increased the interest only mortgage and took out a second endowment. Kept as IO because we were starting a family, so wanted lower repayments while we had childcare to pay for. 

Then we took out an offset mortgage, with interest only repayments and built up the offset. But we also took chunks back out of the offset account as we wanted to. The offset savings account is building up again due to some bonuses and an inheritance. Plan is to clear it completely from the 25% tax free pension lump sums.

amnblog

DullGreyGuy said:

From my limited experience you need a viable plan to repay the mortgage in full within the timescale of the mortgage and "selling the property" is not normally accepted as the mechanism. Haven't heard of a direct age restriction but they may consider the viability of your plan with the typical reduction of income on retirement. 

Nationwide, in common with most lenders that doe interest only on residential mortgages,  do accept sale of property a sale of the mortgage property as a captial repayment option.

They will expect £200,000 to £300,000 equity in the property depending on where it is.

Nationwide wont do AN IO on a term over 25 years or past state retirement age - this is likely what is tripping our OP up

Linton

Retirement Interest Only mortgages (RIOs) are available from around the age of 55. The capital is repaid when the house is sold.

MWT

Linton said:

Retirement Interest Only mortgages (RIOs) are available from around the age of 55. The capital is repaid when the house is sold.

They are usually repayable when the last life on the mortgage either dies or goes into long-term care, full repayment before those events can incur an early repayment charge.

Can be transferred to another suitable property, but when down-sizing it may not be possible to transfer the entire mortgage which could also result in an ERC.

Affordability is also measured individually and will require sufficient guaranteed income into retirement so that can be a challenge as well.

This product may be more suitable to use when actually down-sizing rather than now, or even just a Lifetime Mortgage as that avoids the affordability issues. 

Right now I'd expect there to be options from the traditional mortgage market...

 

fireballpaul

Can I ask, what do generally do people do after the interest only mortgage is over?? The lender gets the house unless a new deal is struck?  

housebuyer143

fireballpaul said:

Can I ask, what do generally do people do after the interest only mortgage is over?? The lender gets the house unless a new deal is struck?  

They use whatever repayment strategy they decided on to repay the balance. 

amnblog

fireballpaul said:

Can I ask, what do generally do people do after the interest only mortgage is over?? The lender gets the house unless a new deal is struck?  

The capital repayment is due and the Lender will press for it.

Typically, if the borrower has the property up for sale to repay the capital, or is re-mortgaging, or the current Lender can otherwise see movement toward clearance they will give the borrower some time.
Ultimately, failure to repay the capital will lead to repossession.
I have yet to see a 'new deal struck'.