Retirement Interest Only Mortgage

So_long_Marianne

Hi - we have recently paid off our mortgage but want to help our son and his partner with a deposit for a house - they are first time buyers. Our initial intention was to downsize and give them some money from the sale but due to a few issues this will not be happening for a couple of years. 
I’ve been looking into various ways to help them and the Retirement Interest Only Mortgage seems to look like a good way for us to go but I want to make sure I’m not missing any potential problems with it. 
Both my partner and I are in receipt of small private pensions, teachers and NHS,We are both still working part-time and not planning on stopping until we receive our state pensions - we are both 63atm. Our house is worth approx £350- 380k  and we would like to release 30k to give to our son. I did a rough on-line calculator and the monthly repayment is approximately just over £100. 
My questions are is this too good to be true? 
What would the set up fees for a new mortgage be approximately?
Would we be able to pay it off earlier when we finally are in a position to down size?
Are there any better solutions ? 
Thanks

El_Torro

It doesn't seem like a bad plan, if you borrow £30k on an unsecured loan you will probably find that the interest rate is a lot higher. 

I wouldn't say this is too good to be true. Just remember that the mortgage lender will want the £30k at some point, not just the interest payments. You might have trouble finding a lender who will lend you the money beyond 70 years old. 

You can pay it off early, just depends what term you take out on the mortgage. Typically you can get a mortgage agreement for 2, 3 or 5 years. After that you either get a new agreement or pay the debt off in full. 

MyRealNameToo

El_Torro said:

Just remember that the mortgage lender will want the £30k at some point, not just the interest payments. You might have trouble finding a lender who will lend you the money beyond 70 years old. 

A mortgage of this type is typically repaid when the last borrower dies or goes into long term care. Unlike a regular interest only mortgage there is no fixed term to it but consequently interest rates tend to be higher than a regular mortgage. 

So_long_Marianne

Thanks for the replies - we are hoping to downsize in the next couple of years and then pay off the £30K

MyRealNameToo

So_long_Marianne said:

Thanks for the replies - we are hoping to downsize in the next couple of years and then pay off the £30K

They typically have early repayment charges so just factor that in. Like most mortgages some have product fees or you can pay higher interest to not have a fee plus application fees. 

So_long_Marianne

Just another quick question! Do you think we need to get a financial advisor or can we just do our own research into the providers and take it from there? 

poseidon1

So_long_Marianne said:

Just another quick question! Do you think we need to get a financial advisor or can we just do our own research into the providers and take it from there? 

You could consider going direct to mortgage providers, however they will require you to be advised (either in house or via appointed brokers). On application you will need to go through a full blown income/expenditure analysis and of course the normal legal procedures for secured lending on property apply. 

These products are designed to be for lifetime and indeed can be ported across to a replacement  property (subject to status), so there are penalties for early redemption. That said, annual overpayments (up to 10% of balance) are usually permitted without penalties.

See link below to Legal and Generals product, for an indication of whats involved and the extent of the income/expenditure Q &A

https://www.legalandgeneral.com/retirement/retirement-interest-only-mortgage/


So having  regard to the above it can be  quite a long drawn out excercise compared to a much quicker personal loan for which you may already be pre approved depending on your credit rating and relationship with your bank.

Also examine up front costs ( advice, survey, legals)  to ensure these are not disproportionately large compared to amount borrowed - link below provides insight in  this area


https://www.protaxaccountant.co.uk/post/equity-release#:~:text=Legal Fees: A solicitor handles the conveyancing,expertise, but fees vary, so compare quotes.