RIO mortgage clarification

Karen222

Good morning. Could someone with their feet firmly on the ground please tell me what I am missing and offer some advice? I have £70k savings and I plan to use this as a deposit on a property costing under £100k and borrow the rest on a retirement interest-only mortgage(RIO), which I hope will allow eventual overpayments/repayments on the capital sum as well (which will be with limits/penalties as I understand it). Looking at 10-15 years if allowed. 

I have a small pension and low income from self employment so a repayment mortgage will not be considered 'affordable'. I'm 67. Sale of the property on my death/need to go into care will be my repayment vehicle and more than cover the outstanding sum. 

What am I missing ?? It seems to me like a no brainer but I am hitting a wall on all the mortgage cost and interest rate calculators. Would like to be fully prepared before approaching someone in real life :-) 

MWT

Karen222 said:

What am I missing ?? It seems to me like a no brainer but I am hitting a wall on all the mortgage cost and interest rate calculators. Would like to be fully prepared before approaching someone in real life :-) 

For some lenders the amount you want to borrow may be too low, how far below £100k is the property you want to buy?

Are you look at RIO specific mortgage calculators?

They will test your affordability against your guaranteed retirement income so your self-employment component may not qualify, but that is really a matter for discussion with a broker that specialises in retirement products.

You do not mention anyone else owning/living in the property with you, but if there is, then that may also be an issue if they do not have sufficient guaranteed retirement income. 

ACG

These are quite specialised products. The criteria can be quirky, the affordability calculators can be fiddly to do them correctly and as mentioned by MWT there are definitely things here that will rule out some of the lenders who do offer them. 

When lenders are doing the affordability calculations, they may be assessing you on a rate higher than will actually be charged to account for future changes - so what you deem as affordable on the rates payable, may no longer be affordable on the buffer rate. 

Appreciate you want to be in the know, but I think you have probably learnt as much as is practical. The next stage is where someone with experience of the quirks comes in and hopefully matches you up with a suitable lender... I dont do these cases BTW so I have no skin in the game so to speak when I say the above. I hand RIO mortgages off to a lad who works for me as I dont have the time to learn the quirks for the few RIO enquiries I do get. 

Karen222

Hi - thanks both - yes I understand I'm not borrowing enough to make a % based fee worthwhile. Perhaps that is the part I am missing, explains why I get fobbed off.