Different types of mortgages explained

This new type of mortgage was launched in March 2018, designed to help people get loans in later life.

Retirement interest-only mortgages (RIOs) work like a standard interest-only mortgage product in that borrowers make monthly interest payments. But there is no set end date or term for the mortgage. Instead, payments continue until either the borrower dies or goes into long-term care, at which point the property is sold in order to repay the debt.

When the loans were first launched only two providers offered them. As of February 2021, there are 22 providers offering 109 retirement interest-only mortgages– up from just 74 in February last year. Most providers are building societies including Nationwide Building Society, Tipton & Coseley Building Society, Bath Building Society and Hodge Lifetime. 

There are loans available with rates of around 3%, with the best rates reserved for those with higher levels of equity in their homes. Borrowers must have at least 35% equity in their home to be eligible. As with other types of mortgage, they must also undergo affordability tests when they apply, and will need a steady income such as a defined benefit pension or an annuity.

Less than 3,000 RIOs have been taken out since launch, according to data analysed by later lending company Responsible Life. It was previously estimated (by the city regulator the Financial Conduct Authority) that around 21,000 of the mortgages, worth £1.7 billion, would be sold every year by 2021.

You can read more about Retirement interest-only mortgages in our article How retirement interest-only mortgages work.

Author: wpadmin

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