If you’re not sure whether downsizing is right for you, there may be other options you could consider.
If, for example, you are selling your home to free up capital to repay an interest-only mortgage, you might want to think about remortgaging to a retirement interest-only mortgage (RIO). This type of mortgage is typically aimed at borrowers in their 50s and 60s who are approaching retirement. They are usually easier to qualify for than standard interest-only mortgage deals, which typically come with age restrictions for when the debt must be repaid.
RIO mortgages enable you to carry on making interest payments indefinitely, with the loan paid back only when you die or sell the house. By contrast, a standard interest only mortgage finishes on a specific date and you must repay the capital you owe on this date. Find out more in our guide How retirement interest-only mortgages work. If you’re not sure which mortgage deals you’ll be eligible for, or what age you can borrow up to, expert mortgage brokers can research the various options that may be available to you on your behalf.
Another option you may want to consider is equity release, which as the name suggests, enables you to unlock some of your property wealth, while continuing to live in your home.
The most popular type of equity release plan is a drawdown lifetime mortgage, where you release equity as and when you need to, and interest on the amount you have released rolls up over time.
You only have to repay the loan, along with all the interest you owe, either when you and your partner pass away or go into long-term care.
However, there are plenty of downsides and risks to consider, not least that equity release can be an expensive way to access cash compared to remortgaging or downsizing and rates are typically higher than standard mortgage rates. Find out more about lifetime mortgages and retirement interest-only mortgages in our guide
Releasing equity from your home may significantly reduce the value of any inheritance you planned to leave, and may mean you won’t be able to rely on your property later in your retirement, for example, to cover long term care costs. It can also affect your entitlement to means-tested benefits, as you’re turning money that was locked up in your home into capital or income. You can find out more about equity release in our article Equity release: What is it and how does it work?
Alternatively, if you’re interested in speaking to someone about your options, you can find an equity release adviser via the Equity Release Council’s (the trade body for the equity release sector) website here.
Key group is one of the more established providers who offer advice on equity release. They are a member of the Equity Release Council and have an excellent customer service rating on Trustpilot. If you are interested in a free, no obligation conversation with one of Key’s equity release specialists, you can request a callback here.