Lifetime mortgage or retirement interest-only?
Lifetime mortgage or retirement interest-only?
A recent mortgage option for older homeowners has become available, retirement interest only (RIO). Effectively the borrower pays monthly interest until they sell their home, go into care or die. At which point the property is sold to repay the loan.
Lifetime mortgage
Lifetime mortgages are also known as equity release mortgages. They are secured against your home allowing you to release excess equity. They are only available to over 55s and in this case the loan is paid off when the last living person in the property sell their home, goes into care or dies.
Retirement interest-only mortgage
Retirement interest-only mortgages are like basic interest only mortgages with one major difference. There’s is no set end date as the loan is redeemed when the property owner dies and there’s no age limit!
Summary
The Financial Conduct Authority (FCA) seems to have cut a lot of red tape which is encouraging more advisers to offer such products to their clients. With that said RIO loans are sold by only a handful of lenders. Lifetime mortgages tend to be offered by specialist equity release brokers.
Equity release can be a better option for those with a less secure income or do not wish to commit to regular mortgage payments for the rest of your life.
What do you think of the additional borrowing option? Have you experienced either of these products?