Around three million homeowners expect to still be paying back their home loans into retirement and lenders are responding by launching increasing numbers of mortgages for older borrowers. One in five (21% of) mortgage holders – which works out at around three million people – worry that they’ll still be paying their mortgage off into retirement.
Over half (58%) don’t know how they’ll keep up their repayments when they’re no longer working, and 53% of that group are already aged over 55, meaning time is running out to make a plan. The ageing population coupled with many people having to wait longer to buy their first home has prompted some lenders to innovate.
This new type of deal is designed for retirees who may struggle to get approved for a repayment mortgage because of their age and reduced income. As the name suggests, you just pay back the interest (and none of the capital) each month; the loan itself is only paid back once the mortgage ends. In this regard, RIOs are just like regular interest-only mortgages.
However, most retirement interest-only mortgages come with indefinite terms, meaning they only need to be paid back when you die or go into long-term care and the house is sold.