Money Matters Margaret Dibben

Getting a mortgage after you’ve retired is much easier these days. It used to be near impossible for anyone retired or nearing retirement age to get a home loan. Even though a pension is a guaranteed income for life, that counted for nothing with mortgage lenders.

But while retired borrowers are reliable, some find it difficult, on a reduced income, to afford a repayment mortgage where you pay both interest and capital as you go.

This makes interest-only loans attractive because you pay only the interest and, in many cases, even that is rolled up until you repay the whole mortgage.

Interest-only loans are not specifically for older people; thousands took them out at a younger age but failed to make sure they saved enough money to repay the capital when it fell due. If they are by now retired, they face having to sell their homes to pay the debt.

In March 2018, the rules for interestonly mortgages changed, and you can now remortgage on an interest-only basis. Mortgage providers, led by building societies, have responded to the increasing demand from older people needing loans. They have begun to sell a new style of interest-only mortgage, called retirement interest-only loans, or RIO for short.

These differ from standard interestonly home loans in several ways.