Retirement Interest Only Mortgages
Discussion
I've seen these products coming into the market and I wondered what people thought of them.
I'm 58 and we've lived in our rented house for over 20 years, we're very settled and it's a great place to live. After being skint for most of our lives I landed a good job a few years ago, the kids grew up and moved out, we have no debt and we've been able to save a reasonable sum. I'm acutely aware that we are extremely vulnerable financially after retirement and risk having to use our savings to pay rent until we die.
If nothing changed we could probably afford to take out a 250k-ish mortgage and repay it over ten years - but that would put an end to savings and extra pension contributions and we all know things do change and health work etc are fragile.
It would be an initial shock to stump up the 45% deposit required, but our money's not doing much anywhere else, and the interest payments would then be very similar to the rent we pay now.
So one point of view is that our savings transfer from banks into bricks and mortar, the money we "waste" on rent is "wasted" on interest payments instead and we have an asset that hopefully stays in the family. We could save rainy day money and continue our pension contributions as we do now and enjoy a not uncomfortable retirement.
Does anyone have any insight or opinions on the best course of action?
I'm 58 and we've lived in our rented house for over 20 years, we're very settled and it's a great place to live. After being skint for most of our lives I landed a good job a few years ago, the kids grew up and moved out, we have no debt and we've been able to save a reasonable sum. I'm acutely aware that we are extremely vulnerable financially after retirement and risk having to use our savings to pay rent until we die.
If nothing changed we could probably afford to take out a 250k-ish mortgage and repay it over ten years - but that would put an end to savings and extra pension contributions and we all know things do change and health work etc are fragile.
It would be an initial shock to stump up the 45% deposit required, but our money's not doing much anywhere else, and the interest payments would then be very similar to the rent we pay now.
So one point of view is that our savings transfer from banks into bricks and mortar, the money we "waste" on rent is "wasted" on interest payments instead and we have an asset that hopefully stays in the family. We could save rainy day money and continue our pension contributions as we do now and enjoy a not uncomfortable retirement.
Does anyone have any insight or opinions on the best course of action?
Macneil said:
I've seen these products coming into the market and I wondered what people thought of them.
I'm 58 and we've lived in our rented house for over 20 years, we're very settled and it's a great place to live. After being skint for most of our lives I landed a good job a few years ago, the kids grew up and moved out, we have no debt and we've been able to save a reasonable sum. I'm acutely aware that we are extremely vulnerable financially after retirement and risk having to use our savings to pay rent until we die.
If nothing changed we could probably afford to take out a 250k-ish mortgage and repay it over ten years - but that would put an end to savings and extra pension contributions and we all know things do change and health work etc are fragile.
It would be an initial shock to stump up the 45% deposit required, but our money's not doing much anywhere else, and the interest payments would then be very similar to the rent we pay now.
So one point of view is that our savings transfer from banks into bricks and mortar, the money we "waste" on rent is "wasted" on interest payments instead and we have an asset that hopefully stays in the family. We could save rainy day money and continue our pension contributions as we do now and enjoy a not uncomfortable retirement.
Does anyone have any insight or opinions on the best course of action?
I am a bit confused as the title says "Retirement Interest Only Mortgages" but you speak about repaying the mortgage over ten years.I'm 58 and we've lived in our rented house for over 20 years, we're very settled and it's a great place to live. After being skint for most of our lives I landed a good job a few years ago, the kids grew up and moved out, we have no debt and we've been able to save a reasonable sum. I'm acutely aware that we are extremely vulnerable financially after retirement and risk having to use our savings to pay rent until we die.
If nothing changed we could probably afford to take out a 250k-ish mortgage and repay it over ten years - but that would put an end to savings and extra pension contributions and we all know things do change and health work etc are fragile.
It would be an initial shock to stump up the 45% deposit required, but our money's not doing much anywhere else, and the interest payments would then be very similar to the rent we pay now.
So one point of view is that our savings transfer from banks into bricks and mortar, the money we "waste" on rent is "wasted" on interest payments instead and we have an asset that hopefully stays in the family. We could save rainy day money and continue our pension contributions as we do now and enjoy a not uncomfortable retirement.
Does anyone have any insight or opinions on the best course of action?
If you have the option of taking out a mortgage and repaying it over ten years, with the interest costing you no more than your current rent then I would say this is exceptional retirement planning.
Whilst you don't get the tax relief you would with additional pension contributions you get the security of owning your own home in retirement and the additional benefit of your pension drawing not having to cover rent in retirement.
As usual with all things mortgage related I would talk to Sarnie here.
JulianPH said:
I am a bit confused as the title says "Retirement Interest Only Mortgages" but you speak about repaying the mortgage over ten years.
If you have the option of taking out a mortgage and repaying it over ten years, with the interest costing you no more than your current rent then I would say this is exceptional retirement planning.
Whilst you don't get the tax relief you would with additional pension contributions you get the security of owning your own home in retirement and the additional benefit of your pension drawing not having to cover rent in retirement.
As usual with all things mortgage related I would talk to Sarnie here.
Sorry J it's a bit ambiguous the way I phrased it, I meant we could take out a conventional repayment mortgage and repay it over ten years finishing around the date I would expect to receive state pension. But payments would be high, probably 3-4 times rent and I would ideally like to step back a little workwise, I don't think I'll be able to keep up what I do now for another ten years. I would see the conventional mortage as a millstone round my neck really. If you have the option of taking out a mortgage and repaying it over ten years, with the interest costing you no more than your current rent then I would say this is exceptional retirement planning.
Whilst you don't get the tax relief you would with additional pension contributions you get the security of owning your own home in retirement and the additional benefit of your pension drawing not having to cover rent in retirement.
As usual with all things mortgage related I would talk to Sarnie here.
On the RIO mortgage I could pay the forecasted monthly interest payments comfortably even on 50% of my current salary, and out of my forecasted pension income after retirement age. If I'm lucky I can also make the allowed yearly capital reduction of 10%, and still keep up a reassuring pension payment with no compromise to our current lifestyle.
TBH honest I can't see a downside, given our current position?
Most interest only mortgages in the normal residential market will have a min income which is often over 50k. Santander will allow 50% ltv with the rest repayment to age 65 with no min income but You need about 200k equity iirc.
Some lifetime options would allow longer int only terms.
What % deposit would you have?
Buy to let’s need min 25% deposit too and need to pass a stress test where the rent needs to fit.
Some lifetime options would allow longer int only terms.
What % deposit would you have?
Buy to let’s need min 25% deposit too and need to pass a stress test where the rent needs to fit.
Caddyshack said:
Most interest only mortgages in the normal residential market will have a min income which is often over 50k. Santander will allow 50% ltv with the rest repayment to age 65 with no min income but You need about 200k equity iirc.
Some lifetime options would allow longer int only terms.
What % deposit would you have?
Buy to let’s need min 25% deposit too and need to pass a stress test where the rent needs to fit.
I think the RIO mortgage differs from a conventional interest only mortgage in that there is no upper age limit and the affordability criteria is simply based on the borrowers income in retirement - the repayment strategy is sale of the proprty on my death or moving into residential care. (That's the t's and C's rather than my personal strategy)Some lifetime options would allow longer int only terms.
What % deposit would you have?
Buy to let’s need min 25% deposit too and need to pass a stress test where the rent needs to fit.
The interest doesn't roll over either, and you can repay up to 10% of the capital each year. so by retirement age there really wouldn't be a huge amount to pay off.
Gassing Station | Finance | Top of Page | What's New | My Stuff