Retirement mortgages
Discussion
What's the difference between a Lifetime mortgage with the option to pay the monthly interest, and a Retirement Interest Only mortgage?
Looking to raise £50k to get everything in the house sorted so that I can retire properly next year, rather than working until I'm 75 and paying for the various projects in "cash" using what I earn from self-employment.
I'm very wary of the standard equity release type deals, as the compounding interest gets out of hand very quickly.
I like the idea of paying the interest monthly, but with the ability to pay nothing when one of us dies and it becomes unaffordable.
Looking to raise £50k to get everything in the house sorted so that I can retire properly next year, rather than working until I'm 75 and paying for the various projects in "cash" using what I earn from self-employment.
I'm very wary of the standard equity release type deals, as the compounding interest gets out of hand very quickly.
I like the idea of paying the interest monthly, but with the ability to pay nothing when one of us dies and it becomes unaffordable.
Sarnie said:
WIth a RIO, payments are mandatory.
With a Lifetime mortgage, you can choose to not make payments and allow the interest to accumulate.
So that's really the only difference?With a Lifetime mortgage, you can choose to not make payments and allow the interest to accumulate.
Are lifetime mortgages generally at a fixed interest rate, and RIO generally variable interest rate?
Edited by clockworks on Sunday 13th September 19:50
clockworks said:
So that's really the only difference?
Are lifetime mortgages generally at a fixed interest rate, and RIO generally variable interest rate?
It's the most significant difference, but not the only one, there are lots of differences in the advice, who can provide the advice and the qualifications they would need, the compliance and regulatory requirements differ too.Are lifetime mortgages generally at a fixed interest rate, and RIO generally variable interest rate?
Edited by clockworks on Sunday 13th September 19:50
RIO mortgages are available on almost any sort of a rate that you may want, in the same way as a standard mortgage.
Sarnie said:
It's the most significant difference, but not the only one, there are lots of differences in the advice, who can provide the advice and the qualifications they would need, the compliance and regulatory requirements differ too.
RIO mortgages are available on almost any sort of a rate that you may want, in the same way as a standard mortgage.
ThanksRIO mortgages are available on almost any sort of a rate that you may want, in the same way as a standard mortgage.
Just had a phone call with Tembo (via the Saga website) and an option suggested was a standard 15 year mortgage, fixed for 5 years. I had no idea that normal mortgages were available into your 80's.
5% interest.
RIO was also offered, at 6.7%
Both with zero fees.
The standard mortgage looks interesting, as there's a very good chance I could manage to pay off 10% of the capital each year - £400 a month into a regular saver account. I've been paying into several of these for a few years anyway, and using the money for home improvements.
The only slightly scary bit is - what happens to interest rates at the end of the fixed rate period?
How does 5% compare to the long term average?
How do these mortgages work if you’re taking private pension drawdown but it’s quite small or irregular?
As an example, I retired a few years back and was utilising savings to live on. I’m 63 now and depending on the year ahead (holidays, house improvements etc.) I may take anything from £12,570 to £30k drawdown per annum. Some to go into a S&S ISA and the rest to live on.
Im now looking at building my next home (possibly my last home) and don’t have the capital to buy the land. I have no mortgage on my current house so how would a mortgage company view this - ie what could I borrow? I’d hopefully only need the loan for 5 years max (or sooner if I can find land and sell the current home in a shorter timeframe) and repay when my current house sells.
Happy to start a new thread if this is a hijack
As an example, I retired a few years back and was utilising savings to live on. I’m 63 now and depending on the year ahead (holidays, house improvements etc.) I may take anything from £12,570 to £30k drawdown per annum. Some to go into a S&S ISA and the rest to live on.
Im now looking at building my next home (possibly my last home) and don’t have the capital to buy the land. I have no mortgage on my current house so how would a mortgage company view this - ie what could I borrow? I’d hopefully only need the loan for 5 years max (or sooner if I can find land and sell the current home in a shorter timeframe) and repay when my current house sells.
Happy to start a new thread if this is a hijack
Discussed it with my partner last night, and we've decided to:
Borrow £40k on a standard 15 year term, fixed for 5 years.
We will budget for £400 a month (£200 each) to cover the interest (£170), with balance (£230) going into a joint savings account. Anything left over from the £40k loan will also go into this account.
Each year, the savings pot will be used to pay off some capital.
When the 5 year fix ends, at around the time she reaches pension age, we will look at our finances, and decide whether to:
Stick on the variable rate
Fix again
Convert to a Lifetime mortgage.
I feel that converting to a Lifetime Mortgage when she stops working (and only gets the state pension) would be the best option.
We think that sounds like a sensible plan?
The other option would be to borrow nothing, stage all the work over the next 4 or 5 years, and I carry on working to pay for them.
Neither of us are keen on that.
Borrow £40k on a standard 15 year term, fixed for 5 years.
We will budget for £400 a month (£200 each) to cover the interest (£170), with balance (£230) going into a joint savings account. Anything left over from the £40k loan will also go into this account.
Each year, the savings pot will be used to pay off some capital.
When the 5 year fix ends, at around the time she reaches pension age, we will look at our finances, and decide whether to:
Stick on the variable rate
Fix again
Convert to a Lifetime mortgage.
I feel that converting to a Lifetime Mortgage when she stops working (and only gets the state pension) would be the best option.
We think that sounds like a sensible plan?
The other option would be to borrow nothing, stage all the work over the next 4 or 5 years, and I carry on working to pay for them.
Neither of us are keen on that.
OzzyR1 said:
What is the work on the house you are doing?
New windows and door on the front of the houseNew shower room and renovating the bedrooms in the dormer conversion. I've been using the upstairs as my workshop/office/cleaning room for 15 years, and it's in a bit of a state.
Air conditioning.
We've spent about £50k over the past few years updating the downstairs, and want to get everything else done before retiring.
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