Are you a Baby Boomer with an Interest Only Mortgage?
There are alternatives to paying off your mortgage when the term ends...
Mortgage debt is not such a bad thing, providing you have the income and/or assets to continue making the monthly payments. Unfortunately, most lenders want their money back as you come to the end of the term, which is usually set around or at retirement. Meaning whether you can comfortably afford to continue paying past your retirement age, is moot.
We have made the distinction between Retirement Interest Only Mortgages (RIO) and Equity Release in the summary to the later life section. Suffice to say a RIO loan is a mortgage and whilst it can run a long time past normal retirement dates, in some cases up to age 95, in theory it still has to be repaid and you have to have income in retirement to be able to qualify.
We have access to an increasing number of specialist lenders who will allow you to have a RIO mortgage, subject to certain criteria being met. These are mortgages, not equity release, so normal mortgage terms apply, meaning income multiples determine how much you can borrow, you will have monthly interest payments to make, and at the end of term a balance to be repaid. The market is still changing though and products that convert to Equity Release, at a certain age, are also becoming available.
Use your hard-earned capital to pay off the debt if you wish, but at least be aware that you could have options. A mortgage debt might also be a useful way to mitigate an inheritance tax liability, if appropriate.
As you can see an interesting market but one where you have to take advice, to take advantage.
Equity release will reduce the value of your estate and can affect your eligibility for means tested benefits.
Your home may be repossessed if you do not keep up repayments on your mortgage.