More retirement interest-only mortgages (RIOs) are available than ever before, giving older homeowners a new way to borrow. But is this new type of interest-only product right for you?
Like traditional , RIOs require you to pay back just the interest each month, instead of the interest and part of the actual mortgage balance. In most cases, the loan is repaid when you die or move into long-term care.
With the number of retirement interest-only mortgage products growing rapidly, we take a look at who RIOs work best for, and whether you should consider one for yourself.
Just six months later, in February 2019, financial data provider Moneyfacts said there were 38 RIO products available from 12 lenders.
Since then, the market has continued to grow, with at least four more lenders launching RIOs and many of them expanding their retirement mortgage offerings.
And it's not just RIOs specifically that are growing. Many lenders are making their criteria friendlier to older borrowers, launching retirement-focused and , and creating even more options for homeowners in retirement.
Which? analysis of Moneyfacts data from this week shows there are 141 mortgage products specifically for borrowers aged 50 and over.
If you're in or approaching retirement, there are a number of reasons a RIO might be a good option for you.
Homeowners who are yet to pay off their current mortgages can benefit from remortgaging to a RIO.
Since your retirement income is likely to be less than your working income, a RIO's lower monthly payments could be more accommodating to your circumstances.
In the next five years, hundreds of thousands of interest-only mortgages will come to term, leaving many homeowners with bills for the full purchase price of their homes.
Thousands will be unable to pay those bills, and many will be too old to remortgage to a traditional repayment mortgage, leading to what many have called an interest-only mortgage 'crisis'.
Since they're open to older customers, and allow you to repay your loan through the sale of your home, RIOs could offer a lifeline to people in this difficult situation.
Many homeowners take out RIOs to pay for renovation projects, such as general home improvement or adapting their homes for reduced mobility.
Most RIOs allow fee-free overpayments after a certain point, meaning if you have the money, you can pay off your mortgage early and avoid selling your home at the end of the term.
Check with your lender first, though, as your particular deal may have early repayment charges (ERCs), which could make settling early expensive.
RIOs might sound great so far, but there are a few things you should be aware of before you apply for one.
The table below has a snapshot of the RIO deals offering the best rates at the moment, although with mortgage providers launching retirement products on a regular basis, there could well be more deals available when you come to apply.
You shouldn't choose a mortgage based on rates alone. Product fees, early repayment charges, customer service and your future plans should all form part of your decision too.
The number of RIOs is growing, and so is the range of product types that you can potentially choose from.
It can be a bit of a minefield, and it's worth talking to a whole-of-market broker who can advise you on the best option for your personal situation.