Retirement Interest Only mortgages

Your guide to Retirement Interest Only mortgages at The Cambridge

We’re proud to have supported older borrowers for many years so it felt fitting for us to support you into retirement too. The decisions you make about your mortgage are some of the most important financial choices you will ever make – that’s why The Cambridge are here to support you along the way. Here we provide you with all the information you need to know about a Retirement Interest Only Mortgage.

It’s important you take the time to read the information provided on this page as there’s lots to consider. 

 

Retirement Interest Only Mortgages explained

If you’re not familiar with a Retirement Interest Only Mortgage, no problem – all is explained here.

A Retirement Interest Only Mortgage allows you to borrow against your property and only pay back the interest incurred on the loan each month. 

Unlike with some other retirement mortgage options, the interest isn’t added to the loan. Each month you make a payment which covers the interest of your loan – this is all that will be repayable each month for the lifetime of your mortgage.

You’ll only repay your loan from The Cambridge in full in one of the following circumstances. These are known as significant life events:

1. Should the homeowner(s) pass away

2. When the property is sold

3. Where the homeowner leaves the property for more than six months, such as moving into residential care or with family

Because the interest is paid every month the loan amount will not increase, giving you certainty of the amount that will need to be repaid when the mortgage ends.

 

The flexibility to repay your loan early 

At The Cambridge there are no fees or early repayment charges should you choose to repay your loan early. You can overpay monthly, which will reduce the size of your loan over time, or if you prefer you can choose to repay the loan in full.

 

The choice is yours

When it comes to lending into retirement there’s a range of different plans and products to choose from. They all have their pros and cons, however choosing the right product will depend entirely on your personal situation.

The Cambridge cannot advise on these other mortgages but we do suggest speaking to a Financial Adviser before committing to a Retirement Interest Only Mortgage. It will help you decide whether the product is right for you and if it suits your lifestyle. 

 

Why might a Retirement Interest Only Mortgage be right for you?

You may be coming to the end of your current interest only deal with The Cambridge or another lender.

If you’ve no longer got your repayment plan in place or don’t want to swallow up your savings then a Retirement Interest Only Mortgage may be an option you want to consider.

You own your property but want to enrich your life using the value of your property

If you want a lump sum to help make your retirement more enjoyable then releasing money on an interest only basis could be an option.

You want to free up finances to pass on to children or grandchildren, without the need to downsize

A Retirement Interest Only Mortgage could enable you to take advantage of the value invested in your property to help those close to you buy their first home.

You’d like to remain independent in your own home for longer

This could include home extensions or property changes such as converting a house for downstairs living, to make sure you’re equipped later on in life. Or maybe you just want that dream kitchen 

 

What you need to know before applying for a Retirement Interest Only Mortgage?

It’s important you take the time to read through the points below. There’s a lot to consider and there are actions you’ll need to take before you apply for a Retirement Interest Only Mortgage.

1. With a Retirement Interest Only Mortgage, you’ll be in receipt of a cash lump sum. This may affect your tax position (both during your lifetime and on your passing). This may include your pension and / or entitlement to benefits. The Cambridge are unable to advise you on this.

The Cambridge recommend that you take independent legal, financial and tax advice prior to applying for this loan.

2. A Retirement Interest Only Mortgage is available for joint applicants. In this instance both must independently be able to demonstrate that the interest payments are affordable for the lifetime of the mortgage. We’ll assess affordability based on your forecast retirement income(s).

If you plan to withdraw lump sums from your pension fund, you’ll need to take into consideration your monthly interest payments. The Cambridge recommends that you take independent financial advice on your pension income, from Citizens Advice offering Pension Wise guidance for example, and consider the ability of a surviving spouse to pay the loan.

3. A Retirement Interest Only Mortgage will be repaid on the sale of the property. You may want to discuss your plans with those who will be affected by your decision – this could be loved ones you want to leave a gift in your will for example.

The Cambridge recommend setting up a Lasting Power of Attorney (LPA) and making a will.

4. You’ll be unable to sublet or lease any part of the property during the lifetime of the mortgage. This could include allowing lodgers and any short-term letting arrangements.

The Cambridge recommend that you take legal advice on the implications of doing this.

5. We’ll calculate the total amount payable on your Retirement Interest Only Mortgage using a term of 120 years. This does not impact your monthly payments or when the term ends. A Retirement Interest Only Mortgage doesn't have a set end date and carries on until a specified life event occurs, such as going into long-term care or when you (or for joint borrowers, the surviving borrower) pass away. This allows you to remain in your property until the life event occurs.

The Cambridge recommend speaking to your Mortgage Adviser if you’d like more information.

 

Useful information for you and your family

Here are some sources of information that you and your family may find useful to support your decision as to whether a Retirement Interest Only Mortgage is right for you:

Citizens Advice
Citizens Advice provide free, independent and confidential advice on legal and money matters. 

HMRC
The UK’s tax, payments and customs authority. You’ll be able to find more information on how a Retirement Interest Only Mortgage may affect your benefits or pension. 

Lasting Power of Attorney (LPA)
An LPA is a legal document that lets you appoint one or more people (known as ‘attorneys’) to help you make decisions or to make decisions on your behalf if you have an accident or an illness, for example.

 

We’re always ready to help

We hope we’ve answered many of your questions. Your Mortgage Adviser will be pleased to help with anything else that’s on your mind alternatively email us at thecambridge@cambridgebs.co.uk or call us today 0345 601 3344.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE