Pension-Backed Interest Only Mortgages
At Rockhopper Later Life Finance we help customers aged 55 and over who want an interest only mortgage where the plan to repay the capital is linked to a pension. With an interest only mortgage you pay the interest each month and repay the capital at the end of the term, often from a defined repayment strategy. A pension can form part of that strategy where the lender accepts it.
We work with customers who are:
- Have an existing interest only mortgage approaching the end of its term
- Plan to repay the capital using tax-free cash that may be available from a pension
- Want to keep monthly payments lower than a full repayment mortgage
- Are unsure whether a lender will accept a pension as a repayment strategy
- Hold a mix of pension types and want to understand how lenders view them
- Are comparing an interest only mortgage with a retirement interest only mortgage
- Want to understand the risks of relying on a pension to repay a mortgage
Relying on a pension to repay a mortgage can feel uncertain, and lenders assess these arrangements carefully. We explain how lenders tend to view pension-based repayment strategies and what evidence they may ask for, so that you can plan with a clear picture of what is involved.
With an interest only mortgage, your monthly payments cover only the interest, so the capital you borrowed remains outstanding until the end of the term. At that point the capital must be repaid in full. The way you intend to repay it is known as the repayment strategy, and the lender will want to be satisfied it is credible.
Where a pension is part of the strategy, lenders may consider tax-free cash that could become available from the pension, or the income it could provide. Lenders differ in how much of a pension they will take into account and what evidence they require, such as a recent pension statement.
Pensions can rise and fall in value, and the rules that govern them can change. Relying on a pension to repay a mortgage carries the risk that the amount available at the end of the term is less than expected. For this reason a pension-backed interest only mortgage is not suitable for everyone.
We provide mortgage advice. We do not provide pension advice, and decisions about your pension should be taken with a qualified pension specialist. Where another route may suit you better, such as a retirement interest only mortgage or a repayment mortgage, your adviser will discuss that with you.
The Process
Your first conversation is an informal discussion about your mortgage, your intended repayment strategy, and your circumstances. The more detail you can share about your pension arrangements, the sooner we can identify which lenders may be suitable.
We complete a full fact-find and assess how lenders are likely to view your repayment strategy. Where pension decisions are involved, we may suggest you speak to a pension specialist alongside our mortgage advice. We then provide a written recommendation.
Every set of circumstances is different. We explain the risks as well as the options so that you can make a considered decision at your own pace.
Speak to an Interest Only Specialist
Call 0203 621 5696
Lines open 9am to 5pm Monday to Friday. Alternatively, complete the enquiry form and we will call you back at a time that suits you.