Interest Only Mortgage Maturing: Options for Over 55s
At Rockhopper Later Life Finance we help customers aged 55 and over whose interest only mortgage is approaching the end of its term without a clear plan for repaying the capital. The Financial Conduct Authority has identified this as one of the largest remaining issues in the UK mortgage market, with hundreds of thousands of borrowers in this position. Options exist for most situations, and the earlier you engage, the broader the options tend to be.
We work with customers whose interest only mortgage is:
- Maturing within the next 12 months and requires a repayment plan
- Has already matured and has been extended by the lender on a short-term basis
- Set to mature in 2 to 5 years’ time, giving time for considered planning
- Previously relied on an endowment that has not performed as projected
- Backed by an investment or pension strategy that no longer fits the plan
- Held with a lender that has withdrawn from the interest only market
- Causing concern because the original repayment plan no longer feels realistic
Interest only mortgages taken out in the 1990s and 2000s often relied on investment vehicles that have not kept pace with expectations. Discovering that the endowment or investment will fall short of the mortgage amount is a shock, and one that often arrives closer to the term end than is helpful. We recognise that customers in this position rarely want to be there, and we work through the options without adding to the pressure.
The options available at the end of an interest only mortgage depend on several factors. Your age matters because it affects which lenders are willing to consider your case and which products are available. Your income matters because some products, particularly RIO mortgages and standard repayment mortgages, require affordability to be demonstrated. The property matters because some lenders will accept properties that others decline. The amount you need to refinance matters because the loan to value percentage affects lender appetite.
Typical refinance routes include: moving to a new term interest only mortgage with a longer term and a revised repayment strategy; converting to a retirement interest only (RIO) mortgage where affordability is based on retirement income and there is no fixed end date; switching to a lifetime mortgage where interest rolls up and there are no required payments; moving to a standard repayment mortgage where your income supports the higher monthly payment; making a partial capital repayment (from savings or downsizing release) and refinancing a smaller balance; or downsizing to a smaller property and clearing the mortgage from the equity released.
The right route depends on your circumstances. A customer with strong pension income who wants to preserve their estate often finds RIO the best fit. A customer with limited income who is comfortable with interest roll-up often finds a lifetime mortgage more appropriate. A customer willing to move may find downsizing the most financially efficient route. There is no single right answer, and our role is to work through the options with you and identify which lender is most likely to accept your case in your preferred format.
Time is a significant factor. Engaging a specialist adviser 12 to 18 months before the mortgage matures gives considerably more options than engaging with only a few months to go. Where your existing lender has already extended the term or put pressure on for a decision, specialist advice is still worthwhile but the timetable is tighter.
The Process
Your first conversation is a calm discussion about your existing mortgage, the maturity date, and your current situation. There is no cost or obligation for this initial call.
We complete a full fact-find and research the options across the main routes (RIO, lifetime mortgage, term interest only refinance, repayment, downsizing). We come back to you with a written recommendation that compares the options honestly rather than steering you toward a single product.
Every case is different. A customer with six years to maturity has time for considered planning; a customer with six months has different options open to them. Our advice always reflects the specific situation including the time available.
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.