Term Interest Only for Over 50's
Awarded by the 2023 Mortgage Broker of the Year for later life lending, we understand that finding the right mortgage path evolves as you get older.
A Term Interest Only (TIO), often called a Later Life Mortgage, is a home loan with a fixed, predetermined duration designed specifically for clients aged 50 and over.
The main distinction between a Later Life Mortgage and a Retirement Interest Only (RIO) mortgage lies in the income accepted and the length of the loan:
Earned Income Flexibility: Unlike a standard RIO, you can factor in active employment or self-employment earnings alongside your current or projected pension income. The lender will review your working income to ensure it is stable and sustainable before factoring it into their assessment.
Defined Loan Term: This mortgage does not run indefinitely. It comes with a fixed expiration date and must be fully repaid by a set age (typically by the time you reach 80).
For joint applications, lenders can assess the combined incomes of both partners to determine maximum borrowing power.
Because a Term Interest Only mortgage has a definitive end date, you must demonstrate a clear, reliable strategy to repay the capital balance in full. You can select one, or a combination, of the following repayment pathways:
Downsizing: Selling your primary home at the end of the term and moving into a smaller, more manageable property.
Selling other real estate: Liquidating secondary homes, buy-to-let properties, or other land assets you own.
Investments and Pensions: Utilising matured investments, cashing in endowments, or taking a tax-free cash lump sum from your pension pot.
A Note on Affordability: If you choose to use an active investment plan as your repayment strategy, the lender may factor the ongoing costs of maintaining that investment into your overall affordability assessment
Term Interest Only
You have the flexibility to select a single repayment method or blend a combination of the strategies outlined above to clear the final balance.
It is worth noting that if you rely on an active investment plan to pay off the capital, the ongoing cost of maintaining that investment may be factored into the lender’s overall assessment of your monthly affordability.
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While these later-life loans are predominantly set up on an interest-only basis, you do have the option to structure them as a traditional capital repayment mortgage.
However, the lender will rigorously evaluate your financial circumstances to ensure safety; if they decide that the higher monthly costs of a repayment structure would put your budget under too much strain, they may require you to proceed on an interest-only basis instead.
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So if you’re looking for an award winning later life adviser approved by the Equity Release Council then contact us today.
