There are interest only mortgages and interest only lifetime mortgages for retirees. There are some differences between the two products, which is why there is a special section introducing each one. An interest only lifetime mortgage is not built on annuities. It requires a monthly payment of interest, which may also fit the voluntary repayment plan. The loan is outstanding until end of life or move to long term care. Interest only mortgages have a time limit for repayment to be made and often work on annuities.

The Structure

When this type of loan is taken out, the homeowner receives a lump sum in cash. They will have up to a certain age or time frame to repay the loan. For retirement products the interest only mortgage usually has to be repaid by age 75 regardless of when it was taken out. Some providers only allow the mortgage to be outstanding for 15 years. These are areas that require more study when speaking with an independent agent to ensure you are looking at a retirement interest only mortgage versus a standard interest only mortgage.

Providers feel by age 75 most retirees will not have significant funds to keep paying interest to the loan, thus they like the loan to be repaid. The nice thing about interest only mortgages for retirees is being able to roll the payment over into a roll-up lifetime mortgage. It pays the interest only mortgage off and gives the homeowner up until death to repay the loan.

This type of loan also has an annuity assigned to it. The annuity is usually an account that is paid into as a way to repay the balloon payment at the end. For some companies these are more like mortgages for pensioners because it uses a pension scheme to create the annuity for repayment.

Advantages of Interest Only Mortgages

The main advantage of an interest only mortgage is keeping the principle balance the same. With an annuity attached to the account is also makes it possible to repay the loan at the correct time.

Disadvantages of Interest Only Mortgages

These loans are harder and harder to find in the current market. They are expensive because an account is paid into as well as needing to repay interest. Most interest only mortgages are also set up based on income qualifications making it difficult to qualify for as one ages.

The fact that a balloon payment is usually required makes it another disadvantage since it may not last the entire lifetime. The good part is that it can be a loan that is rolled over when the term ends at 75. It would become a lifetime mortgage with compounding interest if the entire sum cannot be repaid. While it is not a product that works for everyone, it is a solution to learn more about. There are a select few providers currently offering this type of interest only mortgage to help homeowners live out a comfortable retirement. Speaking with an independent equity release agent can help homeowners obtain a more thorough examination of differences between interest only and interest only lifetime.

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