Owning a home is a dream come true; paying a capital & repayment mortgage in retirement however can be a nightmare for most pensioners. Certain organisations offer mortgage plans where you only pay interest, which makes it easier for you as a home owner to make the monthly payments. Pensioner mortgages are therefore becoming increasingly popular and the interest only lifetime mortgage route seems to be the key.

Features of the interest only mortgage Money lenders assign a period of years for an interest only mortgage plan. You as a borrower are required to make monthly payments on the interest over the estimated term on your loan. The term is estimated as the plan will continue for the remainder of one's life & as yet no one can accurately judge what life expectancy is for anyone!

This basically means that you do not have to pay any money off the principle amount; nevertheless you are repaying the interest generated by the charge levied on the capital each month. This ensures the capital element will always remain constant, providing payments are maintained.

However, until recent regulations changed on mortgage lenders providing their customers with an interest only mortgage, there may be some people trapped between the old & new regimes. The issues arising here are what happens when one needs to take additional funds via a further advance or moving house?

What of the past?
Many people have previously been granted an interest only mortgage running well into retirement with no repayment vehicle in place. However, from experience those same mortgagors now needing amendments to this plan find they have to adapt to the new regime of the mortgage lender. This creates a major problem.

Under the new regulations, the client usually must have to pay off the new mortgage by the time they are 75 & unless they offer an interest only lifetime mortgage then it must also be on a capital & repayment basis. Difficulties therefore will arise when someone age 65 then has to pay off a £50,000 mortgage by the time they are 75! Affordability will be therefore be the issue as monthly payments of paying off £50,000 over 10 years will be outside the realms of most pensioners.

Next we discuss the interest only mortgage options available to pensioners with mortgages that now need to meet their future retirement objectives.