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The Pros and Cons of Retirement Interest-Only Mortgages

The Pros and Cons of Retirement Interest-Only Mortgages

Date: 26 July 2023 | By: Marketing

Retirement Interest-Only mortgages (a form of equity release) have something of a bad reputation. This is because there have been occasions when they’ve been sold without enough clarity or up-to-date knowledge as to how they work.

If you are looking for an equity release product, it’s important to take advice from a specialist mortgage adviser for the most up-to-date information about them.  Retirement Interest-Only mortgages are a great product for those that need them. Here we look at some general pros and cons:


Lower Monthly Repayments: Because this is an interest-only mortgage, you pay the interest on the loan, and nothing else every month.  This results in a lower payment compared to a traditional repayment mortgage. This can be extremely helpful for those on fixed incomes during retirement.

Helping your loved ones now: By releasing equity now, you may be able to give your children their inheritance whilst you are alive and help them onto the property ladder, for example.

Preservation of Capital:

By opting for an interest-only mortgage, you have the potential to save your capital and assets for other purposes.  You might choose to invest, or give them as an inheritance to your chosen beneficiaries.


Some retirement interest-only mortgages come with flexible terms; these terms allow you to make lump sum payments or switch to a repayment mortgage if your circumstances change.

Lifetime Tenure:

Retirement Interest-Only mortgages often come with no fixed end date.  This means that you can stay in their homes for as long as you wish, provided that you continue to meet the mortgage terms.



No Capital Repayment: The main downside of interest-only mortgages is that the original loan amount remains outstanding throughout the mortgage term. This will mean that you aren't building equity in your home through your regular repayments.

Rising Debt: Since the capital isn't being repaid, the total debt owed remains constant or may even increase if interest rates rise. This can lead to a larger repayment obligation over time.

Eligibility Criteria: Retirement interest-only mortgages are typically available to older borrowers with specific age restrictions. Here in the UK, it’s usually over 55s.

Limited Lenders: While the market for retirement interest-only mortgages has been growing, the options may still be limited compared to traditional mortgages.  A whole-of-market broker will have access to these lenders; another reason for not going directly.

Interest Rate Risk: If interest rates rise significantly during the mortgage term, it could result in higher monthly interest payments and so there is potential for some financial strain.

Inheritance Impact: By not repaying the capital, borrowers may reduce the value of the inheritance they leave behind on their death, for their beneficiaries.

To conclude, before you take any steps, please talk to an independent mortgage adviser. They will look at your circumstances, and find the best mortgage for you if it is appropriate to do so.

First Mortgage Solutions is a team of experienced whole-of-market mortgage brokers working with first-time buyers, home movers and retired clients, based in South Wales and working with clients throughout the UK.


*Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.