A reader has a mortgage fix that ends soon – and they are weighing up their future options
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Is the mortgage market turbulence getting you down? Have you got a mortgage-related question you need answering? Email in, and we will get one of our experts to reply. Nick Mendes, mortgage technical manager at John Charcol, has given his advice to a reader below. If you have a question for our experts, email us at money@theipaper.com.
Question: I took out a 25-year interest-only mortgage in 2004 for £750,000 and planned to repay it by selling a property abroad, but we no longer want to sell it. In 2022 I refinanced onto a five-year interest-only deal that ends in 2027 and must be repaid by October that year. I have inherited £350,000, and while downsizing feels like the logical solution, my husband is older, in poor health and very distressed by the idea of moving. I will be 68 in 2027 with around £4,000 a month in pension income. The mortgage balance would be about £400,000 and our home is worth around £2m. Is it realistic to expect another five-year mortgage at that age and what options do lenders offer someone in my position?
Answer: You are facing a situation that is more common than you might think. Many borrowers who took out interest-only mortgages years ago now find themselves with a large balance, a strong attachment to their home and a repayment deadline approaching.
The important thing to know is that you still have options, and age alone does not prevent you from refinancing.
A growing number of lenders are comfortable lending into and beyond retirement, provided the affordability is clear and the exit strategy makes sense.
For mainstream residential lending, many will consider applications up to age 70 or 75 at the end of the mortgage term, and some building societies go further, offering terms that last to age 80 or even 90 where the borrower’s income is stable and verifiable. In your case, a five-year term ending when you are 73 sits well within what several lenders already permit.
Your pension income will be central to the assessment. A guaranteed income of around £4,000 a month gives you a solid foundation for affordability, especially when set against a relatively modest mortgage balance and significant property equity. Lenders typically take 100 per cent of secure pension income and will run standard affordability tests to ensure the monthly payment is manageable on your retirement income.
With a £400,000 balance on an interest-only basis, payments can remain comparatively low, depending on where rates settle in 2027.
Your loan-to-value (LTV) position is another major strength. At roughly 20 per cent LTV – you own a far bigger portion of your property than the amount you are borrowing on – you are in one of the safest lending brackets, and lenders are far more comfortable extending borrowing when equity is strong.
That means your age becomes less of a barrier because the risk to the lender is minimal. This gives you far more choice than borrowers who are closer to, say, 60 or 70 per cent LTV.
There are, however, important differences between lenders. Some require a clear repayment plan for interest-only borrowing, while others will allow sale of the property as the formal repayment strategy. That might sound circular, but it is often accepted because the balance is small relative to the value of the home, making it a credible long-term exit route.
You are not committing to selling immediately, only demonstrating that when the time comes, the equity is more than sufficient to clear the loan.
If your priority is to remain in your home for as long as possible, there are other forms of later-life lending that may give you even more flexibility.
Certain building societies offer retirement interest-only mortgages that do not have a fixed term. Instead, the loan continues until the property is sold, either when the last borrower moves into long-term care or passes away.
These products assess affordability carefully at the outset but remove the pressure of a hard repayment deadline. They are increasingly popular with homeowners who are asset-rich and income-stable but do not want to be forced into selling earlier than they wish.
You mentioned the emotional aspect of moving, and that is every bit as important as the financial side. Your husband’s reluctance is entirely understandable, and one of the advantages of your situation is that you do not need to make that decision in haste.
Lenders will not require you to move immediately, and several realistic refinancing routes remain open to you. Your inheritance also gives you the option of reducing the balance to make the affordability even stronger if you wish, though you are not obliged to use all of it.
The key is to approach this early. As you get closer to 2027, a broker experienced in later-life lending can map out the lenders most likely to support you and test your affordability across both standard interest-only and retirement-focused products.
With your income, equity position, and the relatively modest borrowing you require, securing a new mortgage at 68 is achievable. You have time, options, and enough financial strength to make a calm, considered decision that protects both your home and your husband’s well-being.