Interest-only mortgages are more suited to those with a clear strategy for repaying the capital as a lump sum on maturity. They are suitable for older borrowers with assets that they plan to sell in the future, for example. Some lenders will accept the sale of the borrower’s residence as a suitable repayment strategy provided there is sufficient equity for them to downsize.
But as the IMLA points out, proving that payments are affordable for life is an issue for most borrowers.
Lending to older borrowers is not without additional risks. While lenders will always start by checking a borrower’s projected retirement age, plans can change and ill health, including mental incapacity, may hinder their ability to repay a mortgage in later life. As a result, some products are available with an option for lasting power of attorney.
