Later-life lending at 72: retirement interest-only mortgage to clear an expiring interest-only loan

Mrs P from Poole, aged 72 and widowed, held an interest-only mortgage of £118,000 taken jointly with her late husband in 2001. The mortgage was due to end in 8 months with no repayment vehicle in place — the endowment they had relied on had matured short years earlier. Property value £395,000. Sole income: £14,900 State Pension plus £7,500 late husband's occupational pension = £22,400 gross.

Standard residential lenders capped maximum age at 70 or 75 at end of term. With no lump sum and no wish to downsize, the client faced repossession action from her existing lender if a solution could not be arranged before term end. She was adamantly opposed to equity release (roll-up interest) because she wanted to leave the property to her two adult children as inheritance.

• RIO — Lender A — Min age 55, no max age, min income £15k, ICR 125% at pay-rate. 4.79% 5-year fix.
• RIO — Lender B — Min age 55, max 85 at application, secure pension only. 4.94% 5-year fix.
• Term-extension interest-only — Not offered by existing lender beyond age 75.
• Lifetime mortgage (equity release) — Available, but roll-up interest would erode inheritance the client wanted to protect.

We placed the case with Lender A on a RIO at 4.79% fixed for 5 years, 30% LTV. Monthly interest payments of £471 were comfortably affordable against £1,867/month pension income. The existing mortgage was redeemed 6 weeks before term end. No capital ever rolls up — the £118,000 debt stays flat and is repaid from the estate whenever the property is eventually sold, protecting the inheritance the client wanted to leave.

Full offer issued 18 working days after application. Completion 4 weeks later, comfortably ahead of the original term end. The client remained in the family home; her children retained the same inheritance position as before. Broker fee: £299, agreed in writing before application.

• Do not wait until the last 6 months of an interest-only term. RIO applications typically take 6–10 weeks.
• Compare RIO against lifetime mortgage on a whole-of-life-cost basis, not just monthly cost.
• Get children involved early if inheritance is a priority — they usually welcome it.
• Fixing the RIO rate for 5–10 years removes payment-shock risk from a fixed retirement income.