Retirement Interest-Only Mortgages

Suitable for:

Borrowers aged 55 or over who are looking to purchase or release some equity from their current main residence. For joint applications, both applicants must be aged at least 55. There’s no maximum age.

It’s important to note that the capital is only repaid from the sale of the property on death or moving into care.

It’s also important to note that the amount borrowed won’t decrease unless payment over and above usual interest payments are made. The section below on Early Repayment Charges has all the details.

Loan amount and loan to value

The minimum loan size is £30,000 up to a maximum of £300,000.

We may consider loans up to £500,000 by exception.

We’ll lend up to a maximum of 50% of the property valuation, as assessed by an independent valuer, or purchase price (whichever is lower)

Property

Retirement Interest-Only Mortgages are available for owner occupied residential properties. All mortgages are subject to a suitable property valuation.

Suitable for:

It’s important to note that the capital is only repaid from the sale of the property on death or moving into care.

Loan amount and loan to value

The minimum loan size is £30,000 up to a maximum of £300,000.

We may consider loans up to £500,000 by exception.

We’ll lend up to a maximum of 50% of the property valuation, as assessed by an independent valuer, or purchase price (whichever is lower)

Property

Retirement Interest-Only Mortgages are available for owner occupied residential properties. All mortgages are subject to a suitable property valuation.

Suitable for:

It’s important to note that the capital is only repaid from the sale of the property on death or moving into care.

Loan amount and loan to value

The minimum loan size is £30,000 up to a maximum of £300,000.

We may consider loans up to £500,000 by exception.

We’ll lend up to a maximum of 50% of the property valuation, as assessed by an independent valuer, or purchase price (whichever is lower)

Property

Retirement Interest-Only Mortgages are available for owner occupied residential properties. All mortgages are subject to a suitable property valuation.

Flexible underwriting means we assess all applications on an individual basis and based on affordability. We’ll assess net income and outgoings to make sure that the mortgage is affordable now and in the future, whether working or retired.

The maximum we can lend is generally determined by your income, which can include a pension as well as the value of the property.
Any existing financial commitments will also be taken into consideration when affordability is calculated.

Please note that for joint applications the last survivor needs to be able to show they can manage the monthly mortgage payments.
If the property is in joint occupancy we’ll not lend in a sole name. Both occupiers should be party to the mortgage and fit the age and income requirements.

If we’re unable to offer a Retirement Interest-Only Mortgage, speak to your Business Development Manager for other potential options.

Retirement Interest-Only Remortgage Incentives

Valuation Cost

A valuation of the property is needed as part of the mortgage application. The cost of this will be paid by Scottish Building Society.

Contribution to Legal fees

If remortgaging to Scottish Building Society's Retirement Interest-Only Mortgage, the applicant’s solicitors will also act for the Society. The Society will contribute £250 towards the cost of this.

Repayment Options

Our Retirement Interest-Only Mortgage is set up on an interest only basis with no repayment vehicle being required.

The mortgage is normally not repayable until the mortgage holder (or the last survivor if it is a joint application) has died, moved into long term care or moved home and the property is sold.

The mortgage can be repaid at any time, subject to relevant Early Repayment Charges. The borrower should let us know if they intend to move, or have moved, into long-term care. It is the estate executor’s responsibility to inform us in the event of death.

A monthly payment is required to cover the interest on the mortgage. By doing this the capital balance of the mortgage will never increase.

It’s important to remember that the amount borrowed won’t decrease unless payment over and above the usual interest payments is made. The section below on Early Repayment Charges has all the details.

Interest Rates

Check our current interest rates.

Security

A Standard Security (Scotland) / First Legal Charge (England) will be taken over the property being purchased as security for the mortgage borrowing.

Early Repayment Charges

If overpayments of 10% or more of the loan amount are made in any 12 month rolling period during the initial period, and depending on which mortgage your customer has, the charges apply as follows:

For our 2-year mortgage, the charge will be equivalent to 3% of the outstanding balance amount in year 1, and 2% in year 2
For our 5-year mortgage, the charge will be:

o 5% of the outstanding balance in the 1st year

o 4% of the outstanding balance in the 2nd year

o 3% of the outstanding balance in years 3 & 4

o 2% of the outstanding balance in year 5

After the initial period, the Society will not make an early repayment charge if the mortgage is on Standard Variable Rate and is repaid. However, there will be certain redemption fees that will need to be paid (see our mortgage product rates leaflet for more information).

Insurance

We’ll need evidence that buildings insurance for the property is in place before we can release funds.

Packaging requirements

Check our packaging requirements for full details of documents needed for mortgage applications.

Legal Advice
Scottish Building Society require customers to receive Independent Legal Advice (ILA) in connection with RIO mortgages. Scottish Building Society do not cover the cost of ILA.

Legal advice associated with RIO mortgages may attract additional costs over and above solicitors standard charges.

How long does it take to arrange a Retirement Interest-Only Mortgage?

It usually takes about eight weeks for you to release funds from when we receive the application. If the mortgage is to provide a cash sum, this will be paid via the applicant’s legal adviser.

Moving home

This mortgage can be moved to a new property if the application satisfies our normal lending criteria. If the new property is of a lower value, we may ask for part of the outstanding mortgage balance to be repaid.

Change of circumstances

If someone else moves into the mortgage property, for example a family member, the owner must obtain the permission of Scottish Building Society before they move in. Similarly, if ownership of the property changes from single to joint (for example, through marriage), the mortgage may become repayable. Scottish Building Society will assess each change of ownership individually.

Increased borrowing in the future

If income and/or the value of the mortgaged property goes up significantly, we’ll consider lending more in the future.

Tax and entitlement to benefits

A cash lump sum could affect tax liabilities so it’s a good idea to get more information and/or advice on tax issues before taking out a Retirement Interest-Only mortgage.

The law relating to taxation could change in the future and HM Revenue & Customs can give more details how the borrower’s tax position may be affected.

A cash lump sum could also affect entitlement to welfare benefits (such as pension credit and housing benefit) depending on financial circumstances.
Contact the Department for Work & Pensions or the Citizens Advice Bureau from more information on welfare benefits issues.

FOR INTERMEDIARY USE ONLY

Retirement Interest-Only Mortgages

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