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Mortgage Advisor & Director
What is a Retirement Interest-Only (RIO) mortgage?
A Retirement Interest-Only mortgage is a type of lifetime mortgage designed to help older borrowers who may struggle to get a standard residential mortgage.
With a Retirement Interest-Only mortgage, you pay off the loan when you die, move into long-term care or sell the house, and only have to demonstrate you can afford monthly interest repayments.
While there is typically no minimum age requirement, Retirement Interest-Only mortgages are aimed at older borrowers, whose income is more likely to qualify for interest-only payments. These mortgage products are similar to lifetime equity release options; however, with a Retirement Interest-Only mortgage, you only repay the interest each month, so your monthly repayments are lower.
How does a Retirement Interest-Only mortgage work?
With a Retirement Interest-Only mortgage, there are two parts to pay off:
- The interest
- The outstanding capital
During the mortgage term, you will only make monthly repayments on the interest of the loan, and the outstanding capital part of the mortgage is paid off when you die, move into long term care or sell the property.
Are Retirement Interest-Only mortgages a good idea?
There are several benefits to retirement interest-only mortgages:
There is no need for you to demonstrate a plan for repaying the capital part of the mortgage.
You are more likely to have something to pass on as an inheritance
The interest is not rolled-up (compounded) like with equity release mortgages
You can remain in your home, with no need to move or downsize.
The term of the loan is not fixed
Retirement interest-only mortgages are generally more cost-effective than most Lifetime mortgages
You can use the equity in your home to pay off existing debt
What are the disadvantages of Retirement Interest-Only Mortgages?
There are also a few drawbacks to getting an RIO mortgage.
You will need to demonstrate that you can afford the interest-only monthly repayments
Your home will be sold to repay the loan when you die or start long-term care.
If you cannot keep up monthly repayments, your home is at risk of repossession.
The Loan to Value ratio and your retirement income will determine how much you can borrow.
How can I get a Retirement Interest-Only mortgage?
These mortgage products can be complicated, and it is a big decision to get a mortgage later in life.
For this reason, we would recommend using an experienced broker to explore your options. At Teito, we have helped many later life borrowers to access finance that is right for them. We work with hundreds of lenders to find you the right mortgage.
Start today by completing our simple online form, and we promise to make your mortgage journey as stress-free and straightforward as possible.
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Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.
Last updated 29 February 2024