Retirement Interest Only

Later Life Interest Only Mortgage (RIO)

A retirement interest-only (RIO) mortgage is very similar to a standard interest-only mortgage, with two key differences.

1. The loan is usually only paid off when you die, move into long term care or sell the house.
2. You only have to prove you can afford the monthly interest repayments.

While there’s no minimum age requirement, retirement interest-only mortgages are generally aimed at older borrowers, such as the over 55s, over 60s and pensioners who might find them easier to qualify for than a typical interest-only mortgage.

In this way, they’re similar to types of equity release schemes like a lifetime mortgage, where you pay-off the original capital and possibly any interest when you die or move into long-term care.

However, with a lifetime mortgage you will either:

• have a larger amount to repay at the end because there are no monthly repayments and the interest is rolled-up and added to the total loan value, or
• make monthly interest payments and ad-hoc capital repayments during the term of the mortgage. This reduces or stops the effect of interest roll-up, but involves higher monthly repayments.

But, with a retirement interest-only mortgage, you only pay off the interest each month, so your monthly repayments will be lower.

This means you should be more likely to have something to pass on as an inheritance, or pay for long-term care.