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What is a retirement interest-only mortgage (RIO Mortgage)?

Retirement-interest only mortgages (RIO Mortgages) are a relatively new set of products designed to help older borrowers who may struggle to get a standard residential mortgage.

They allow you to borrow against your property and only pay back the interest (and not the loan itself) each month. RIO Mortgages are very similar to standard interest-only mortgages but there are some key differences.

With most RIO mortgages, you only repay the loan when you sell your property, move into residential care or die. But some retirement-interest only mortgages carry terms like a regular mortgage, meaning you either pay them back after a set number of years or when you reach a certain age – 90, for example.

Rather than the onerous steps you have to take to prove your income with a standard residential mortgage, you only have to prove that you can afford the interest. Some retirement interest-only mortgages allow you to repay some capital as well as interest.

This will cut down the size of your loan over time, meaning that more of your property can be passed onto your loved ones.

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RIO Mortgages FAQs

How much can I borrow with a RIO Mortgage?

Who offers RIO Mortgages for older borrowers?

Increasing numbers of mortgage lenders have launched deals specifically aimed at older borrowers, as they begin to recognise that traditional mortgage products may not meet the needs of this demographic. Below are a selection of lenders that now offer this type of mortgage:


Why might you need a mortgage when you’re older?

We are all living and working for longer, but getting hold of a mortgage in your 60s and above can be extremely tough. However, as the list above demonstrates, lenders are increasingly taking a more considered approach when lending to older people.

There are many reasons why older borrowers might want to take out a mortgage:

  • To purchase a retirement property which better suits your needs as you get older.
  • To release cash from your property to top up your pension income.
  • To gift money to a loved one to help them purchase a property.
  • Another big motivation for some older borrowers is to remortgage away from their existing interest-only mortgage.

These deals were very popular before the credit crunch, and allow borrowers to only pay off the interest on their loan every month, ahead of repaying the capital borrowed in full at the end of the mortgage term.  However, thousands of these borrowers have no plan in place for repaying that capital, leaving them with the prospect of having to sell up and downsize unless they can remortgage

Can I get a RIO Mortgage?

Lenders consider two different ages when you apply for a mortgage. The first is your age at the time of application. The other is the age you will be at the end of the mortgage, when the debt will be fully repaid.

In the past, lenders have been uncomfortable about lending to borrowers into their retirement years. This was in part due to the tougher affordability tests lenders have to carry out on borrowers following the credit crunch, which force them to look closely at income and expenditure.

While this situation is improving, as lenders begin to adapt to the fact we are all living and working longer, it’s true to say that many lenders have an upper age cap which they will not consider lending beyond

How can older mortgage borrowers prove their income?

In order to check that you can afford a mortgage in retirement, lenders will carry out a variety of different checks.

These vary between lenders. If you plan to work beyond state pension age, Halifax, for example, will consider your earned income up to the age of 70. But you’ll also need to provide a company pension forecast or annuity statement dated within the last 18 months as well as a state pension statement.

If you are already receiving some form of pension income, you’ll need to provide you latest bank statement too.

With Nationwide, it comes down to how close you are to retirement. If retirement is less than 10 years away, it requires details of both your current and anticipated retirement income, and will then use the lower of those two figures for its affordability calculations.

If retirement is more than 10 years away, your current income is used to calculate affordability, but it requires evidence of your pension planning beyond the state pension, such as a pension statement.

RIO Mortgages v Equity Release

RIO mortgages share some similarities to equity release, in that they both allow you to tap into your property’s value to access cash.

With equity release, you borrow a portion of the property’s value, but are not required to make monthly repayments (although some deals now allow you to do this).

Instead, the debt is repaid once you die or move into long-term care and the property is sold.

These products are typically called ‘lifetime mortgages’. Because you don’t make repayments, the debt grows over time and can erode the value of your property.

This is not the case with a RIO Mortgage. Let’s look at an example.

You own a property worth £200,000. You want to borrow 50% of this, meaning a loan of £100,000. In 15 years’ time, your property is worth £300,000, and you go into care, so the loan needs to be repaid. The interest rate is 5%.

Equity release

Your monthly repayments: £0 Total value of the loan after 15 years: £211,370 How much is left after repaying the loan: £88,630

RIO Mortgage

Your monthly repayments: £417 Total value of the loan after 15 years: £100,000 How much is left after repaying the loan: £200,000 Total amount of interest paid: £75,055

With equity release, there will be less equity in your property to pass onto your family after you’ve died than with a RIO mortgage.  If you are considering equity release, it’s really important that you get advice from an expert such as Mint FS.

Mint Mortgages Services

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The legal bit...

Your home is at risk if you fail to keep up payments on your mortgage or any other loans secured against it. Buy to Let mortgages and Commercial Lending are not usually regulated by the Financial Conduct Authority. Equity release may involve a lifetime mortgage which is secured against your property or a home reversion plan which requires the sale of property for a discounted price. To understand the features and risks, ask for a personalised illustration. You only continue to own your own home with a lifetime mortgage. Equity release may impact the size of your estate and it could affect your entitlement to current and future means-tested benefits. Mint FS Limited , trading as Mint FS , Mint Financial Services and Puzzle Mortgages is an Appointed Representative of New Leaf Distribution Ltd which is authorised and regulated by the Financial Conduct Authority: FCA Number 460421 Mint FS Limited is registered in England and Wales with company number 11993128. Registered Office: Unit 6 The Centurion Centre, Castlegate Business Park, Salisbury, Wiltshire, SP4 6QX. The information contained in this website is subject to UK regulatory regime and is therefore intended for consumers based in the UK.