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A Guide to Retirement Interest Only Mortgages

Looking for the perfect mortgage as you reach your older years can be difficult. RIO mortgages or retirement interest-only mortgages can be a fantastic solution! Read on to find out more!

For those of you who are wondering how retirement interest-only mortgages might affect you, then you’re in the right place! Over this article, we’re going to explain to you what a retirement interest-only mortgage is, whether you’re going to be eligible for one and, ultimately, if it’s the right option for you. So, read on if you want to know more!

What is a retirement interest only mortgage?

In essence, there’s not too much difference between retirement interest-only mortgages and standard interest-only mortgages. This basically means that throughout the mortgage term, you’ll only have to pay the interest amount per month. Then at the end of your mortgage term, you can repay the capital – as opposed to standard repayment mortgages where you pay a contribution of the amount outstanding plus the interest dues in monthly repayments. Basically, if you borrow £100,000 you literally rent the money & at the end of the term you have to give the £100,000 back. On a repayment mortgage you pay the interest & a bit of the capital so, at the end of the term you have cleared the £100,000 in full. The advantage of an interest only mortgage if you are wondering is that they are agreat deal cheaper per month as you are not repaying any of the capital.

What the ‘retirement’ component means is that the mortgage has no end date. You will continue to pay back interest on the amount that you borrow until you pass away or go into a care home. Then, once this happens you will pay back the original amount borrowed to your lender by selling your home.

Why should you go for an interest only retirement mortgage?

The truth is that retirement interest-only mortgages can be a great option for you. Especially those of you who are involved with interest-only mortgages with no repayment strategy to pay back the capital at the end of your mortgage term.

By involving yourself with a retirement interest-only mortgage, this will allow you to carry on paying your interest only amounts until you either pass away or go into a care home. Then your lender will take the rest of their money back by you having your house sold. This can provide a great option for borrowers as it will not mean that your mortgage repayments are extortionate due to your mortgage term being reduced as a result of your age.

In the past, retirement interest-only mortgages had been put under the same umbrella as equity release. With regulators calling them the same as any other lifetime mortgage. For those of you who don’t know what this is, listen up. Equity release is essentially when you boost your own capital by releasing some of the equity that you have in your home.

Luckily for you, retirement interest-only mortgages are much more simple than releasing equity in your home! This is because they require a fare less thorough sales process and you don’t need anywhere near as many advanced qualifications before the property is sold.

Do all lenders offer retirement interest only mortgages? 

The good thing here is that we expect retirement interest-only mortgages to rise in popularity. Though, this should mean that there would be some small differences that are being offered by the different mortgage lenders. Therefore, we can’t emphasise enough that you do your research and understand what the differences are between the products that are available!

This is where we step in! At Mortgages Online, we compare thousands of deals from loads of different lenders so that we can help you get the best retirement interest only mortgage for you! So, as well comparing all of those mortgage deals, we have your best interests at heart and don’t want you to get fooled by a lender who might offer you extortionate rates. We’re also going to make the process of comparing lenders way easier for you so that you get a lender that is going to provide you with the tools you need to commit to such a long-term payment.

What else should I be aware of regarding retirement interest only mortgages?

Like we’ve just said, retirement interest-only mortgages are going to be a long-term commitment so it’s going to be important that your lender knows about your broader finances. This isn’t just a boring formality but it’s going to be absolutely essential to make sure that you don’t go into a deal that you won’t be able to afford.

When your affordability is being assessed your income is also going to be taken account. Here, lenders will look at your income post and pre-retirement and then base their lending on the lower of these two amounts. As well as this, for joint borrowers, a lot of lenders look at the income of the lowest earner.

How can we help you at Mortgages Online?

At Mortgages Online we can help find the right lender for you! Our team of experts have a wealth of experience in the property market, who know the ins and outs of retirement interest-only mortgages and how to advise our customers.  This means that we can help compare the multitude of deals and lenders out there on the market until we find the right one for you! What’s more is that we’re completely free to use so no credit card or payment needed!

At MO, we not only offer our customers mortgages but life insurance and home insurance too!


Laura Waller

Laura Waller has been working in the mortgages industry since 2013, joining an independent brokerage in Essex. Laura has CeMAP 2 & 3 – Certificates in Mortgages Advice and Practice. Since then Laura oversees marketing for Mortgages Online, using her experience and expertise to write articles and blogs about mortgages and related topics.

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