"> What is a Retirement Interest Only mortgage and how does it work?
What is a Retirement Interest Only (RIO) mortgage and how does it work?

What is a Retirement Interest Only (RIO) mortgage and how does it work?

The mortgage market is always changing to reflect society and one of the starkest transformations we have seen in recent years is the growth of the later life lending market. According to recent research by the Ipswich Building Society, more than 60 lenders now offer later life lending products such as Retirement Interest Only (RIO) mortgages[i].

Despite this fact, almost two thirds (60%) of over 50s say that they have fewer mortgage providers available to them compared to younger mortgage applicants[ii], so there’s a gap in perception and reality which needs to be addressed. Perhaps part of this is due to the fact that RIO mortgages remain relatively little-known despite being reclassified by the Financial Conduct Authority nearly two years ago[iii] in order to make them more accessible to the market.

What is a RIO mortgage?

In its simplest terms, a RIO mortgage allows over 55s to take out an interest only mortgage with no fixed end date and a commitment to using their home as the repayment vehicle for the loan. People taking out a RIO mortgage only need to prove that they can cover their monthly interest payments, meaning they are often much more accessible to those on a retirement income. They’re also less detailed in the process than equity release[iv] and therefore can be a good option for people who are either in retirement or approaching retirement age.

Am I eligible for a RIO mortgage?

The best way to find out is to discuss your situation with a professional. As leaders in large and complex lending, we only employ experts and a quarter of our team are qualified by the Equity Release Council. That means that, as well as advising on RIO lending, they can also give you a wider picture of the market and outline your options for Equity Release.

What if a RIO mortgage isn’t right for me?

The beauty of working with largemortgageloans.com is that we take an individual approach to every single case. There is no ‘one size fits all’ in our mindset. If a RIO mortgage or Equity Release product isn’t the right option for you, there are bespoke or hybrid mortgages we can seek to tailor using our network of contacts across 200 lenders in private banks, boutique lenders and challenger banks.

If you would like to discuss your options, please don’t hesitate to get in touch for a free and confidential chat with one of our expert advisers.

Alternatively, if you would like more information about later life lending DOWNLOAD our handy guide.

[i] https://www.mortgagefinancegazette.com/lending-news/equity-release/older-people-incorrectly-perceive-not-eligible-mortgage-14-02-2020/

[ii] https://www.mortgageintroducer.com/growth-in-later-life-market-contradicts-older-borrowers-perceptions

[iii] https://www.mortgagestrategy.co.uk/news/retirement-interest-only/

[iv] https://www.mortgagestrategy.co.uk/news/retirement-interest-only/

A lifetime mortgage is a loan secured against your home. Think carefully before securing other debts against your home. Your home or property may be repossessed if you do not keep up the repayments on your mortgage.

Equity release will reduce the value of your estate and may affect your entitlement to means tested benefits. Home reversion plans and lifetime mortgages are complex products. To understand the features and risks, ask for a personalised illustration. If you are in doubt, seek independent legal and financial advice. 

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