Retirement Interest Only Mortgages

What are retirement interest only mortgages?

A retirement interest only mortgage or RIO is a mortgage that lets you pay the interest on a monthly basis, without reducing the original amount (capital) you have borrowed. It is only available to people who are over the age of 50 and has been designed to help older borrowers who may struggle to get a standard residential mortgage.

They’re very similar to standard interest only mortgages, but with some key differences. With the majority of retirement interest only mortgages in the UK, you only repay the loan when you sell your property, move into full-time care or pass away.

Similarly to a standard mortgage, you’ll have to prove you can afford the monthly interest repayments. To take out a retirement interest only mortgage, it's worthwhile getting expert advice from an independent qualified mortgage adviser. That’s where the experienced team at Key can help.

Our award-winning service saw us named the Best Later Life Broker by Financial Reporter in 2018 and 2020. We have also been rated excellent on Trustpilot by over 15,000 customers, so you know you’re in good hands. Request a callback from one of our experts today or call 0808 252 9170.

How do retirement interest only mortgages work?

It’s important to consider if a retirement interest only mortgage is right for you.

In March 2018 RIOs, or retirement interest only mortgages, were authorised by the Financial Conduct Authority (FCA) as part of standard mortgages, as they were formerly categorised under equity release. Retirement interest only mortgages can be used for many purposes and, are usually repaid when you or the last remaining applicant either pass away or move into long-term care.

Typically, your house will then be sold and the retirement interest only mortgage provider will take their money from the sale proceeds. The remainder goes to your estate.

How much can I borrow with retirement interest only mortgages

Every lender will have different limits on how much you can borrow against your property.

Other factors lenders will take into consideration when you’re applying for retirement interest only loans are things such as property value, income and loan size. The amount you’re able to borrow will be based upon what you can afford, your property value and your age. Lenders will look at your income and outgoings, as well as pensions, savings and investments.

Use our free mortgage calculator to see how much you may be able to borrow or request a callback from one of our expert mortgage advisers.

Why choose retirement interest only mortgages?

If you thought you were too old for a mortgage or you can’t find a conventional mortgage to meet your needs, we can help you with impartial and tailored advice to help take the stress out of later life borrowing.

As a nation, we’re all living and working for longer than we ever have done, but successfully getting a mortgage when you hit retirement age can often be tough. However, there are lenders out there who are taking a much more considered approach to lending to older people.

You might be looking to take out a retirement interest only mortgage because you want to:

Get a mortgage term extension but are unable to
Buy a retirement property that suits your needs better than your existing home.
Release funds from your property to top up your pension income.
Gift money to loved ones for a variety of reasons.

Specialist advice tailored to you from the experts

Whatever your motivation for looking into RIO mortgages, we tailor our advice to suit your needs and advise on a range of mortgages available to those over 50.

Even if your own bank or building society are unable to offer you a new mortgage or extend your existing loan, our specialist mortgage advisers can search the whole market to find the most suitable retirement interest only mortgage for you. Book an appointment with one of the team today or call 0808 252 9170.

Want to better understand your options before getting in touch? Put your details into our later life mortgage finder to see what could be available to you.

Retirement interest only mortgage interest rates

As with a standard mortgage, the next step is to decide which type of interest rate would most suit you: fixed or variable.

Fixed interest rate

A fixed interest rate means your repayments will be the same for a fixed period, no matter how interest rates look across the mortgage market. This period is normally two years to lifetime, though it varies by mortgage provider.

Variable interest rate

A variable interest rate means the rate you pay could go up or down, depending on such factors, for example, as the Bank of England base rate or the Lenders own standard variable rate. There are a number of variable-rate mortgages you can choose from and they vary by mortgage provider.

What are my options for retirement interest only mortgages?

As an independent advisory service, our mortgage advisers can search the whole market, including specialist lenders, giving you more options when it comes to later life borrowing.

Whether you’re looking for a standard mortgage or retirement interest only mortgages, our friendly expert mortgage advisers can help you choose the option that’s right for you.

Request a callback from a member of the team or use our later life mortgage finder to better understand what could be available to you.

Our retirement interest only mortgage providers

At Key, we work with a number of later life mortgage* providers. Some of these include names such as Leeds Building Society, LiveMore, Marsden Building Society, Hodge, The Nottingham Building Society and Leek United Building Society.

Advantages and disadvantages of retirement interest only mortgages

If you’re looking at your options and aren’t sure if a RIO mortgage is right for you, here are some of the key advantages and disadvantages for you to consider.

Advantages

You’re able to release funds tied up in your home to pay off existing debt.
You may be able to pass on an early inheritance.
You won’t have to downsize to a smaller property.
Your mortgage can be repaid early (although there may be an early repayment charge).

Disadvantages

If you have an existing mortgage, that needs to be repaid first.
You’ll need to prove you can afford the interest repayments through affordability checks.
Your home will usually be sold off to repay the loan when you enter long-term care or pass away.
Your home is at risk if you don’t keep up with repayments.

For RIO and retirement repayment mortgages, these products are available through Key Group and we charge an advice fee of 1.99% of the amount released, subject to a minimum of £1,499, usually payable when the mortgage completes.

Remember a mortgage is secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

Retirement interest only mortgage vs equity release

Although RIO mortgages share some similarities to equity release – they both allow you to access funds tied up in your property – they do have some key differences. With equity release, like any mortgage, you’re essentially borrowing a portion of your property’s value, but don’t necessarily need to make monthly repayments.

For both RIO's and equity release the loan is repaid once you move into long-term care or pass away, and the property is sold to cover this. With a lifetime mortgage, the most popular form of equity release, you don’t typically make repayments and your debt will grow over time and can have a negative impact on the value of your property, however you could opt to make interest repayments with an interest only lifetime mortgage.

Whether you’re considering a RIO or equity release, it’s important to get advice from a qualified expert. Get in touch with the team at Key today to discuss your options further.

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What our customers are saying

Expedited matters with skill and efficiency.

Stanley

My wife and I are approaching retirement and we had a need to reorganise our finances to enable repayment of an outstanding mortgage and credit card debts, as well as providing funding for some improvements to our home. We approached Keys having previously explored their literature on Lifetime Mortgages, and we were then allocated a financial...

Christopher Jeary

We felt very lucky to have Neil Clarke as our key advisor. He answered all our questions and never failed to reply to any e.mails or phone calls promptly. In many ways we feel sorry that we won’t have the need to chat to him anymore, he feels like a friend. He finished our last conversation assuring us that if we needed anything else we could...

Sally Elizabeth Collins

The whole process of getting equity release from my property was quick, efficient and handled professionaly at all stages.

Mrs Levett

Excellent service, especially from Julie Thompson, many thanks.

Glennise Horne

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What is a living inheritance?

A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
For our RIO products we charge an advice fee of 1.99% of the amount released, subject to a minimum of £1,499, usually payable when the mortgage completes.
You should always think carefully before securing a loan against your home.
Key Equity Release offer lifetime mortgages only, which is a loan secured against your home. It will reduce the value of your estate and may affect your entitlement to means-tested benefits.
You have to get expert equity release advice before releasing tax-free cash from your home - please read all our information and make sure it’s right for you.
All of Key Equity Release's lifetime mortgage plans meet the Equity Release Council standards and come with several protections, including the no negative equity guarantee, which means you’ll never owe more than your home’s value.
With a lifetime mortgage there are typically no monthly repayments to make as the loan, plus interest, is repaid when the plan comes to an end.

Page last updated: Thursday 24 June 2021