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.
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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.