The main difference between the two is with a RIO you only pay the interest each month, meanwhile with a retirement repayment mortgage, you can choose a mortgage option where your monthly repayment contributes towards both the capital and the interest.
As a result, the monthly repayments for a capital and interest mortgage are usually higher than that of a RIO.
However, a RIO is designed to last for the rest of your life, while a retirement repayment mortgage has a set end date. Meaning once you reach that date, after making all of your scheduled repayments, you’re mortgage-free - allowing you to pass on more of your property wealth to your beneficiaries.
Because of this, the overall cost of borrowing for a retirement repayment mortgage is usually lower than that of a RIO. So, while you typically pay more monthly towards a capital and interest retirement repayment mortgage, in the long run, it’s usually a cheaper borrowing option than a RIO; provided you can commit to the higher monthly outgoing.
Whether you’re considering a RIO, retirement repayment or a lifetime mortgage, it’s important to get advice from a qualified expert. Get in touch with the team at Key today to discuss your options further.
Back to "What's in this guide?"