Retirement Interest Only Mortgages
Retirement interest only mortgages (RIO’s) are a new option for wealthier homeowners looking to release funds tied up in their home. They are now gaining favour with a growing number of lenders, said one market insider.
These mortgages work in a similar way to standard interest-only deals but there’s a key difference – you don’t have to repay your loan capital until you sell the property, move into long-term care or pass away.
What is a RIO?
A retirement interest only mortgage is a home loan that’s available to people over 55. They work in a similar way to equity release lifetime mortgages but the main difference is that you only pay back interest and don’t need to repay capital until you sell your property, move into residential care or die.
These loans can be a great option for those struggling to get a standard residential mortgage due to age restrictions. They also allow you to borrow more money than a lifetime mortgage can offer, but you may need advice from a financial expert before taking one out.
RIO mortgages are not a new product, however, they are becoming increasingly popular with older borrowers. They are a good alternative to equity release and can help you clear some of your current mortgage debt without needing to sell the property.
What is the difference between a RIO and equity release?
RIO’s (retirement interest only mortgages) are a type of product aimed at older borrowers who may find it difficult to meet the criteria for other types of mortgage. They allow you to borrow against your property’s equity – which can help boost your retirement income, make home improvements or help your family.
They also offer the flexibility to pay back any time – which means you could leave a bigger inheritance to your family when you die. You can even opt to ‘roll up’ interest for a period, reducing the size of your debt.
With equity release, you don’t need to make monthly repayments as the loan plus interest rolls up when you move into long-term care or die. However, you’ll need to repay the loan and interest if you sell your property.
How can I get a RIO?
If you’re aged 55 or over and looking to borrow against your property, a retirement interest only mortgage (RIO) could be the answer. They’re designed to help older borrowers who haven’t been able to get a standard residential mortgage.
These mortgages have no end date and they’re repaid only when you sell your home, die or move into long-term care. They’re a good option for those who may have a secure retirement income source such as a pension, but can’t afford the repayments on an equity release product.
They’re easier to be approved for as your income will only be assessed based on repaying the interest, rather than the capital. They also tend to be cheaper than equity release products as the interest is repaid monthly and doesn’t roll up, reducing the overall cost of your RIO.
How much can I borrow with a RIO?
If you are aged 55 or over, a retirement interest only mortgage (RIO) could be an option for you. This mortgage allows you to borrow against the value of your property, avoiding a sale when you retire.
A RIO is designed to help older borrowers who may struggle to get a standard residential mortgage. They can also be a great way to release equity in your home as you age.
The amount you can borrow with a RIO depends on the lender’s affordability assessment, along with your current income and total property value. You will need to provide information about your income, expenses and pension planning as part of the affordability assessment process.
A RIO can be an excellent solution to accessing extra cash in retirement, but it’s important to check how your tax position and welfare benefits will be affected. It’s also a good idea to talk to an independent financial adviser about the product and any potential financial implications.