Retirement interest-only mortgages

See if you are eligible for a retirement interest-only (RIO) mortgage by talking to the experts at Tembo Money – our RIO mortgage partner. Get fee-free advice today.

What is a retirement interest-only mortgage?

Retirement interest-only mortgages (RIO) are designed for borrowers aged 55 and over who are approaching retirement. They enable you to make interest payments indefinitely, with the mortgage capital paid back only when you die or move out. By contrast, a standard interest-only mortgage finishes on a specific date and you must repay the capital you owe on this date.

If you’d like to speak to discuss whether a RIO mortgage might be right for you, you can arrange a free consultation with Tembo Money, our retirement interest-only mortgages partner.

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  • See if you are eligible for a RIO mortgage
  • Access to a wide range of RIO lenders
  • Get free, expert advice from a dedicated adviser at Tembo Money

Get fee-free retirement interest-only mortgage advice

We’ve partnered with Tembo Money who offer fee-free advice and can help you find the best retirement interest-only mortgage to suit your needs. They have an excellent customer service rating on Trustpilot.

The experts at Tembo Money will talk you through your options and make recommendations based on your individual circumstances. Visit their website to book a fee-free consultation with them today.

Who is eligible for retirement interest-only mortgages​?

You must be aged 55 or over to apply for a retirement interest-only mortgage. The maximum amount you can borrow is generally around 50% of the property value, although some lenders will be prepared to lend up to 75%. The interest on the RIO must be paid each month. If you’d like to find out more, get in touch with Tembo Money for fee-free advice on retirement interest-only mortgages.
retirement interest-only mortgages for over 55s

Advantages and disadvantages of RIO Mortgages

Advantages of a retirement interest-only mortgage

Retirement interest-only mortgages have several benefits:

  • Monthly repayments will be cheaper than if you have a standard repayment mortgage, as you’re only repaying the interest each month and not any capital.
  • As repayments are relatively low, this should make it easier to prove they are affordable when you undergo the affordability assessment.
  • There is no need to demonstrate a suitable plan for repaying the mortgage either as the mortgage only has to be repaid when the property is sold after you die or if you move into long-term care.
  • You can remain in your home without worrying about how to repay your outstanding mortgage debt in retirement and may also avoid having to downsize to a smaller property to repay your mortgage at retirement.
  • Depending on which RIO mortgage you choose, you may be able to repay some capital too, as and when you can afford it so that you can leave a bigger inheritance when you die.

Disadvantages of a retirement interest-only mortgage

Retirement interest-only mortgages have certain downsides which you’ll need to consider when deciding whether this type of mortgage is right for you:

  • The amount you’ll be able to leave to loved ones as an inheritance may be reduced as the mortgage capital needs to be repaid when you go into long-term care or die.
  • The amount you can borrow will depend on your retirement income, which may be lower than your previous income.
  • You may find it difficult to get a RIO mortgage if you don’t have an excellent credit score and don’t own at least 40% of your property outright.
  • You may find it difficult to change mortgage providers once you’ve retired or when you move home, depending on your circumstances and the deal you have chosen.
  • You are not protected from negative equity caused by falling property prices when the total value of the borrowing exceeds the value of the property (although in reality, this would require house prices to fall 40%, given the maximum loan to value acceptance of 60%).

Should I choose a retirement interest-only mortgage?

You may want to consider taking out a RIO mortgage if, for example, you need to extend your interest-only mortgage into retirement as you are unable to pay off the capital you owe by the end of the mortgage term.

Taking out this type of mortgage may be one way you can stay in your home and avoid having to sell up to pay off your mortgage debt in retirement.

There are several factors a mortgage provider will consider to ascertain if you are eligible for a mortgage, with specific criteria varying from lender to lender. You can read more about retirement interest-only mortgages in How retirement interest-only mortgages work.

 

Frequently asked questions

How much can you borrow on a retirement interest only mortgage?

How much you can borrow on a RIO mortgage will depend on the provider and your personal circumstances. RIO mortgage providers will want to look at your pension and any other income, including your current mortgage payments, to make an accurate assessment of how much they are willing to lend. This is the same process no matter how old you are – but if you are already retired, lenders will typically want to check your private and company pension forecasts, and your state pension entitlement, as part of their affordability assessment criteria.

RIO mortgage deals typically have a maximum 60% loan-to-value (LTV) ratio. This means you need to own at least 40% of your property outright for your mortgage application to be accepted. However, the majority of older homeowners may already have this proportion of equity in their property by the time they reach retirement, and so will usually find a range of RIO mortgage options available to them.

Can I remortgage if I have a retirement interest-only mortgage?

Yes, you may be able to remortgage a retirement interest-only mortgage. However, you may face an affordability assessment, particularly if you’re changing lenders or looking to change the size or term of your mortgage. So it depends on what you’re looking for and your personal circumstances. 

Equity release vs RIO mortgages - What is the difference?

An equity release plan is a specialist type of mortgage aimed at older borrowers aged 55 and over that enables you to unlock some of the value of your home as a lump sum or regular payments.

However, unlike an RIO mortgage, with equity release you do not usually make any monthly payments. Instead, the interest you owe builds up over time and is paid back, along with the capital sum you owe, when you move into long-term care or die.

By contrast, a RIO mortgage is more like a traditional interest-only mortgage deal, where you make interest payments to your lender every month to stop them building up over time.

Which lenders offer retirement interest-only mortgages?

Lenders offering retirement interest-only mortgages are typically building societies. Here is a full list of lenders currently offering RIO mortgages:
  • Bath Building Society
  • Beverley Building Society
  • Buckinghamshire Building Society
  • Family Building Society
  • Hanley Economic Building Society
  • Hodge Lifetime
  • Ipswich Building Society
  • Leeds Building Society
  • Loughborough Building Society
  • Marsden Building Society
  • Melton Building Society
  • Nationwide Building Society
  • Newbury Building Society
  • Nottingham Building Society
  • Mansfield Building Society
  • Saffron Building Society
  • Scottish Building Society
  • Tipton & Coseley Building Society
  • Vernon Building Society
You can arrange to speak to our partners at Tembo Money to compare RIO mortgage rates. They can provide fee-free advice on the best RIO mortgage deals for you based on your individual circumstances.

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