Retirement interest-only mortgages

Could a retirement interest-only mortgage be right for your clients?

What is a retirement interest-only mortgage?

A retirement interest only (RIO) mortgage is a loan secured against the home that allows clients to pay monthly interest, without reducing the capital borrowed. It is only available to people over the age of 55 and has been designed to help older borrowers who may struggle to get a standard residential mortgage. They’re similar to standard interest only mortgages, but you only repay the loan when you sell your property, move into full-time care, or pass away.

When looking at a RIO product, lenders will take into consideration:

The amount that your client can borrow will be based upon what they can afford. Like a standard interest-only product, lenders will review your clients income and outgoings to make sure they meet affordability

Types of retirement interest-only mortgages

Fixed interest rate

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

Variable interest rate

A variable interest rate means the rate you pay could go up or down, depending on several factors – for example, the Bank of England base rate or the lender’s standard variable rate. There are a number of variable-rate mortgages you can choose from and they vary by provider.

What a retirement interest-only mortgage could be used for

Extend a mortgage term

Buy a retirement property

Boost retirement finances

Gift money to loved ones

Which option suits your client best?

Our Later Life Lending Navigator Tool can help you stay on the right side of regulatory changes whilst providing great outcomes for your clients – and, deliver a straightforward way of generating an additional revenue stream into your business this year. It provides a simple way to triage a customer based on their affordability and needs.

Developed by advisers and reviewed by industry stakeholders, our brand-new tool helps you assess and record the suitability of your clients’ different later life lending options, including RIOs, residential, lifetime mortgages and payment term lifetime mortgages, to ensure the product, and advice journey, you recommend is the right one.