How retirement interest-only mortgages work

These mortgages are designed for older homeowners seeking to pay just the interest on their mortgage, and do not require a plan for how the capital will be repaid at the end of the term.

An interest-only mortgage can help to significantly reduce monthly repayments, as you only pay the interest on your outstanding mortgage balance and not any of the capital back each month. This may be considerably more manageable for those who expect their income to fall when they retire.

Unlike standard mortgages, RIO mortgages have no set term and are repaid only when the property is sold after you die or move into long-term care, with the remaining value of the property forming part of your estate. This is the main difference between a standard interest only mortgage and a RIO mortgage.

The specific terms for RIO mortgages vary widely depending on the mortgage lender. Some, for example, enable you to repay part of the capital alongside the interest, enabling you to leave a greater proportion of your property’s value to family and loved ones when you die.

Some providers offer these mortgages to the over 55s, while others may require you to be older. Depending on the lender, there may also be other requirements. For example, the property may need to be worth a minimum amount, or you may find there is a minimum loan size.

Remember that like standard mortgages, if you don’t keep up with your monthly repayments on an RIO mortgage, there is still the risk of repossession.

Author: wpadmin

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