What is a retirement interest only mortgage?
A Retirement Interest Only mortgage, sometimes called a RIO mortgage can help people who have previously considered downsizing their property in order to pay off their mortgage debts. With RIO you could remortgage and stay in your home for longer as you would only be paying the interest payments on your mortgage, not the capital repayments
If you remortgage onto a retirement interest only mortgage you could also raise funds to travel, carry out home improvements or fund grandchildren’s university fees, weddings or first house deposits.
How do retirement interest only mortgage work?
Retirement interest only mortgages work in a way where you will be able to borrow a percentage of the value of your home as a lump sum and will only pay the interest of the loan. You have to prove that you can afford the monthly interest repayments and go through the usual affordability checks with mortgages. There is no set end date for the settlement of the loan, it is repaid by eventually selling the property.
What is the difference between a lifetime mortgage and a retirement interest only mortgage?
The difference between a lifetime mortgage and a retirement interest only (RIO) mortgage is the fact that you still pay your capital repayments with a lifetime mortgage and you only pay the interest repayments with RIO.
A lifetime mortgage is a way to boost your income later in life by allowing you to release some of the equity held in your property. This is a type of equity release where a loan is secured against your home and you repay it when you die or go into long term care. The interest that is due each month is rolled up and added to the mortgage loan, which means the outstanding balance increases over the time the mortgage is in place.
With a RIO mortgage as we have detailed above, the interest that is due each month, and the balance on the mortgage remains the same. Again, you will pay the balance off when you sell the property.
What criteria do I need to meet to be eligible for the retirement interest only mortgage?
The criteria for a retirement interest only mortgage is currently being over the age of 55 with a reliable and regular income that will allow you to make repayments now and in the future.
What happens at end of a retirement interest only mortgage?
At the end of a retirement interest only mortgage, the loan is repaid by selling the house.