Retirement interest-only (RIO) Mortgage
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Retirement interest-only (RIO) Mortgage
James Bull explains how a retirement interest-only mortgage works.
What is a retirement interest-only mortgage?
It’s a special mortgage that’s available to people aged 55 and over, where you can basically just make interest payments on the mortgage for the rest of your life.
What are the benefits of a retirement interest-only mortgage (RIO)?
The mortgage has no end date, so there’s no fixed term within which the capital needs to be repaid. With it being interest-only, the payments are lower, as well.
Are there any income requirements to qualify for a retirement interest-only mortgage? Can you use pensions or investments?
The amount you can borrow will be based on your retirement income, but we can take most forms of income into consideration. Mainly your pension income will be factored in.
How much can you borrow for a retirement interest-only mortgage? How is that amount determined?
In terms of how much you can borrow, lenders have affordability calculators just the same as for any other mortgage.
The amount you can borrow is based on your retirement income – usually a pension. But because it’s open to over 55s, you can apply for this kind of mortgage while you’re still working. Even then, it’s still based on your retirement income – so even if you’re not receiving your pension yet, that’s still going to determine how much you can borrow.
What are the minimum and maximum ages for RIO mortgage applicants?
The minimum age is 55, and there’s no maximum age. A simple answer on that one.
Can we get a joint retirement interest-only mortgage?
Yes, you can get a joint mortgage. This is a lifetime mortgage, where you’ll pay the payments for the rest of your life. With a joint mortgage, obviously at some point one applicant’s going to pass away and the payments will be made by the survivor alone.
Because of that, the amount you can borrow will be based on the lowest income received by the two people. Some pensions have survivor’s benefits, however, which we can take into consideration.
Can you remortgage with a retirement interest-only mortgage?
If you’ve got a traditional mortgage and you want to switch it, you can. You can remortgage to a RIO.
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Everyone’s different. You might be self-employed. You might have some credit history issues – whatever your situation, we will find the most suitable product available to you from across the whole market.
When will a retirement interest-only mortgage need to be repaid?
If you come into additional money for whatever reason, you can repay the mortgage at any time, subject to the usual early repayment charges from the lender.
Ordinarily, though, this is intended to be a lifetime mortgage that just gets repaid on death.
Can my heirs keep the property if I have a retirement interest-only mortgage?
Yes, your heirs can keep the property if they want to, but obviously all the debts need to be cleared, including the RIO mortgage. If they have the money to pay that off separately, that’s fine.
You could also take out life assurance to cover the mortgage debt, although depending on your age and how much cover you need, that could be expensive. It is available as an option to explore.
How do I apply for a retirement interest-only mortgage? How does the process work?
As mortgage brokers, we deal with these kinds of mortgage applications all the time. The first step is just to give us a call. We’ll take all the details and then will discuss the next steps with you.
You’ve demonstrated how a mortgage broker can help, but is there anything else to add?
We’ve got access to all the lenders, so we know the criteria and can deal with whatever circumstances someone might have. We’re happy to help anyone looking for this kind of mortgage.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.
YOU MAY HAVE TO PAY AN EARLY REPAYMENT CHARGE TO YOUR EXISTING LENDER IF YOU REMORTGAGE.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
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