Retirement Interest Only Mortgage

How to Safely Release Home Equity With an Interest-Only Lifetime Mortgage Plan After Retirement
Contributors: Nicola Date, Katherine Read. Edited by Rachel Wait & Reviewed by Francis Hui
Looking for a Great Retirement Interest-Only Mortgage Package? Find Out if You Qualify, What You Can Expect and Whether it’s the Best Option for You.

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You must be aware of one of the newest later-life mortgage options available in May 2022!

With more than 100 retirement interest-only products on the market, you’re spoilt for choice with even more fantastic retirement options.

Could a retirement interest-only mortgage be the key to your retirement financial freedom?

We’ll help you discover:

  • What are retirement interest-only mortgages in the UK?
  • How it differs from equity release.
  • The advantages and disadvantages of RIO loans.
  • The RIO mortgage interest rate you could expect to achieve.

Our dedicated team is passionate about helping you achieve a dream retirement.

So it’s our goal to provide you with all the necessary information. We combed the market to find the latest RIO scoop.

Here it is!

What Is an RIO Mortgage?

A retirement interest-only mortgage is the latest type of later-life mortgage in the UK. It allows homeowners over the age of 55 to unlock tax-free cash from their home, with only the monthly interest being paid off in their lifetime.

Retirement mortgages with interest-only payments were established in 2018. They’ve had a slow start, but are growing in popularity.

The features of an RIO include:

  • Minimum age – Available if you’re 55 or older.
  • Interest only repayments – The loan itself is repaid when you die or go to a care facility.
  • LTV Between 50% and 65% of your property value.
  • Borrowing cap – Usually somewhere between £500,000 and £1,000,000.

RIOs are the 4th most popular loan catering to the over 55s. They’ve surged in popularity since the onset of the Covid-19 pandemic in 2020.

RIOs are not the only interest-only mortgage in retirement that you can choose from.

They are very similar to the interest-only lifetime mortgage, but there are some key differences.

Who Qualifies for a Retirement Interest-Only Mortgage?

To qualify for this interest-only retirement mortgage, the youngest homeowner must be older than 55.

You’ll need to pass an affordability check, and the lender will need to ensure that your home’s value is worth the collateral.

If you’re planning to take one of these interest-only mortgages into retirement.

You must prove that you’ll always have a form of income available to cover the interest costs.

How Do Interest-Only Lifetime Mortgage Repayments Work?

With interest-only lifetime mortgage repayments, you’ll pay the interest on a monthly basis,

And the actual loan is repaid at the end of the plan when you die or enter a facility for long-term care.

Benefits of Retirement Interest-Only Mortgages

The biggest benefit of a retirement interest-only mortgage is that your family will be left with a larger inheritance,

Due to monthly interest repayments, in comparison to other retirement mortgage products like equity release.

Additional benefits in May 2022, include:

  • Lower interest rates – The retirement interest only mortgage rates1 can be lower than that of lifetime mortgage schemes.
  • Advice not compulsory – You don’t need financial advice, even though most financial experts recommend it.
  • More capital – You can borrow more capital with the RIO mortgages than you can with lifetime mortgage products.
  • Pay back any time – You can repay the mortgage plan early, although there might be associated early repayment charges.
  • Relocate – You have the right to move homes or downsize, as with a lifetime mortgage.

Drawbacks of Retirement Interest-Only Mortgages

The biggest drawback of a retirement interest-only mortgage is the risk that your lender could seize your property if you can’t repay the monthly interest.

Other disadvantages include:

  • Affordability checks – You’ll have to successfully pass the mortgage provider’s income and affordability checks to prove you can cover the monthly interest payments.
  • Variable RIO mortgage rates – Your interest rate might be fixed for the short term and could go up or down in the future (depending on your plan provider).
  • Mortgage renewal – You have to renew the mortgage scheme at the end of the initial interest-rate period – potentially incurring new costs and charges associated with taking out a residential loan policy.
  • Less inheritance – As with lifetime mortgage schemes, your estate will ultimately be sold to repay the mortgage provider, affecting the amount of inheritance you’ll leave behind.

Retirement Interest-Only Mortgage Interest Rates You Can Expect to Pay

Retirement interest-only mortgage rates are usually variable and capped interest rates.

Initial RIO mortgages interest rates can be as low as 2.39%, reaching a cap of 3.74% in 2 to 10 years.

With this example, the overall average rate would be an average of around 3.4%.

RIO mortgage interest rates are usually lower than lifetime mortgages and are quite competitive in adjacent to traditional mortgages.

The best RIO mortgage rates you can achieve will be determined mostly by your age and property value.

To get the best retirement interest-only mortgage rates, you may want to contact a whole market mortgage adviser.

Equity release, on the other hand, comes with fixed interest rates, so it’s essential to compare the difference between fixed vs variable interest rates.

Who Offers Retirement Interest-Only Mortgages?

Most retirement interest-only mortgage providers are mutual and challenger banks.

And, as this new product sees continued growth, more and more leading financial institutions are becoming RIO mortgage providers.

Here are some of the top retirement interest-only mortgages providers in the field:

Halifax Retirement Interest-Only Mortgage

When it comes to retirement interest-only mortgages, Halifax is one of the leading RIO mortgage lenders on the market.

You can unlock up to 65% of your property value with Halifax, you’ll get a free valuation, and there are no product or lender fees.

Lloyds Bank Retirement Interest-Only Mortgages

Lloyd bank proudly offers competitive rates for their retirement interest-only mortgages, so you’ll only have to make very small payments each month.

Plus, Lloyd bank’s plans come with a free home valuation.

Leeds Building Society Retirement Interest-Only Mortgage Products

You can unlock up to 55% of your property value with a retirement interest-only mortgage from Leeds Building Society.

Leeds Building Society’s plans are available for people between 55 and 80, and no minimum equity is required.

Retirement Interest-Only Mortgages with Nationwide

Nationwide RIO mortgage rates are very competitive, considering they’re likely the best RIO mortgage providers in the UK.

Furthermore, Nationwide’s RIO products are fee-free, allow you to pay back 10% of the equity annually, and you cal release up to £500,000.

If you’re set on a Nationwide retirement interest-only mortgage and want to achieve the best nationwide RIO mortgage interest rate.

Contact them directly for in-house advice on the best RIO mortgages they offer.

Santander RIO Mortgage

Unlock up to 65% of your property value with Santander’s retirement mortgages.

You get a free valuation and there are no product or lender fees. Plus, if you are an existing Santander customer, you could access fixed rates at a low 2.74%.

The Best Retirement Interest-Only Mortgages in May 2022

The way to find the best retirement interest-only mortgage to suit your needs is by talking to a mortgage broker,

Or financial adviser who specialises in retirement products.

While the best retirement interest-only mortgages will be determined by your individual needs,

Nationwide is likely the most ‘high street’ name operating in this sector.

Are Retirement Interest-Only Mortgages Regulated?

Yes, RIOs are regulated. With retirement interest-only mortgages, FCA2 (Financial Conduct Authorities) oversees the industry,

And legitimate lenders will appear on the Financial Conduct Register3.

Retirement Interest-Only Mortgage Calculator

Your first step on your journey towards a retirement interest-only mortgage is to get an estimate of how much cash you could unlock from your home through one of these fantastic products.

Try our free retirement interest-only mortgage calculator now.

Our Most Commonly Asked Questions

What is a Retirement Interest-Only Mortgage?

Who Offers Retirement Interest-Only Mortgage Plans?

How Much Can You Borrow with A Retirement Interest-Only Mortgage?

How Does A Retirement Interest-Only Mortgage Work?

Can I Get a Natwest Retirement Interest Only Mortgage?

Do Barclays Retirement Interest Only Mortgages Exist?

Can I Get a Post Office Retirement Interest Only Mortgage?

In Conclusion

Interest-only retirement mortgages are a fantastic way to gain access to some of the money in your home, but still, leave an inheritance for your heirs.

If, of course, you can afford the monthly payments.

While seeking advice is not compulsory when opting for a retirement interest-only mortgage, it’s still worth consulting your financial adviser before making any final decisions.

Furthermore, you must ensure that you’re aware of all your options, and speak to your closest family, who can support you through your retirement journey.

Before You Go…

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Editorial Note: This content has been independently collected by the SovereignBoss advisor team and is offered on a non-advised basis. Sovereignboss may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.

rachel w

Rachel Wait
Personal Finance Journalist

Rachel is an experienced finance journalist and editor with a particular interest in personal finance and consumer affairs. She has vast experience writing about money issues, property, insurance, and consumer affairs, and you’ll find her articles regularly featured in top media and newspaper publications.
John Lawson

Written by
John Lawson
Founder SovereignBoss

John is passionate about education and has made it his life-long mission to assist UK citizens on their future financial options, with a specialist interest in equity release, and SovereignBoss is the natural extension of this passion.
francis

Reviewed by
Francis Hui
Senior Risk Manager

Having held various high-level roles across the industry, Francis is truly an expert in aiding UK citizens in their financial decisions and risk analysis. His unique insight and statistical knowledge make him the perfect person to help you take your financial future to the next level.
kath icon

Katherine Read
Consumer Affairs Writer

Since joining the editorial team at SovereignBoss, Katherine has become focused on bringing transparency to finances and opportunities for those approaching retirement age. She writes on the topics of equity release, home reversion, and mortgages.
nicola

Nicola Date
Writer & Journalist

Nicola is a financial writer for SovereignBoss and is passionate about the opportunities that equity release can open up for homeowners. Her extensive business experience and deep understanding of the industry means that she’s always up-to-date with the latest developments.

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