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An RIO mortgage could be a great way to help you enjoy your later life to the full. By borrowing a nontaxable lump sum you could be able to fund home improvements, help younger family members get on the property ladder, or simply maintain your lifestyle in retirement.

How much you can borrow depends on a number of factors, including your age, the type of house you own, and its value.

When comparing the RIO mortgage market, a specialist adviser will explain:

• You have to get advice before releasing equity.
• Check for plans that have a no negative equity guarantee, so you will never be indebted more than your home’s value.
• It reduces the value of your estate.
• The initial consultation is free with no obligation.
• The most popular form is a lifetime mortgage, which is a loan secured against your home. Note that you will still own your home.

It is a way of releasing the wealth (cash) tied up in your property without the need to move.

With these products, if you are over the age of 55, you can either borrow against the value of your home or sell all or part of it for a regular monthly income, a lump sum, or the facility to get at equity as and when you like or a combination of these options.

Although there are many different schemes available, they can all be split into four categories of equity release schemes.

Lifetime Mortgage Loan

You release a lump sum from the value of your house, by taking out a mortgage set on your asset (provided it’s your primary residence) whilst maintaining 100% ownership of your house. This amount, plus any interest accrued, (you can opt to make repayments) is repaid from the sale of your house when you pass away or move into long-term care.

Drawdown Lifetime Mortgage

This works similar to Lifetime Mortgage but with a regular cash reserve/draw down⁴ 
option allowing you to withdraw amounts at a frequency you like up to a specified amount of years, or until the cash reserve has been used up.

Interest-Only Lifetime Mortgage

You get a lump sum and pay a monthly interest on the loan, which can be fixed or variable, rather than allowing the interest to roll up. The amount you originally borrowed is normally repaid when your house is eventually sold.

Home Reversion Plan

Here, you sell some or all of your house to a home reversion provider in exchange for a lump sum of money or routine payments, whilst maintaining the right to remain residing in your house, rent free, for as long as you live, but you have to agree to maintain and insure it. At the end of the plan your asset is sold and the sale proceeds are shared according to the remaining proportions of ownership.

You are free to use the money on almost anything you like. There are many reasons for releasing equity from your home and here are a few of them.

Common Equity Release Uses:

• To supplement your pension income to cover living expenses
• To settle a repayment mortgage or clear the balance on an interest-only mortgage
• To improve your life condition
• To see your family relish their inheritance while you’re still here
• To carry out some home renovations
• To take that holiday of a lifetime
• To help your children onto the property scale
• To pay off other outstanding debt
  and lower your monthly outgoings.

Equity release plans are not right for everyone and it’s important that you fully consider your options and receive financial advice before making a decision. It’s also necessary that, if you do decide to use an equity release product, you choose one that meets your needs.

Remember that taking an equity release plan is generally a long term option. However, there are flexible ones available that may fit your varying needs and some will allow you to repay in the future without any penalties. A financial adviser can help you to choose the one that is right for you.

Well, the retirement interest-only mortgages (RIOs) are typically the latest set of equity release plans that help older homeowners to unlock the value of their property. There are specially meant for those borrowers who might struggle to get a standard residential mortgage.

Unlike other mortgage loans, with the RIOs, you only pay back the interest (and not the loan itself) each month. Therefore, when the loan term ends, you only pay back the initial mortgage amount.

To get an idea of the amount of capital you’ll receive from the retirement interest-only mortgage, you have to input:

• The value of your property
• The age of the youngest homeowner
• Your postcode (to figure out where you live)

Use our retirement mortgage calculator to see how much you can get now.

Well, the RIOs offer you a variety of perks, and some of these include:

• The mortgage plan features interest rates that are typically low
• With RIO’s you don’t need advice (even though the Financial Conduct Authority (FCA) and the ERC recommends it)
• You can borrow more equity if you need to
• You have the right to repay your loan policy early (although you might have to pay a hefty early repayment charge depending on your plans)
• You don’t have to worry about inheritance since your heirs will get a substantial amount

Well, unlike with the interest-only mortgage, with the RIO plan, you only repay the loan when you die or move into residential care. You also have only to prove that you can afford the monthly interest repayments.

With the retirement interest-only mortgage, there’s no age requirement, but it’s typically for older borrowers who are over 55, 60 and those who’ve reached their stage pension age. Moreover, you don’t also have to seek advice like the interest-only mortgage loan.