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Retirement Interest-only mortgages?


Over the years Enables’ experienced IFAs’ of Bishop’s Stortford have seen a range of mortgages come and go. This year there has been another home finance product to add to the mix – retirement interest-only (RIO) mortgages.

These deals let borrowers pay monthly mortgage interest until they die, sell their house or go into long-term care. At this point, the loan is repaid by selling the house. There have been RIOs in the past but they are now returning in popularity because the Financial Conduct Authority (FCA), recently cut red tape around the deals.

There can be confusion around the range of products and Chris Buchanan, product director at retirement lender Legal & General Home Finance says: “All of these products make sense to us as advisers, but to customers, they are just mortgages. They just have a need, which is to borrow. They don’t really need to know what we call it or what the regulator calls it.”
RIO mortgages share many characteristics with lifetime mortgages. These are loans secured against your house that allow equity to be released.

Lifetime mortgages have also been called equity release mortgages. These mortgages are available to over-55s, and the loan that is taken out is paid off in full when the last person living in the property dies, sells the home or goes into care.

These are similar to standard interest-only mortgages that let you pay the interest on the loan monthly. However, the “retirement” element means that this product has no set end date. Like a lifetime mortgage, the loan is redeemed when you die, go into care or sell. There is no minimum or maximum age limit. The idea is that if more RIOs can be used it will help with the huge number of interest-only borrowers who are unlikely to be able to repay their loans.

Your home could be at risk if you do not keep up the repayments.

Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.


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