Exploring Interest-Only vs. Retirement Interest-Only (RIO) Mortgages: Which One Fits Your Financial Future?
Are you over 50 and finishing up your Interest-Only mortgage but still haven't paid off the capital? If you want to keep your interest-only set-up and stay put, you've got two choices: stick with a regular interest-only mortgage or consider a retirement mortgage.
What is a standard interest-only mortgage?
If you're over 50 and still working or retired, you can apply for a Standard Interest-Only mortgage for up to 65% of your property's value. It can be used for your primary or secondary residence, such as a holiday home, and you’ll only need to pay back the interest each month, rather than the amount you’ve borrowed.
You’ll then pay back the mortgage capital when your agreed term ends, at any time before you’re 80. So, if you take the loan out when you’re 50, you’ve got it for up to 30 years. Whereas if you take it out at age 70, you’ve got it for up to 10 years, and you can take out a loan before you turn 75. Depending on which part of the UK you live in, you’ll need to hold a certain amount of equity in the property before being able to apply for a mortgage.
To receive more personalised information, feel free to book a call with our friendly team.
What is a retirement interest-only (RIO) mortgage?
Despite what the name suggests, you can take this out whether you’re retired or still working. It’s similar to a Standard Interest-Only mortgage, as you’ll only need to make monthly interest payments.
However, with a RIO mortgage, there’s no end date, and the loan – or capital – will only be paid off when you pass away, move into long-term care, or decide to sell your house. The mortgage lender is entitled to the outstanding value of the loan when your property is sold, so keep that in mind if you plan to leave an inheritance.
How do I know which over 50s interest-only mortgage is best for me?
Check out these two tables for a straightforward way to compare the features of a Standard Interest-Only mortgage with a RIO (Retirement Interest-Only mortgage).
These should give you a good idea of what to think about and expect when applying for a mortgage with us.
See how much you might be able to borrow instantly with our simple 5-step calculator.
