Your home may be repossessed if you do not keep up repayments on your mortgage.
What are Retirement Interest-Only Mortgages?
Retirement Interest Only mortgages (often referred to as RIO mortgages) are very similar to standard Interest Only mortgages, where you are only paying the interest per month. The key difference is that RIO mortgages are aimed at older borrowers that may struggle to get a standard mortgage due to age restrictions or affordability.
Some RIO mortgages still have age limits and need you to repay the debt before you reach a certain age, such as 85 or 90. Most, however, only need you to repay when you sell your property, move into a care home, or upon death.
Who might need an RIO mortgage?
These mortgages were really developed to give older borrowers mortgage options. Many people that took mortgages 25-30 years ago took them on an interest-only basis. This was a very popular option back then with people investing and saving alongside in the hope that their savings would be higher than the outstanding mortgage balance at the end of the mortgage term. However, due to the credit crunch and a number of other issues, many people have found themselves coming to the end of their mortgage terms without enough investments or savings to clear the full mortgage balance, let alone be left with a surplus. Suddenly these borrowers were 50-60 years old, needing to remortgage and finding themselves with very few options apart from selling the property or taking some sort of equity release scheme, and so the RIO mortgage was born to help these people out.
There are a number of other reasons you may want to explore a Retirement Interest-only mortgage:
- To purchase a property for retirement.
- To release money from your property later in life. Whether this is to help children with deposits, improve your property, or even top up your retirement income, etc.
Should I take Retirement interest-only or Equity release?
There are a number of similarities between RIO mortgages and Equity release of course, but the main difference is that with Equity Release you don’t have to make any monthly repayments. The debt therefore will grow over time and when you move in to care or die, the balance owed will be much higher. With RIO mortgages, the debt remains the same as you are servicing the interest every month.
Traditional Equity Release has historically, received some bad press, but due to the heavy regulations these days, that shouldn’t be the case. For the right person, they can be the best option.
Click here to know more about Interest-Only mortgages vs Repayment mortgages.
Next Steps
Get in touch. There are many different options for Retirement Interest-only mortgages and it can be hard to work out whether it’s the right thing for you. Give us a call or drop us an email on the contact details below and we’ll be able to talk through your scenario and give you an idea of the best rate and costs so you can make the right decision.
Tel: 0117 332 5197
Email: Enquiry@lloydwellsmortgages.co.uk
You may also be wondering if equity release might be the better option. Again, get in contact. We’ll discuss your situation and if it’s the right thing for you, we can put you in contact with the right person to help.