What is a Retirement Interest Only Mortgage?

A Retirement Interest Only Mortgage (RIO) is an interest-only mortgage designed for those aged 55 and over. It can be used to replace an existing interest-only mortgage or take out a new interest-only mortgage for the duration of their life. A RIO is a loan secured against your client's home.

The amount that can be borrowed will be based upon an affordability assessment, looking at your client’s income and outgoings to make sure they can keep up payments. Joint applications will be based upon the current or future income of the lowest earning applicant to ensure they'll still be able to afford the mortgage if something was to happen to the other applicant.

Every month they'll pay the interest on the balance of the mortgage. This amount is fixed for the duration of their mortgage, providing some peace of mind that they know what they'll owe on a monthly basis.

A RIO is usually repaid from the sale of their home when they, or the remaining applicant (if the mortgage is in joint names), dies or moves out of their home into long-term care. The RIO can be also can be repaid early, although this may result in an Early Repayment Charge, see our Retirement Interest Only Mortgage Terms and Conditions PDFsize: 289KB for further details.

A simple guide

To help you explain RIO to your clients, we've created a simple guide that they can take away and read in their own time. We've detailed how a RIO works, who it could be best suited for, and how it compares to other products in the market. Find our guide here:

Our simple guide to Retirement Interest Only Mortgage PDFsize: 3258 KB

 

Our Retirement Interest Only Mortgage is for:

  • Those aged 55 or over.
  • Living in or buying their own home in England, Wales or mainland Scotland.
  • Property must be worth a minimum of £70,000 or £100,000 for flats, maisonettes, ex-council, ex-housing association or ex-Ministry of Defence properties.
  • Those that can demonstrate their ability to afford the monthly interest payments now and when they're no longer working.
  • Applicant(s) that meet our specific lending criteria. Our eligibility assessment will be based upon the lowest income of any joint application in order to ensure that the remaining borrower will still be able to afford the mortgage.
  • Those who want to borrow a minimum of £10,000.

How can it help?

A RIO exists for the over 55’s who're looking for an interest-only mortgage during retirement years. This could be a new mortgage or to replace their current interest-only mortgage with a mortgage that allows them to continue making interest-only payments for the remaining time that they live in their home. A RIO is a loan secured against your client's home. When a client takes a RIO, at that point they may be able to take a larger mortgage than they currently have, depending on affordability checks. They may choose to use it for items such as:

  • Home and garden improvement
  • Helping family - children and grandchildren.
  • Having a little extra for enjoying retirement. 

It's important for your clients to understanding that by taking out a RIO, it may:

  • Impact any inheritance.
  • Need to make an Early Repayment Charge if they repay the loan early.
  • As a last result, may have their home repossessed if they fail to make interest payments.

Our Retirement Interest Only Mortgage is for clients who want to borrow at least £10,000.

Retirement Interest Only Mortgage Product Summary PDFsize: 63KB

The amount we’re willing to lend will be subject to an affordability assessment and our Retirement Interest Only Mortgage Lending Policy PDFsize: 197KB

You can use our retirement interest only mortgage calculator with your client to see how much they can release and their affordability outcome.

Use our calculator

How does a RIO compare to a Residential and Lifetime mortgage? 

table
  Residential mortgage RIO Lifetime mortgage
Loan type

A loan secured against your client’s home. May be either repayment (capital and interest) or interest-only.

A loan secured against your client’s home. An interest-only mortgage. RIO is a type of residential mortgage for over 55s.

A loan secured against your client's home throughout their lifetime. A lifetime mortgage is for over 55s.
Interest

Interest is charged on the mortgage monthly and your client makes monthly payments.

Interest is charged on the mortgage monthly and your client makes monthly payments.

Interest is charged on the mortgage monthly. Any unpaid interest charged on the mortgage is added to the loan. This is sometimes called compound or rolled up interest.
Interest rates There are a variety of interest rates your client can choose from. The most common are variable or fixed rate.

The interest rate is fixed for a set period or for the duration of the mortgage.

The interest rate is fixed for the duration of the mortgage.
Monthly payments Your clients are required to make a monthly payment. Your clients are required to make a monthly payment. No monthly payments are required during the lifetime mortgage. It's possible with some products to pay the interest in part or whole.
Loan term The term is fixed for a set period of time. For example, 25 years.

There is no loan term. The mortgage lasts until the last borrower dies or moves out of their home into long term care.

There is no loan term. The mortgage lasts until the last borrower dies or moves out of their home into long term care.
Affordability Your client's income and expenditure is assessed to ensure they can afford the mortgage.

Your client's income and expenditure is assessed to ensure they can afford the mortgage.

There are no affordability assessments.
Repayment

Repaid through the monthly payments over the loan term. 

With an interest-only mortgage your client only makes monthly interest payments, so your client will need to make a lump sum payment at the end of the mortgage.

Repaid from the sale of your client's home when the last remaining borrower dies or moves out their home into long term care.

The loan and interest is repaid from the sale of your client's home when the last remaining borrower dies or moves out their home into long term care.

To find out how to make an application for our Retirement Interest Only please use the link below.

Application process 

To find out how much your client can borrow, by using our calculator below.

Use our calculator 

Property eligibility

To apply for one of our Retirement Interest Only Mortgage your client needs to meet our minimum eligibility criteria. Your client must be able to answer yes to the following questions:

  • Is their property made of traditional masonry construction, in a good state of repair, free of any tenancy restrictions, and is it in England, Wales or mainland Scotland?
  • Is their home valued at minimum of £70,000 or £100,000 for flats, maisonettes, ex-council, ex-housing association or ex-Ministry of Defence properties. 

Below is a list of some of the main reasons why the client’s application might have been declined based on their property:

  • The lease is too short yet the purpose of loan is to pay for a lease extension and this wasn't selected.
  • Acreage of the property exceeds 10 acres. Anything between 10-15 acres will be considered as a refer basis and above 15 acres will be declined.
  • Their property is a studio or bedsit.
  • Their flat is part freehold.
  • Their property has agricultural ties.

If your client has an age restricted property please refer to new business enquires team.

For more details please see the Later Life Mortgage Suitability Criteria PDFsize: 121KB

Applicant criteria

To apply for one of our Retirement Interest Only Mortgage your client needs to meet our minimum eligibility criteria. Your client must be able to answer yes to the following questions:

  • Are they aged 55 or over?
  • Are they living in (or buying) their home and have either a small or no mortgage?
  • Do they want to borrow a minimum of £10,000?

Your client will also need pass our affordability criteria. For more details please our Retirement Interest Only Mortgage Lending Policy PDF size: 241KB

Below is a list of some of the main reasons why your client's application might have been declined based on our applicant criteria:

  • Submitted a sole application but a partner was listed as an additional occupant (resident for over 17 years).
  • Undischarged bankruptcy.
  • Applicant doesn't have indefinite rights to reside in the property.
  • The applicant has Charging Orders registered against them.
  • Property is held in Trust.

For more details please see the Later Life Mortgage Suitability Criteria PDFsize: 121KB

Retirement Interest Only Mortgage affordability calculator

Our affordability calculator will give you an indication of the amount your client could borrow. Please make sure you complete the mortgage loan amount, income and monthly payments as accurately as possible.

Once you've received a figure, you'll need to complete a full Decision in Principle to receive the exact amount your client can borrow. This is subject to the information you provided, plus the results of a credit reference check. Applications are subject to our standard lending criteria, status and financial standing.

The calculator gives an estimate of affordability and is not a guarantee of lending. Additional evidence may be required. 

A Retirement Interest Only Mortgage is a loan secured against your client's home. As a last resort, their home may be repossessed if they don't keep up with payments.

Required information for each applicant

  • Their property value

  • Their desired loan amount

  • Dependants and retirement age

  • Employment and other income

  • Pension income

  • Monthly payments

Quoting and services

Available Portals

Quotes for our Retirement Interest Only Mortgage are available through the listed portals.

Twenty7tec

Mortgage Brain

Trigold

Ready to apply?

Log in to start the application process for your client's RIO product to start an illustration and submit an application.

Application process

We've outlined below the steps you take when you're ready to apply for your client's application with us for a Retirement Interest Only Mortgage.

Register for online services

You'll need to register with Legal & General Home Finance to produce illustrations and submit applications.

Register now

 

 

FAQs