A Guide to Retirement Interest-Only Mortgages

17th August 2023

A retirement interest-only mortgage, also known as a RIO mortgage, is a type of mortgage available for retirees.

A Guide to Retirement Interest-Only MortgagesAs individuals approach retirement age, financial planning becomes a crucial aspect of ensuring a comfortable and secure future. Among the many considerations, mortgages play a significant role in offering potential solutions for older borrowers seeking additional funds. A popular mortgage option often considered is the retirement interest-only mortgage.

In this blog, we will discuss RIO mortgages. It will help you understand why this type of mortgage may be best for you.

What is a Retirement Interest-Only Mortgage?

A retirement interest-only mortgage, also known as a RIO mortgage, is a type of mortgage available for retirees. It allows individuals aged 55 and above to borrow against the value of their home while making monthly interest payments. Unlike other mortgages, the outstanding loan balance does not need to be repaid until a specific event occurs, such as the homeowner's death or when they move into long-term care.

A RIO mortgage is not like a traditional interest-only mortgage as it does not have a specific date for loan repayment. As long as the homeowner remains in the property, they continue to make monthly interest payments until the mortgage is ultimately repaid.

What is the difference between a retirement interest only mortgage and other mortgages?

The primary difference of a RIO mortgage lies in the repayment structure and interest accrual:


An RIO mortgage requires monthly interest payments, ensuring that the loan balance does not increase over time.

Interest Accrual

With a retirement interest-only mortgage, the outstanding balance remains the same as long as the homeowner continues to make the monthly interest payments.

What is the application criteria for a RIO mortgage?

Like any other mortgage, retirement interest-only mortgages have certain criteria that borrowers must meet:

Age Requirement: Borrowers be aged 55 or older.

Property Value: The value of the property plays a crucial role in determining the maximum loan amount. Generally, the higher the property value, the more funds homeowners can release.

Affordability: Lenders will conduct an affordability assessment. An RIO mortgage is not the same as a traditional interest-only mortgage. The main difference is that a RIO mortgage does not have a specific date for loan repayment. This ensures that homeowners can comfortably make the monthly interest payments.

Benefits of Retirement Interest-Only Mortgages

1. Greater Flexibility

A retirement interest-only mortgage offers flexibility by allowing you to maintain your current lifestyle during retirement. By paying only the interest, your monthly mortgage payments are significantly reduced, freeing up additional funds for other essential expenses or enjoying your retirement.

2. Extended Mortgage Term

Unlike conventional mortgages that often require repayment by a certain age, retirement interest-only mortgages can have an extended term, enabling you to spread the cost over a more extended period, reducing the monthly payment burden.

3. Unlocking Equity

If you have built up considerable equity in your home, a retirement interest-only mortgage can allow you to access some of that equity, providing a potential source of additional funds for various purposes, such as home improvements or supporting family members.

Choosing the Right Mortgage Option for You

Deciding whether a RIO mortgage is right for you will depend on your financial circumstances, long-term plans, and personal preferences. Here are a few factors to consider when making your choice:

Repayment Preferences

If you can afford monthly interest payments and wish to maintain a stable loan balance, a RIO mortgage could be a good option for you.

Financial Flexibility

Consider your future financial needs and whether having access to additional funds through an equity release would be beneficial.

Professional Advice

It is essential to seek independent financial advice from a qualified adviser to ensure you fully understand the implications and make an informed decision.

At Vernon, our financial advisors are always on hand to help and answer any questions.

Why choose a Retirement Interest-Only Mortgage?

An RIO mortgage is a great option  if you are looking for a flexible, affordable, and manageable mortgage solution that aligns with your retirement goals and financial circumstances.

However, it is still important to consider all of the factors addressed above to ensure you make the best investment for your future goals. To learn more about our retirement interest-only mortgages, visit our page or contact our customer advisors.