RIO Mortgages & Lasting Power of Attorney

Our Retirement Interest-Only Mortgages or Retirement Mortgages (RIOs) are designed with over-55s in mind. They offer a flexible option for retired borrowers who don’t want to be limited by a set loan term. The loan is secured against your home, and because you only pay the interest each month, the amount you owe stays the same over time. Since RIO mortgages are long-term financial commitments, borrowers need to plan for situations where they might lose the ability to manage their affairs due to conditions such as dementia, stroke, or other illnesses. 

A Lasting Power of Attorney (LPA) ensures that a trusted individual can step in to manage mortgage payments and other financial matters without legal delays or complications. This guide will explain why an LPA is beneficial, how to set one up, and its legal implications for mortgage repayments.

What is a Lasting Power of Attorney?

A Lasting Power of Attorney (LPA) is a legal document that allows someone (the "donor") to give another person (the "attorney") the authority to manage their affairs if they become unable to do so themselves. The LPA must be set up while the donor still has mental capacity - once capacity is lost, it is too late to create one. There are two types of LPAs, including a Property and Financial Affairs LPA – this covers financial matters, including mortgage payments, managing bank accounts, and selling property if necessary. This is usually the most relevant type for RIO mortgage borrowers. There is also a Health and Welfare LPA – this covers medical and personal care decisions, including where the donor lives and what medical treatment they receive. This does not cover mortgage management but may be useful for broader long-term planning.

Why an LPA is Essential for RIO Mortgage Borrowers

An LPA is particularly vital for RIO borrowers because it will ensure that mortgage payments continue. If the borrower becomes unable to manage their finances due to illness or cognitive decline, the attorney can access funds and make payments to prevent arrears or repossession. Without an LPA, banks and mortgage lenders will not automatically grant access to the borrower’s accounts, even to a spouse or close family member. Family members must apply to the Court of Protection for a deputyship order, which is expensive, time-consuming, and stressful. 

Also, since an LPA can include safeguards, such as requiring attorneys to act jointly, it provides legal protection against potential exploitation. It also offers peace of mind as borrowers and their families can be reassured that there is a clear legal process in place if the borrower becomes unable to manage their affairs.

How to Set Up an LPA

• Step 1: Choose Your Attorney(s) - Select someone trustworthy and financially responsible, such as a spouse, adult child, or close friend. You can appoint more than one attorney.
• Step 2: Complete the LPA Forms - Forms are available to download online or you can set up an LPA using the online service on GOV.UK
• Step 3: Get the LPA Signed and Witnessed - The form must be signed by:
  The donor (the person giving the LPA).
  The attorney(s) (the person(s) managing affairs).
  A certificate provider (an independent person who confirms the donor understands their decision).
• Step 4: Register the LPA with the Office of the Public Guardian (OPG) - This process takes 8–10 weeks and incurs a fee.
• Step 5: Inform Your Mortgage Lender (if required) - Some lenders may request confirmation that an LPA is in place to ensure a plan is in place for mortgage.

Setting up a Lasting Power of Attorney is one of the most important steps you can take to protect your financial future.