Retirement Interest Only (RIO) Mortgage

Can I switch to a retirement interest only mortgage? When would this apply?

Yes, you can switch at any time as long as you meet the age requirements – which means you’re over 55. It’s useful for people who are currently on an interest only mortgage and transitioning, or even if you’re on a repayment mortgage and don’t want to pay the capital back right now.

It’s suitable if you have enough equity to take care of you in later life. For a couple, if one of you were to pass away, that equity is enough to look after the other one. It’s not the most upbeat of topics, but that’s sometimes the reality.

As long as affordability is met based on your retirement income, and you understand what the mortgage product does and how it works, it’s completely up to you if you want to switch.

What are the interest rates for retirement interest only mortgages?

As at the time of recording in August 2025 the rates are slightly higher than standard mortgage rates – just because it’s a more specialist, niche proposition. It’s becoming less specialist, and it’s definitely cheaper than equity release rates.

You can have fixed rates or variable products like a tracker, discount or capped rates. It can vary depending on the product you’re looking for. Rates can also vary depending on how old the applicants are, the loan size and the lender. At the moment in August 2025 I would say that rates are typically between 4% to 6.5%.

That is obviously a big range, but it really depends on the circumstances. Hopefully we’ll have a chat with you about affordability and costs and find something that’s within budget.

How much can I borrow on a RIO mortgage?

The main thing to consider is that affordability is based on pension income. If you’re employed at the moment but intend to retire, the employed income won’t be part of affordability, as it’s not sustainable.

Lenders are offering you an indefinite term, so they can’t base it on an income that’s likely to be reduced when you retire and go onto a pension.

The loan will also depend on how much you’re borrowing compared to what the house is worth. Typically lenders go to 50% to 60% of the property value. They want to leave a decent amount of equity in the property – so, for a couple, if one partner were to pass away or had to go into long-term care, the other is left with enough money to take care of themselves.

How do I know if a RIO mortgage is right for me?

It’s very client-specific. It’s about considering your goals and being aware that you’re not going to reduce the balance.

Your equity is only going to increase if the house price goes up. You need to have enough equity in the property to meet your preferences. You might plan to downsize later, and release some money from the property now. People like to use some of the money they’ve earned – obviously we can’t take it with us.

It’s usually a case of wanting to stay in the home long-term. Some clients aren’t ready to move out yet. They’ve usually been there for a long time and a RIO gives them a way to legitimately stay in the property for as long as they want, without having to pay off the mortgage or sell.

It’s usually a good fit for people that can service the monthly interest and just want to avoid paying the capital back. Obviously if you can service the loan, it’s fine. If you can’t, equity release is another option. But a RIO is always something I would consider before equity release.

I always recommend speaking to someone for mortgage advice – but especially in this case. It’s well worth understanding how it looks, what it’s going to cost and how it’s going to work – because it’s just that little bit harder to navigate.

How do I prove my income?

With the increasing number of lenders coming into the market, it’s less intense than it once was. We will need things like pension statements, whether that be state, private or workplace pensions.

You may have annuity income or investment income where we would require an annual statement, or potentially a set of bank statements showing the income into the account.

Some lenders will even accept rental income, with evidence in the form of tenancy agreements, tax calculations or SA302s.

You won’t obviously have to produce all those documents. Most people just need to evidence pension income. Depending on the income we’re using, we’ll explain which documents we need.

How will I repay a retirement interest only mortgage?

The loan is usually repaid when either all the clients pass away, or one of the clients passes away and the other wants to sell the property.

It could also be repaid if the property is sold because a client is moving into long-term care. The equity left in the property would be released to the clients.

There’s no need to have a repayment plan, as with a traditional interest only mortgage, because that’s the assumed approach. If you’ve got other properties or investments, that could also potentially be used, but it’s usually based on the sale of the property.

What are the advantages and disadvantages of a RIO mortgage?

We’ve already covered a lot of these points, so I’ll keep them brief. The main advantage of a RIO mortgage is that you get to stay in your house without downsizing. You won’t have to pay back the loan within a certain timeframe or term.

In terms of disadvantages, you have to make monthly payments – whereas with equity release you won’t. It’s worth considering how much they will be and checking if they’re affordable. Affordability is crucial. Based on the lender’s calculations, your pension income needs to ensure you can borrow what you want to.

There can be fewer lenders for a RIO mortgage, although usually more than for equity release. [How retirement interest-only mortgages work – Rest Less, Your Guide To The Top Equity Release Companies]

I would only recommend a RIO if it’s contextually right for the client. I wouldn’t just suggest this because you’ve reached the age of 55. It’s more designed for older borrowers.

Another disadvantage is that the property has to be sold on death or going into long-term care. So it’s worth considering that if you originally planned to let your children inherit the property. There could be a way they can pay off the mortgage, however – or they may be happy to just receive the equity.

How can a mortgage broker help here?

I would always suggest talking to someone to navigate the landscape, work out affordability, give you the costs and identify the most suitable lender. It’s also invaluable to pick their brains, bounce ideas off them and compare all your options.

With any mortgage, but especially a RIO, it’s worth having someone experienced on your side. There’s no detriment to having someone in your corner getting you the most appropriate deal.

Even if you’re not at that age or position yet, it’s something to bear in mind for the future. It’s always good to have a plan.

Please note, for Equity Release, Major Money Matters acts as an introducer only.