What is a RIO?
A Retirement Interest-Only (RIO) Mortgage is a form of residential mortgage designed for older borrowers. Unlike Lifetime Mortgages or Home Reversion plans, a RIO Mortgage is not an equity release product.
You borrow a lump sum secured against your home and make monthly payments covering the interest only. The amount you originally borrowed does not reduce unless you choose to repay capital.
The loan is usually repaid when the last borrower dies or moves permanently into long-term care.
You remain the legal owner of your home throughout.
How does it work?
- Your income and affordability are assessed.
- You borrow a lump sum secured against your property.
- You make monthly payments covering the interest.
- The original loan amount is repaid when the home is sold.
Because you are paying the interest each month, the loan balance does not increase over time (provided payments are maintained).
You must be able to demonstrate that you can afford the repayments.
Who might it suit?
A RIO Mortgage plan may be considered by people who:
- Have sufficient and sustainable retirement income.
- Want to prevent interest from building up.
- Are comfortable committing to ongoing monthly repayments.
- Wish to remain in their home without a fixed mortgage term.
It is not suitable for everyone, and advice is essential.
Things to consider
- You must make monthly interest payments for the duration of the mortgage.
- If payments are not maintained, your home may be at risk.
- Affordability checks apply, based on income.
- It will reduce the value of your estate
A RIO Mortgage may not be suitable if your income is likely to reduce significantly in future.