Retirement Interest-Only Mortgages Explained (UK)
- Nick Parker
- 3 hours ago
- 3 min read
How retirement interest-only mortgages work, who they may suit, and how they compare with other later-life options.
Introduction
A retirement interest-only mortgage (often shortened to RIO mortgage) is a later-life borrowing option that allows homeowners to release money from their property while making regular interest payments.
RIO mortgages are sometimes considered as an alternative to equity release, particularly by homeowners who have sufficient income to meet ongoing payments. This guide explains how RIO mortgages work, their key features, and how they compare with other later-life financial options.
What is a retirement interest-only mortgage?
A retirement interest-only mortgage is a type of mortgage designed for older borrowers, typically aged 55 or over.
With a RIO mortgage:
You borrow money secured against your home
You make monthly interest payments
The original loan amount is repaid when:
You pass away, or
You move into long-term care
Unlike traditional interest-only mortgages, there is no fixed end date, provided you continue to meet the interest payments.
How does a RIO mortgage work?
The key feature of a RIO mortgage is that the capital balance does not reduce unless you choose to make voluntary repayments.
Instead:
Monthly payments cover interest only
The loan remains outstanding for life
The property is sold at the end of the plan to repay the balance
Because monthly payments are required, lenders assess affordability carefully.
Who may be eligible for a RIO mortgage?
Eligibility criteria vary by lender, but commonly include:
Minimum age requirements (often 55+)
Proof of sustainable retirement income
A property that meets lender criteria
Passing affordability and credit checks
Income sources considered may include:
Pensions
Employment income
Investment income
Rental income
How RIO mortgages differ from equity release
RIO mortgages and equity release are often compared, but they work differently.
Monthly repayments
RIO mortgage: Monthly interest payments are required
Equity release: Some plans have no mandatory monthly repayments
Impact on inheritance
RIO mortgage: Interest does not roll up, which may help preserve inheritance
Equity release: Interest can compound over time, reducing estate value
Affordability
RIO mortgage: Requires sufficient ongoing income
Equity release: Less emphasis on income affordability
Pros and cons of retirement interest-only mortgages
Potential benefits
No interest roll-up
May protect inheritance
Stay in your home
Familiar mortgage structure
Potential drawbacks
Ongoing monthly payments required
Risk if income changes
Property may still need to be sold later
Fewer providers than standard mortgages
RIO mortgages compared with downsizing
Some homeowners consider downsizing instead of borrowing.
Downsizing involves:
Selling your current home
Buying a smaller or less expensive property
Releasing equity without taking on debt
Downsizing avoids interest costs but requires moving home, which may not be suitable for everyone.
Are there alternatives to RIO mortgages?
Depending on your circumstances, alternatives may include:
Equity release
Downsizing
Using savings or pension income
Family support arrangements
Understanding how these options compare can help you decide whether a RIO mortgage is appropriate.
Is a RIO mortgage right for you?
A retirement interest-only mortgage may be suitable if:
You have reliable retirement income
You are comfortable making monthly payments
You want to avoid interest compounding
You wish to preserve inheritance where possible
It may be less suitable if:
Your income is uncertain
You prefer not to commit to regular payments
You may need flexibility later in life
Not sure where to start?
If you’re unsure how a RIO mortgage compares with other later-life options, exploring all options side-by-side can help clarify your next steps.
Free to use. No obligation. We do not provide financial advice.
Frequently asked questions
Are retirement interest-only mortgages regulated?
Yes. RIO mortgages are regulated in the UK, and advice from an FCA-authorised adviser is required.
Can I repay a RIO mortgage early?
Some lenders allow early repayment, but charges may apply depending on the terms.
What happens if I can’t make the payments?
If payments are missed, the lender may take action. It’s important to consider affordability carefully.
Is a RIO mortgage better than equity release?
Neither option is universally better. Suitability depends on income, priorities, and long-term plans.
This guide provides general information only and should not be considered financial advice. Retirement interest-only mortgages are regulated in the UK, and advice from an FCA-regulated adviser is required before proceeding.
