RIO Affordability Calculator: Would the Payments Be Affordable?
A Retirement Interest-Only mortgage is approved mainly on whether you can afford the monthly interest payments. Use this RIO affordability calculator to get a rough sense of where you stand.
Monthly interest payment
This is a rough guide only, not a lending decision. Affordability is assessed individually by each lender, based on income, outgoings, credit history and other factors. Speak to a qualified adviser to understand your actual options.
How lenders assess affordability
Lenders look at your income, your existing outgoings, your age, and how long the mortgage term would run. Most want to see the interest payments comfortably covered by guaranteed income, such as a pension, rather than income that could reduce later. Some lenders also apply stricter limits as you get older.
How the RIO affordability calculator works
The calculator works out the monthly interest on the amount you would like to borrow, then compares your total monthly borrowing costs with your income.
- Monthly interest is the loan amount multiplied by the interest rate, divided by 12. With a retirement interest-only (RIO) mortgage you pay only the interest, so this is the regular payment and the loan itself does not go down.
- Your borrowing ratio is the monthly interest plus any existing debt or mortgage payments, as a share of your monthly household income after tax.
The result is described in one of three broad bands: under 30% of your income, 30% to 45%, and over 45%. These bands are a simple guide used by this tool, not any lender's criteria.
The interest rate box starts at 6.5%. This is an illustrative starting point rather than a current market rate, so change it if you have a quote or an adviser's figure.
A worked example
Borrowing £100,000 at an illustrative 6.5% gives monthly interest of about £541.67. If your household income after tax is £2,400 a month and you have no other debts, the interest takes up around 23% of your income, which falls in the lowest band. If one partner's pension stopped and the income dropped to £1,500 a month, the same payment would take up around 36%.
What the calculator does not cover
The calculator looks only at the monthly interest against your income. A lender will also consider how much you want to borrow compared with your home's value, the property itself, your credit history and your wider outgoings. It does not include arrangement or valuation fees, or the effect of the rate changing after any fixed period ends. If a rate could rise, it can help to try a higher figure to see how the payments would change.
Planning for the future, including a surviving partner
A RIO mortgage usually has no fixed end date and is repaid from the sale of your home when the last borrower dies or moves into long-term care. That means the interest may need to be paid for many years. It is worth thinking about how your income could change, such as a pension that reduces on death, or higher living costs later in life.
Running the calculator again with a lower income is a simple way to see how much headroom you might have. The loan is regulated by the Financial Conduct Authority (FCA), and lenders must check that the payments are affordable before they lend.
Our guide to retirement interest-only mortgages explains how they work, who may qualify and the alternatives to consider, including equity release and downsizing.
Frequently asked questions
What income can I include in the calculator?
Use your regular household income after tax, such as State Pension, workplace or private pensions, annuity income and reliable investment income. Lenders generally prefer guaranteed income that will continue for life, so income that could stop or fall, such as part-time earnings, may be treated more cautiously in a real application.
What interest rate should I enter?
The calculator starts with an illustrative rate, which you can change. Retirement interest-only (RIO) mortgage rates vary between lenders and over time, and depend on how much you borrow against your home. An FCA-regulated adviser can tell you the rates currently available for your circumstances.
Why do lenders look at a single income as well as a joint one?
A RIO mortgage usually runs until the last borrower dies or moves into long-term care, so lenders check that the survivor could still afford the interest. Pensions often fall when one partner dies, which is why it can help to run the calculator again using only the income one of you would have.
Does the calculator show whether I would be approved?
No. It is a rough guide to how the monthly interest compares with your income. Lenders also consider your outgoings, credit history, age, property and the amount you want to borrow against its value. See our guide to RIO eligibility and affordability for what lenders typically check.
Is a RIO mortgage cheaper than equity release?
It can cost less overall because you pay the interest each month, so the debt does not grow. The trade-off is that the payments must be affordable for as long as the loan runs. Equity release needs no monthly payments, but interest usually compounds. Which suits you depends on your income and plans.