You're on pension income and your interest-only mortgage is ending
For anyone fully on pension income who needs to repay an interest-only mortgage, this could be a way to keep paying just the interest each month.
Mortgages in retirement
Retirement interest-only mortgages, with just the interest to pay.
A retirement interest-only mortgage lets you borrow in later life and pay just the interest each month. The loan itself is repaid when your home is sold, whether that's because you decide to move, go into long-term care or pass away. There are lots of different retirement interest-only options, so we compare the whole market to find the lender whose criteria suit you.
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How it works
How does a retirement interest-only mortgage work?
- Step 1Take out the mortgageBorrow against your home to remortgage, release money or buy.
- Each monthPay the interestYour monthly payment covers the interest only, so the balance doesn't go down or grow.
- Over timeNo fixed end dateThere's no set term, so you won't be asked to repay the loan at a certain age.
- At the endRepaid from the saleRepaid when your home is eventually sold.
Who it's for
When could a retirement interest-only mortgage help?
This type of mortgage is often used by homeowners whose interest-only mortgage is ending, people buying a home in retirement and those who want to release money from their home while keeping monthly payments low.
Your lender has an upper age limit
Many standard mortgages have an upper age limit, but most retirement interest-only mortgages have higher age limits or none at all, so you can apply at an older age.
Buying a home in retirement
Some lenders offer retirement interest-only mortgages for purchases too, such as downsizing, moving closer to family or finding somewhere better suited to later life.
Releasing money from your home
Borrow against your home for things like home improvements or helping family, while keeping your monthly payments to the interest only.
Whether a retirement interest-only mortgage is right for you depends on your circumstances and the lender's criteria. We'll talk you through all of your options, not just this one.
Compare your options
How is a retirement interest-only mortgage different from other later-life options?
Think of it as sitting between a standard interest-only mortgage and a lifetime mortgage. You make monthly interest payments like a standard mortgage, but there's no fixed end date, and the loan is repaid from the sale of your home like a lifetime mortgage.
| Retirement interest-onlyRIO mortgage | Standard interest-onlyResidential mortgage | Lifetime mortgageA form of equity release | |
|---|---|---|---|
| Monthly payments | Interest each month | Interest each month | None required, although some let you pay the interest |
| End date | No fixed end date | A fixed term, often with a maximum age | No fixed end date |
| How it's repaid | From the sale of your home, whether you move, go into long-term care or pass away | At the end of the term, from your repayment plan | From the sale of your home, usually after death or a move into long-term care |
| Amount owed | Stays the same | Stays the same | Grows over time as interest is added, unless you make payments |
| Affordability check | Yes, based on your income in retirement | Yes, plus a plan to repay at the end of the term | Not usually, as monthly payments aren't required |
| Typical minimum age | 55, with some lenders from 50 | No minimum age | 55 |
Features depend on the individual lender and your circumstances.Read about equity release
Lender criteria
What do lenders look at for a retirement interest-only mortgage?
Lenders mainly look at your age, your income in retirement and how much your home is worth. For joint applications, they also check the payments would still be affordable for one of you on your own in the future.
Your ageThe youngest borrower usually needs to be 55 or over, with a few lenders starting from 50. There's usually no maximum age.
Your retirement incomeState, workplace and private pensions all count, and many lenders also consider income such as rental or investment income.
Future affordabilityFor joint borrowers, lenders check the remaining borrower could still afford the payments if one of you passes away.
Your home's valueLending typically goes up to 50% to 60% of your home's value, and the maximum can depend on your age.
The propertyIt usually needs to be your main home, and some lenders have restrictions on certain flats and non-standard properties.
Your credit historyLenders check your credit file, as with any mortgage. A past credit issue doesn't always rule you out.
Every lender sets its own criteria, so what's available depends on the individual lender and your circumstances.
From experience
Who usually comes to us for a RIO mortgage
Most of my retirement interest-only clients are 65 or over and coming up to, or already in, retirement. Typically they have an interest-only mortgage that needs repaying, with pension income coming in, and they want to settle without the worry of finding a lump sum.
Moving onto a retirement interest-only mortgage can replace the existing interest-only one, so they pay just the interest each month and the loan is repaid when the home is eventually sold. The lender still checks the interest is affordable from their retirement income.
Harry Mansell, CeMAPMortgage Specialist, Keyholder Mortgages
Based on real client cases, with personal details withheld. What’s possible depends on your circumstances and each lender’s criteria.
Who you'll speak to
Later-life advice from people who take their time.
Harry and Lois both advise on retirement interest-only mortgages. We'll explain everything clearly, at your pace, and you're welcome to have family with you on the call.
Harry Mansell
Mortgage SpecialistRIO specialistRetirement interest-only mortgages are one of Harry's specialisms, and he arranges a lot of them. If your interest-only mortgage is ending, your lender has an upper age limit or you're buying in retirement, he'll show you which lenders' criteria fit and explain how each option works.
Book a call with Harry
Lois Holder
Founder and DirectorLois is one of our later-life lending experts and regularly helps clients who are in or approaching retirement. If your interest-only mortgage is coming to an end or you want to borrow against your pension income, she'll compare the lenders whose criteria could suit you and talk you through each option at a pace that's right for you.
Book a call with LoisPrefer to meet in person? If you're local to Sudbury, you can arrange to meet us by appointment.
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Retirement interest-only FAQs
Your later-life questions, answered.
What people ask us most about retirement interest-only mortgages. For anything else, call us and we'll explain. Our retirement interest-only mortgage guide goes into more detail, and our equity release advice page explains the main alternative.
What is a retirement interest-only mortgage?
A retirement interest-only (RIO) mortgage is a mortgage for later life where you pay just the interest each month. There's no fixed end date, and the loan is normally repaid from the eventual sale of your home. Features depend on the lender and your circumstances.
Who can get a retirement interest-only mortgage?
Most lenders want the youngest borrower to be 55 or over, and a few start from 50. You'll need enough income in retirement, such as pensions, to afford the monthly interest, and the property usually needs to be your main home. Each lender sets its own criteria.
How much can I borrow with a retirement interest-only mortgage?
It depends on your income and your home's value. Lenders check you can afford the monthly interest from your retirement income, and most lend up to 50% to 60% of your home's value, with the maximum often depending on your age. The exact amount depends on the lender and your circumstances.
When does a retirement interest-only mortgage have to be repaid?
It's repaid when your home is sold, whether that's because you decide to move, go into long-term care or pass away. You can also repay it earlier, although early repayment charges may apply during a fixed rate, depending on the lender.
Can I get a fixed rate on a retirement interest-only mortgage?
Yes. Many lenders offer two and five-year fixed rates on retirement interest-only mortgages, as well as variable rates, so you know what your monthly interest payment will be. The rates and options available depend on the lender and your circumstances.
Is a retirement interest-only mortgage the same as equity release?
No. With a retirement interest-only mortgage you pay the interest every month, so the amount you owe stays the same, and lenders check you can afford the payments. With a lifetime mortgage, a form of equity release, monthly payments aren't required and the amount owed usually grows over time.
Can I replace my interest-only mortgage with a retirement interest-only mortgage?
Yes. If you're on pension income and your interest-only mortgage is ending, a retirement interest-only mortgage may let you keep paying just the interest each month, as long as you meet the lender's criteria for age, income and property value.
Can I buy a house with a retirement interest-only mortgage?
Yes. Purchases are possible with some lenders, for example when downsizing, moving closer to family or buying somewhere better suited to later life. You'll usually need a deposit, as most lenders lend up to 50% to 60% of the property's value, depending on the lender and your circumstances.
What happens to a joint retirement interest-only mortgage if one of us passes away?
The mortgage usually continues for the surviving borrower, who carries on paying the interest. That's why lenders check, when you apply, that the payments would still be affordable for either of you on your own. The loan is then repaid when the home is sold later on.
Are retirement interest-only mortgages regulated?
Yes. They're regulated by the Financial Conduct Authority in the same way as other residential mortgages, so lenders have to check the mortgage is affordable for you. Your home may be repossessed if you do not keep up the monthly payments.
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Let's talk about your plans.
Choose who you'd like to speak to, then pick a time that suits you. We'll call at the time you book, listen to what you need and talk you through your options.
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- Speak to Lois or Harry directly, not a call centre
- Advising clients in Suffolk, Essex and across the UK
Prefer to talk now? Call 01787 209880 or email [email protected]
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