What is a RIO?

Retirement interest-only mortgages, or RIOs, allow later-life clients to borrow on their home using an interest-only mortgage.

When a retirement interest-only mortgage is arranged, clients have to prove at the outset that regular interest payments can be afforded for the rest of their lives, as a RIO typically has no end date. Crucially, your clients will need to make regular interest payments until their property is sold and the loan is repaid in full.

Whilst RIOs and lifetime mortgages both enable lifetime borrowing on a client’s property, no affordability checks are required with a lifetime mortgage. This is because any interest or capital payments made by the client are merely voluntary, with the option available to switch to roll-up at any point.

As with a lifetime mortgage, a retirement interest-only mortgage is repaid in full when the property is sold, usually when the homeowner/s pass away or move into long-term care.

A retirement interest-only mortgage could be suited to clients aged 55+ who:

• Are facing the prospect of their conventional interest-only mortgage term coming to an end with no other means of repaying it, or
• Wish to borrow on their home to unlock a lump sum to spend however they choose
• Can afford the regular repayments
• Do not want the interest on their loan to roll up on a compound basis

Do you have clients aged 55+ considering a retirement interest-only mortgage? If so, refer them to Bower Partnerships to ensure they receive a first-class guidance and arrangement service.