Retirement interest only (RIO) mortgages and standard interest only lifetime mortgages are similar, as they allow your clients to pay the interest on the loan monthly. However, there are significant differences.
With both products, the loan is redeemed when your client (or both clients if borrowing jointly) dies, or goes into long-term care.
But there are some very important differences to consider when deciding the best option for your clients. The table below summarises the key differences between Lifetime Mortgages and RIOs.
| Lifetime Mortgages | RIOs |
| Your client can choose to stop making monthly payments and the mortgage will convert to an interest ‘roll up’ basis. | Your client must make every monthly repayment due throughout the term of the mortgage or until it’s redeemed.
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| The amount your client can borrow is based on their age and property value. | The amount they can borrow is based on their ability to pay the monthly interest payments. They’re able to borrow more but repayments can then be higher, potentially causing affordability issues. |
| They have the right to remain in their home until they (one or both of them if borrowing jointly) have died or move permanently into long-term care.
| If they fail to make their monthly repayments, their home is at risk of repossession. |
| Most products come with a No Negative Equity Guarantee, meaning the customer or their estate will never owe more than the value of the property when the mortgage becomes repayable. | If the property is worth less than the outstanding mortgage when it becomes repayable, your client or their estate will pay any resulting shortfall. |
We can help you
Need some help with next steps as you have a client that could benefit from considering it as part of their retirement income solution? We have different options to help you and our contact details are below.
Call: 01737 233297 Email: support@wearejust.co.uk Or visit: justadviser.com Lines are open Monday to Friday, 8.30am to 5.30pm
