Equity Release, Retirement Interest Only (RIO), and Residential Interest Only Mortgages for Over 50s
Empowering you with knowledge
Understanding the nuances between these options is critical. Equity Release might be more suited for those who do not have a regular income but own a property outright and are comfortable with the debt increasing over time.
The interest on the debt can be paid with Equity Release and often part of the capital amount too. This prevents the loan increasing, in fact the original debt can be reduced with overpayments. RIO mortgages are ideal for retirees who can afford ongoing interest payments and wish to maintain ownership of their home. In contrast, residential interest-only mortgages for over 50s are suitable for those with a definite repayment strategy but may not be geared specifically towards retirement needs.
Each option carries its own risks and benefits, and it is crucial to consider these in the context of your long-term financial planning and retirement goals. Advice Guru is here to enable you to watch, listen, read about and discuss your alternatives. When you are ready to discuss your individual situation with a qualified, experienced Advisor, we can match you with one.
Equity Release
This option allows homeowners, typically over the age of 55, to access the equity tied up in their home without the need to move. The two main types of Equity Release schemes are Lifetime Mortgages and Home Reversion Plans.
Lifetime Mortgages. These are the most common form of Equity Release. A loan is secured against your home which does not have to be repaid until you pass away or enter long-term care.
Home Reversion Plan. Less common, these involve selling a part or all of your home to a home reversion provider. They pay you a lump sum or regular payments in exchange. You retain the right to continue living in the property rent free.
RIO Mortgages
RIO stands for Retirement Interest Only and are a newer type of mortgage specifically designed for older borrowers.
They differ from standard residential interest-only mortgages in two key ways: there is no set end date, and the loan is usually only repaid when you sell your home, move into long-term care, or pass away.
This option is beneficial for those with a stable income in retirement who can continue to cover the interest payments. It is a loan secured against your home, requiring monthly interest payments.
Interest Only
These are standard interest-only mortgages available to individuals over the age of 50. Unlike RIOs, these mortgages have a fixed end date by which the loan must be repaid.
This type of mortgage may suit those who have a clear and credible repayment strategy, such as the sale of another property, investments, or savings.
They are different from RIOs in that they require a repayment plan and are not specifically tailored to retirement planning.
Other Lending
It may be that considering alternative types of lending may be a better idea for you. These are generally split into Secured Lending and Unsecured Lending.
Secured Lending simply means that the loan is taken out with your property being the security for the lender. Examples of these could be a Buy To Let Mortgage, a Bridging Loan.
Unsecured lending includes things like Credit Cards, Unsecured loans and overdrafts. We do not advise on these but can put you in touch with someone who does.