Retirement interest-only (RIO) mortgages

A retirement interest-only (RIO) mortgage lets you borrow against your home while paying only the interest each month. The amount you borrowed, the capital, is not repaid monthly at all: with most RIO mortgages you repay the loan only when you sell the property, move into residential care or die¹. Unlike a standard interest-only mortgage, there is no repayment vehicle to arrange, because the sale of the home itself is what clears the debt.

The monthly payments are smaller than on a repayment mortgage for the same loan, and the amount owed stays the same rather than growing, because interest is paid as it is charged rather than being added to the loan². The Financial Conduct Authority (FCA) formally defines a RIO mortgage as an interest-only mortgage restricted to older customers above a specified age, under which the lender cannot demand full repayment until a specified life event occurs, unless you breach your contractual obligations, including the obligation to pay the interest³.

These mortgages exist because more people are carrying debt later in life: Which? has reported that over half of borrowers will still have a mortgage at 65⁴. A RIO mortgage is one of the main ways of borrowing, or refinancing, into retirement.

How a RIO mortgage works: interest now, the loan repaid when the home is sold

Each month you pay the interest the loan accrues, and nothing towards the capital. The Equity Release Council's consumer guide describes the arrangement plainly: you make interest-only payments each month for life, the loan amount stays the same with no roll-up of interest, and the loan is repaid when you pass away or move into long-term care². Because interest never compounds onto the debt, the balance at the end is the same balance you started with, which is the key difference from a lifetime mortgage where interest usually rolls up.

There is no fixed end date. Family Building Society's guidance explains that repayment does not have to be made until a specified life event occurs⁷. Most lenders define those events the same way: the sale of the property, the death of the last surviving borrower, or a move into long-term care. Mansfield Building Society, for example, requires the repayment strategy to be the sale of the property when the surviving borrower moves into long-term care or dies¹⁰.

A minority of RIO mortgages work differently and carry a term like a regular mortgage, meaning you repay after a set number of years or when you reach a certain age, 90 for example⁵. Before applying, it is worth checking which kind is on offer, because a mortgage with a fixed term puts the repayment problem back on you at the end of it, while one with no term does not.

The FCA's definition also contains the important protection: the lender is not entitled to seek full repayment until one of the specified life events occurs, unless you breach your contractual obligations, which includes failing to pay the interest³. In other words, as long as the monthly interest is paid, the loan cannot be called in early.

Who can get one: age, income and property

RIO mortgages are restricted to older customers above a specified age, with each lender setting its own threshold³. In practice the entry point is usually 55: Cambridge Building Society asks applicants to be over 55¹¹, Legal & General makes its product available to clients aged 55 and over¹³, and Family Building Society offers RIO mortgages to customers aged 55 and over⁹. One specialist lender, Livemore, goes lower, with a minimum age of 50, and states its RIO mortgages are available whether you are working or retired⁶. Lloyds Bank describes RIO mortgages as aimed at customers over the age of 55¹⁴.

Age is not the only filter. Cambridge Building Society requires applicants to be retired, and for joint applications requires the youngest applicant to be under 85 at the time of application¹¹. Beyond age and status, Which? notes that lender requirements can include a minimum property value, a minimum income and a minimum loan size, with borrowing based on an affordability assessment of pension, savings or investment income¹. The Nottingham, for its part, describes its RIO mortgages as helping over-55s free up money in retirement¹².

Property type matters too. Cambridge Building Society lends only on residential properties in England and Wales¹¹, so borrowers in Scotland and Northern Ireland need a lender that covers their nation. Where a mortgage's terms include restrictions on who may live in the property, the rules require those restrictions to be disclosed to you before an application is made¹⁵.

How much you can borrow: typically 50% to 75% of your home's value

How much a lender will advance depends on two things: the loan-to-value (LTV) limit in its criteria, and what the affordability assessment says you can service each month. The two pull in different directions, and the lower of the two wins.

Lenders' maximum LTVs vary widely. As an example of typical limits, Which? suggests you might be able to borrow 50% of the property's value on an interest-only basis, or 65% on a capital repayment basis⁵. The Nottingham states its maximum loan to value is currently 65%¹⁶. Legal & General determines the actual loan by an affordability assessment up to a maximum of 60% of the property value⁸. Livemore's criteria allow a maximum LTV of 75%⁶. So across the market the range runs from around 50% to 75%, but any individual offer may be well below the headline maximum once income is taken into account.

For comparison, a lifetime mortgage usually allows less at the same age. Which? reports that at age 65 you can typically borrow between 35% and 39% of your home's market value, rising with age¹⁷. The Financial Ombudsman Service notes lifetime mortgage lenders usually limit borrowing to around 60% of the home's value¹⁸. A RIO mortgage can therefore release more, but only if you can afford the monthly interest payments, which a lifetime mortgage does not require.

Monthly payments and how affordability is tested

The affordability test on a RIO mortgage is lighter than on a standard residential mortgage, because you only have to prove you can afford the interest, rather than going through the more onerous income proof a full repayment mortgage demands¹. That is the trade the product makes: smaller monthly payments, tested against pension and other retirement income, in exchange for the capital staying outstanding.

The rules support this. Under the FCA's mortgage rules, where lending is under a RIO mortgage the lender may assess affordability on the basis of payment of interest only over the term, and need not treat the cost of the repayment strategy as committed expenditure, because the sale of the property is the accepted repayment strategy¹⁹. The Nottingham describes the sale of the property as the only repayment vehicle assessed at affordability¹².

For joint applicants the test is stricter, and it is designed around what happens when one borrower dies. Cambridge Building Society requires each borrower to demonstrate affordability individually, using forecast retirement incomes, so each can afford the payment alone should the other pass away¹¹. Family Building Society assesses affordability to ensure you can meet the monthly interest payments, and for joint borrowers each must be able to afford them should the other die²⁰. The Nottingham's guidance says affordability is typically tested on both applicants, with the lower earner used, to ensure a surviving borrower can remain in the property¹⁶. You will also go through credit history and other checks¹⁶.

Costs, rates and paying off some of the capital

RIO mortgages come with a choice of rate types in the same way ordinary mortgages do. Cambridge Building Society, for example, offers both variable and fixed interest rate RIO mortgages²¹. The same considerations as elsewhere in the market apply: a fixed rate gives certainty over the payment, while a variable rate can move. The site's guides to fixed rate mortgages, tracker mortgages and the standard variable rate explain how each behaves.

The cost of interest-only borrowing over a lifetime should not be underestimated. Which? gives a worked example comparing a £250,000 interest-only mortgage with a repayment mortgage on the same terms over 25 years: the repayment mortgage would cost £105,800 in interest, making it £81,700 cheaper than the interest-only mortgage over the period²². A RIO mortgage can run for much longer than 25 years, since it has no maximum term, so the total interest paid over a lifetime can be substantial even though the monthly payment is small.

Some RIO mortgages soften this. Which? notes that some allow you to repay some capital as well as interest, cutting the loan size over time¹, and Lloyds Bank makes the same point: with certain retirement interest-only deals you might be able to pay off some of the actual mortgage as well as the interest¹⁴. Where a deal is fixed for an initial period, overpaying or repaying early can trigger an early repayment charge, so the terms of the specific deal matter. The guide to making overpayments covers how part-repayment works in practice.

Effects on benefits, tax and inheritance

This is the area the rules treat most carefully, because releasing a lump sum from your home can change what the state pays you. Where a RIO mortgage will be used to release capital, the firm must inform you that taking out the mortgage may affect your tax position and your entitlement to benefits, and that advice on these issues can be taken before applying¹⁵. The FCA's rules go further: the firm must consider whether the benefits to you outweigh any adverse effect on your entitlement to means-tested benefits and on your tax position²³. Legal & General tells its customers the same in plain terms: taking out one of its RIO mortgages could affect any means-tested benefits or pension credit you receive⁸.

Where the firm does not know enough about your means-tested benefits or tax allowances, it must refer you to an appropriate source, such as the Pension Service, HM Revenue and Customs or a Citizens Advice Bureau, to establish the information¹⁵. If you claim any means-tested benefit, having that check done before committing matters, because the effect can be to reduce or remove the benefit.

Inheritance is affected in a more direct way. The loan is repaid from the sale of the home, so whatever is borrowed, plus the costs of selling, comes off what your estate passes on. The amount owed does not grow over time as it does with a rolled-up lifetime mortgage, which makes the effect on inheritance more predictable, but it is not zero. The site's guide to equity release and benefits covers the interaction with benefits and inheritance in more depth.

RIO or lifetime mortgage: how each one behaves

A RIO mortgage and a lifetime mortgage both let an older homeowner borrow against the value of a property without moving out, but they behave very differently. The core difference is what happens to interest. On a RIO mortgage you pay the interest monthly and the loan stays the same size². On a lifetime mortgage the interest is usually added to the loan, so the debt compounds and grows over the years.

The second difference is affordability. A lifetime mortgage requires no monthly payment at all, which suits people with little spare income. A RIO mortgage requires a monthly payment forever, so it suits people with reliable pension income. StepChange notes that for newer retirement mortgages and interest-only lifetime mortgages, affordability will also be considered²⁴, and some products blur the line: an interest-only lifetime mortgage lets you borrow against your home while living there, with the option to pay all or part of the monthly interest, repaid when the home is sold²⁴.

The third difference is how much you can release. Lifetime mortgage plans usually allow you to release from 20% to 60% of the value of your home²⁵, with the amount rising with age: typically 35% to 39% at 65¹⁷, and around 60% as a usual ceiling¹⁸. RIO maximum LTVs run from 50% to 75% depending on the lender⁵, but only for borrowers who can pass the affordability test. The dedicated comparison page on RIO mortgages versus lifetime mortgages and the guide to equity release set the two side by side.

What can go wrong: missed payments, repossession and a smaller estate

A RIO mortgage is secured on your home, and the standard warning applies: your home may be repossessed if you miss payments. Gov.uk states that if you miss your mortgage repayments and cannot agree a repayment plan, your lender might start court action to repossess your home²⁶. Most lenders do not start repossession action until you have missed at least three payments²⁷, which gives some room to act, but the risk is real and the FCA's definition of a RIO mortgage is explicit that breaching your obligation to pay the interest allows the lender to terminate the agreement³.

The danger with any interest-only mortgage is the capital at the end. Which? uses the example of a £300,000 interest-only loan: at the end of the term you would need to repay the £300,000 you borrowed in the first place, and if you cannot, you may need to sell the property or face repossession²⁸. On a RIO mortgage with no term, that cliff edge is replaced by the life-event trigger, but the debt still has to be met from the house when the time comes, leaving less for the estate.

The FCA's rules on interest-only lending list repayment strategies that are not acceptable, and they are a useful checklist of what not to rely on: an expectation that the property's value will increase, an expected but uncertain inheritance, or selling your main residence without considering whether the sale would repay the capital and allow purchase of a cheaper property²⁹. Thousands of borrowers who took interest-only mortgages before the credit crunch have no plan in place for repaying the capital, leaving them facing the prospect of selling up and downsizing¹.

If payments become difficult, help exists. The guides to mortgage arrears, what a lender must do before going to court and repossession in England and Wales set out the process, and free debt advice is available from charities such as StepChange²⁴.

What happens when you move home, remortgage or die

The loan ends when a significant life event occurs: the sale of the property, the homeowner or homeowners passing away, or a move into long-term care²¹. In each case the home is sold and the proceeds repay the loan, with anything left going to you or your estate.

For joint borrowers, the death of one does not end the mortgage. The surviving borrower stays in the home and continues the interest payments, and the loan becomes repayable only when the last surviving borrower dies or moves into care. This is why the affordability rules require the firm to consider the ability of a single borrower to continue making the required payments if the other dies, taking into account evidence such as pensions payable to the surviving spouse or civil partner³⁰. Family Building Society puts the same requirement on applicants directly: joint applicants must prove the mortgage is affordable on one income if the other borrower passes away⁷.

Moving home does not necessarily mean repaying the loan, but it depends on the lender's terms; the guide to porting a mortgage when you move explains how transferring a mortgage works. Remortgaging to a different deal or lender is also possible, and the rules treat a switch into a RIO mortgage as a variation of the existing contract: where a firm proposes to vary the term of a regulated mortgage so that it becomes a RIO mortgage, the rate-switch rules apply as though it were a switch, and the disclosure rules apply as though a new transaction were being entered into³¹. The guides to remortgaging and product transfers cover the mechanics.

Advice and applying

Some RIO mortgages can only be arranged through an adviser. Legal & General states its Retirement Interest Only Mortgage can only be taken out with a mortgage adviser⁸. Mansfield Building Society requires independent legal advice for its RIO mortgages, to ensure a Lasting Power of Attorney is in place¹⁰. Livemore's criteria confirm an affordability assessment is required⁶. The guide to mortgage advice explains the difference between applying through a broker and going direct, and the page on broker-only lenders covers lenders you cannot approach yourself.

Two protections apply during the process. First, the firm must tell you that a lifetime mortgage may be available and more appropriate for your circumstances¹⁵. Second, where the mortgage will release capital, the firm must weigh the benefits against the effect on your benefits and tax position, and refer you to the Pension Service, HMRC or a Citizens Advice Bureau if it lacks the information to do that¹⁵. The document you will be given, the ESIS illustration, must show the costs and assumptions, including the firm's reasonable estimate of the term where you cannot suggest a repayment date¹⁵.

If something goes wrong with the sale or the servicing of the mortgage, complaints can be taken to the Financial Ombudsman Service, which handles complaints about mortgages and equity release.

Who offers RIO mortgages in the UK

RIO mortgages are a specialist corner of the market served mainly by building societies, one major insurer and one specialist lender. Mansfield Building Society offers RIO mortgages as an alternative to equity release, enabling retired borrowers to raise funds against the equity in their property¹⁰. Cambridge Building Society offers RIO mortgages for joint and sole applicants on residential properties in England and Wales, on both variable and fixed rates¹¹. Family Building Society offers RIO mortgages with no requirement to borrow over a fixed term, available for purchase and remortgage and for existing customers who wish to product switch or borrow more⁹.

The Marsden Building Society describes its RIO mortgage as an interest-only mortgage with no maximum term, with the capital repaid when a life event occurs, such as the last remaining borrower going into long-term care³². The Nottingham offers RIO mortgages that help over-55s free up money in retirement, with borrowing periods of up to 40 years where a term is required¹². Legal & General offers a Retirement Interest Only Mortgage available to clients aged 55 and over, arranged through a mortgage adviser¹³. Livemore offers RIO mortgages from age 50, whether working or retired, with no maximum term⁶. Lloyds Bank publishes guidance on getting a mortgage when retired, including RIO mortgages, for its own customers¹⁴.

The market is growing: UK Finance reported new later-life lending up 5.9 per cent year on year in the second quarter of 2026³³. The directory of equity release and later-life mortgage providers lists the firms operating in this market, and the guide to specialist lenders explains how they differ from the high-street banks.