Expert VerifiedRetirement Interest Only Mortgages: Key Facts for 2025
- Last Updated: 05 Aug 2025
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Key Takeaways...
- RIO mortgages allow interest-only payments during retirement, with the capital repaid at the end of the term.
- Available to applicants aged 55+, depending on lender criteria and affordability.
- Different from lifetime mortgages, as you must make regular payments with RIOs.
- 2025 rates remain competitive, but vary based on age, loan amount, and lender.
- Borrowing amounts are based on income, not property value alone.
- Useful for those with pensions or other income, looking to release funds without selling their home.
- The mortgage is usually repaid when the borrower dies or sells the property.
- Comparing deals and getting advice is crucial to finding the right option for your retirement needs.
If you are over 55 and looking for a way to stay in your home, reduce your monthly mortgage payments, or release some equity, you may be interested in a retirement interest-only mortgage (RIO).
According to a survey by Finder UK, the average pension pot in the UK for all British citizens (both retired and non-retired) stands at just £42,651, which is far below the amount needed to fund a comfortable retirement.1
This shows the importance of planning ahead and finding the best way to make your money last in later life.
In This Article, You Will Discover:
At EveryInvestor, we aim to provide you with helpful and impartial information on equity release and alternatives to equity release in the UK based on our research and experience.
We aim to simplify complicated topics so you can make informed decisions about your retirement finances.
Retirement interest-only mortgages and what they can offer you:
What Is a Retirement Interest Only Mortgage (RIO)? Simple Definition and How It Works
A RIO mortgage is a later-life loan secured against your home, where you pay only the interest each month. The capital is repaid when you sell your property, move into long-term care, or pass away. Unlike standard interest-only mortgages, RIOs have no fixed end date, offering lifelong flexibility for retirees who can demonstrate ongoing affordability.
For a detailed breakdown of costs and considerations, visit the Equity Release Costs Checklist.
How Do RIO Mortgages Work in 2025?
RIO mortgages are designed for older homeowners who want to reduce monthly payments and remain in their home. You must prove you can afford the interest payments, typically from pension income or investments. The loan is repaid from the sale of your home when the last borrower dies or moves into care.
Key Features
- Interest-Only Payments: You pay only the interest each month, keeping monthly costs lower than standard repayment mortgages.
- No Fixed Term: The mortgage lasts until a specified life event, such as death or moving into care.
- Affordability Checks: Lenders assess your income and outgoings to ensure you can maintain payments for life.
- Inheritance Impact: The capital owed is repaid from your estate, reducing the inheritance left to beneficiaries.
RIO Mortgages vs. Lifetime Mortgages: Key Differences for 2025 Borrowers
While both products help older homeowners unlock property wealth, there are crucial differences:
| Feature | RIO Mortgage | Lifetime Mortgage |
|---|---|---|
| Repayments | Monthly interest only | No repayments required (unless you choose to) |
| Affordability Check | Yes, based on income | No, based on property value and age |
| Loan Repayment | On death, sale, or move to care | On death, sale, or move to care |
| Inheritance Impact | Capital remains until end, more equity preserved | Interest compounds, reducing equity over time |
| Regulation | FCA-regulated, strict affordability | FCA-regulated, ERC standards apply |
This means you retain more equity in your property and can pass on more inheritance to your family.
Who Can Get a Retirement Interest Only Mortgage? 2025 Eligibility and Income Requirements
People aged 55 or over who own a home in England, Wales, or mainland Scotland are eligible for the best retirement interest-only mortgages.3
In addition, you will need to have a reliable source of income from pensions, savings, or investments, and be able to afford the monthly interest payments.
Be sure to consider:
You will also need to meet the lender’s criteria for credit history, property type, and loan size.
It is important to note that specific lending criteria can vary between providers and the plans they offer.
This makes it even more important to consult a professional later-life lending advisor or broker to navigate the intricacies of different plans and find the one that best suits your needs.
What Are the Tax Implications of Taking Out a Retirement Interest-Only Mortgage?
Taking out a retirement interest-only mortgage may have tax implications, particularly on inheritance tax and potential impacts on benefits, requiring careful financial planning.
The loan itself is not taxable, but the way you use the borrowed funds can affect your tax situation.
For instance, if you invest the money or use it to generate income, this could be subject to taxation.
How Do RIO Mortgages Work in 2025? Interest Rates, Terms, and Repayment Costs
A RIO mortgage works like any other mortgage, except that you only need to prove that you can afford the monthly interest payments, not the capital repayment.
The amount you can borrow will depend on your income, outgoings, age, and property value.
You can use a RIO mortgage to buy a new home or remortgage your existing one.
Some RIO mortgages also allow you to repay some of the capital as well as the interest, which can reduce the size of your loan over time and leave more equity for your heirs.4
RIO Mortgages Rates: Rate and Fee Expectations
RIO mortgage rates typically range from around 3% to 5%, depending on factors such as the lender, loan amount, and borrower’s financial profile.
Fees may include arrangement fees and legal costs, all of which should be considered when comparing products, typically ranging from £500 to £1,500 depending on the lender and the complexity of the mortgage.
These may include:
- Application fees
- Valuation fees
- Legal fees
- Product fees
- Arrangement fees
- Broker fees (if you use one)
These fees can vary depending on the lender and the product you choose, so ensure you seek professional financial advice and compare them before applying for an RIO mortgage.
Remember...
You may also need to pay an early repayment charge if you decide to pay off your RIO mortgage before it ends.
RIO Mortgages for Couples vs. Individuals
For couples, retirement interest-only mortgages often require repayment upon the second partner's death or move to long-term care, differing from individual agreements where repayment triggers on the first occurrence.
Should one partner pass away or move into long-term care, the surviving partner is not immediately required to repay the loan.
This arrangement allows them to continue living in the home without the immediate financial burden of repaying the mortgage.
In contrast...
For an individual borrower, the RIO mortgage's repayment is closely tied to their personal life circumstances.
If they move into long-term care or pass away, the loan repayment becomes due. In such cases, the individual's estate is responsible for settling the debt, usually through the sale of the property.
This scenario emphasises the importance of planning for how the loan will be repaid to avoid financial difficulties for any beneficiaries or executors handling the estate.
What Are the Benefits and Risks of a RIO Mortgage in Retirement?
The benefits of RIO Mortgages include lower monthly costs and home retention, while risks involve potential interest accumulation and impacts on inheritance.
What Are the Advantages of Retirement Interest-Only Mortgages for Pensioners?
Some advantages of an RIO mortgage include reducing your monthly repayments and giving you more financial stability in retirement.
Other advantages are...
- You can stay in your home for as long as you want, provided that you keep up with your interest payments and meet any other terms and conditions.
- You can reduce your monthly mortgage payments by only paying the interest.
- You can choose from a range of products and interest rates offered by different lenders to suit your needs.
- You can switch to a different product or lender if you find a better deal, depending on your circumstances and eligibility criteria.
What Are the Disadvantages of Retirement Interest-Only Mortgages?
Some disadvantages of an RIO mortgage include that if you default on your monthly payments, you risk repossessing your home.
Additional disadvantages include...
- You will still need to pay interest every month, which can affect your disposable income.
- You will not reduce the size of your loan unless you make capital repayments.
- You may have to pay fees to set up and maintain the mortgage.
- You may have to pay an early repayment charge if you want to pay off the mortgage before it ends.
As there are so many facets to consider, receiving professional advice is essential.
Best Tools for Comparing Retirement Interest Only Mortgage Deals in 2025
Tools to compare RIO mortgages and make informed decisions can be found on financial comparison websites, lenders' sites, and through independent financial advisers' resources.
How Can You Use a RIO Mortgage Calculator to Compare Rates?
To use a retirement interest-only mortgage calculator you will need to enter some basic information, which we will explore in this section.
It can help you estimate how much you can borrow, how much interest you will pay, and how much equity you may leave in your property with a RIO mortgage.
The information you will need to enter into a RIO mortgage calculator includes...
- Your age
- Your property's value
- Your income
- Your outgoings
- The interest rate
- The loan term (if applicable)
You can use different scenarios to compare your options and find the best deal for you.
Importantly...
These calculators are designed to provide you with an approximation based on the information you enter.
Only a lender can provide you with an accurate quote after considering your unique circumstances and passing their various affordability tests.
RIO Mortgage Rates: Comparing the Best Deals
In 2025, comparing the best retirement interest-only mortgage providers involves assessing interest rates, terms, customer service, and flexibility to find the ideal fit for your needs.
Several lenders offer RIO mortgages in the UK, each with their own products, rates, and criteria.
Who Offers Retirement Interest Only Mortgages? Top Providers
Top providers offering RIO mortgages include well-known lenders like Legal & General, Nationwide, and Leeds Building Society, with these companies providing tailored RIO mortgage options to help older homeowners manage their finances in retirement.
2 of the most popular options are Leeds Building Society and Nationwide Retirement.
Let's take a look at them:
Leeds Building Society
Leeds Building Society is one of the oldest building societies in the UK and offers RIO mortgages for borrowers aged between 55 and 80.7
You can borrow up to 55% of your property value on an interest-only basis, or up to 65% on a capital repayment basis.
You can choose from fixed or discounted rates, with terms from two to five years.
Leeds Building Society also offers fee-free products and cashback incentives.
Nationwide Retirement
Nationwide Retirement is a specialist lender that offers RIO mortgages for borrowers aged 55 or over.
An important note is that it now only offers these products to its existing customers wishing to change plans or borrow additional money.8
You can borrow up to 50% of your property value on an interest-only basis, or up to 65% on a capital repayment basis.
You can choose from fixed, variable, or tracker rates, with terms from 2 to 5 years.
Retirement Interest Only Mortgage Providers: Who to Choose?
Interest rates for RIO mortgages in July 2025 typically range from 4.7% to 5.5% fixed for 2–5 years, depending on the lender, your age, and income. Some of the leading providers include:
| Provider | Typical Fixed Rate (2025) | Max LTV | Age Range | Notable Features |
|---|---|---|---|---|
| Leeds Building Society | 5.49% (5-year fixed) | 55% | 55–80 | Fee-free options, cashback |
| Legal & General | 4.7%–5.5% (fixed) | 60% | 55+ | Fixed for life, up to 8.5x income |
| Nationwide (existing) | 4.7%–4.85% (fixed) | 50% | 55+ | For existing customers only |
| Hodge, Ipswich, Marsden | Varies | 50–75% | 55+ | Flexible terms, long durations |
For a full comparison, see the Top 10 Equity Release Companies in the UK 2025 Review.
Retirement Mortgage Rates: How They Differ from Standard Mortgages
Retirement mortgage rates tend to be slightly higher than standard mortgages due to the flexible repayment terms and longer loan duration.
While retirement mortgages offer lower monthly payments, the longer duration means that the total cost of the loan can be higher in the long term.
This is important to consider when deciding whether a retirement mortgage is right for you.
How Do You Pay Off a RIO Mortgage? Repayment Triggers and End-of-Term Scenarios
Planning repayment for an RIO mortgage should consider the impact on inheritance, as the loan reduces estate value, requiring strategies to mitigate the effects on beneficiaries, as well as assessing rates and repayment terms.
How Do You Pay Off a RIO Mortgage?
You pay off a RIO mortgage when you sell your property, move into long-term care or pass away.
The lender will then claim the loan amount from the proceeds of the sale of your home or from your estate.
Your beneficiaries will inherit any surplus if present.
How Does a RIO Mortgage Affect Your Inheritance and Home Equity?
A retirement interest-only mortgage affects your inheritance and home equity by reducing the estate's value through the repayment of the loan from the property's sale.
As you pay only the interest, the principal loan amount remains unchanged, preserving more home equity than a typical equity release plan.
This means there is potentially more of your home's value to leave as inheritance, though the total loan amount will be deducted from your estate.
Is a Retirement Interest Only Mortgage Right for You? Suitability, Advice, and Alternatives
Whether RIO mortgages are the best choice for you or not will depend on personal circumstances, preferences, and future goals.
A RIO mortgage can be a good idea if you...
- Want to stay in your home for as long as possible.
- Want to reduce your monthly mortgage payments by only paying the interest.
- Want to release some equity from your property to meet your financial goals.
- Want to retain more equity in your property and pass on more inheritance to your family.
- Want to have more flexibility and choice in your later life borrowing.
A RIO mortgage may not be a good idea if you...
- Want to pay off your mortgage as soon as possible.
- Want to avoid paying interest every month.
- Want to maximise your income for your living expenses.
- Want to qualify for means-tested benefits.9
- Want to qualify for tax credits.10
- Want to have more certainty and security in your later life borrowing.
You should always seek independent advice before making any decision about your retirement finances.
Common Pitfalls and How to Avoid Them
Choosing a RIO mortgage is a significant financial decision. Here’s how to avoid common mistakes:
- Overestimating Affordability: Ensure your income can reliably cover interest payments for life, even if your circumstances change.
- Ignoring Early Repayment Charges: Some RIOs have penalties for early settlement. Always check the terms before committing.
- Not Comparing Providers: Rates, fees, and features vary widely. Use comparison tools and seek whole-of-market advice to find the best deal.
- Overlooking Alternatives: Consider downsizing, remortgaging, or a lifetime mortgage if a RIO isn’t the best fit.
For a practical checklist, see the Equity Release Costs Checklist.
What’s the Maximum You Can Borrow on a RIO Mortgage in 2025?
The maximum borrowing for an RIO mortgage will vary depending on the lender, but typically it will be between 50% and 65% of your property value.5
Some lenders may even offer up to 75% of your property value.6
For example, if your property is worth £300,000, you may be able to borrow between £150,000 and £195,000 with a RIO mortgage.*
Several factors will determine the exact amount, including your age, property value, and your lender's affordability assessment.
* The figures provided above are for indicative purposes only.
What Are the Best Retirement Interest Only Mortgage Rates in 2025?
The best retirement interest-only mortgage rates in 2025 depend on market conditions, the borrower's financial situation, your loan-to-value ratio, your credit score, and competitive offers from lenders.
You should always check the latest rates and terms with the lender before applying for an RIO mortgage.
What Are the Early Repayment Terms and Charges for Retirement Interest-Only Mortgages?
Early repayment terms and charges for retirement interest-only mortgages vary by lender, often including penalties for early settlement within certain time frames.
These charges can apply if you repay the mortgage earlier than agreed, often as a percentage of the outstanding loan.
It is crucial to understand these terms upfront, as they can significantly impact the total cost if you decide to sell your home or switch mortgage products.
Common Questions
A retirement interest only mortgage works by allowing homeowners aged 55 and above to borrow funds against the value of their property.
Instead of making regular repayments towards the principal loan amount, borrowers only need to pay the monthly interest on the loan. This means that the loan balance remains the same throughout the term of the mortgage.
At the end of the mortgage term, typically when the borrower sells the property or passes away, the loan is repaid through the sale proceeds.
It is important to note that the interest rate on a retirement interest only mortgage may be higher than traditional mortgages, and the borrower should carefully consider their ability to repay the loan in the future.
It is also worth mentioning that the borrower retains full ownership of the property, allowing them to continue living in their home.
Applying for a retirement interest only mortgage involves several steps.
First, it is advisable to seek independent financial advice to determine if this option aligns with your needs and circumstances.
Next, research and compare different lenders and their offerings to find the most suitable mortgage terms and interest rates.
Once a lender has been chosen, the application process typically involves completing an application form, providing documentation to verify income and assets, and undergoing affordability assessments.
No, a RIO is not a type of equity release but a type of standard mortgage.
In 2018, the Financial Conduct Authority changed the rules around a RIO so that it was no longer classified as a lifetime mortgage, but as an alternative to equity release.11
Equity release is a way of unlocking the value of your property without having to make any repayments whereas a RIO is a type of mortgage that requires you to pay the interest every month.
If you pass away, your RIO mortgage will be settled from the proceeds of the sale of your home or from your estate.
Any excess amount will be passed on to your beneficiaries.
If you want to move house, you may be able to transfer (port) your RIO mortgage to your new property, subject to the lender’s approval and criteria.
Alternatively, you may be able to repay your RIO mortgage from the sale of your old property and take out a new mortgage for your new property.
Bear in mind that the latter may incur early repayment charges, depending on your lender’s terms and conditions.
If you cannot afford the interest on an interest-only mortgage, you should contact your lender as soon as possible and discuss your options.
They may be able to offer you some flexibility or support, such as extending the term, switching to a lower rate, or allowing you to make partial repayments.
If you are struggling with debt, you can also seek free and independent advice from organisations such as Citizens Advice12 or StepChange.13
Whether you should choose a RIO mortgage will depend on your personal circumstances and preferences.
You should consider factors such as:
- How much you can afford to borrow and repay.
- How long you want to stay in your home.
- How much equity you want to leave for your family.
- How much flexibility and choice you want in your later life borrowing.
- How much risk and uncertainty you are comfortable with.
We recommend that you compare different products and rates from different lenders and seek independent advice before applying for a RIO mortgage, as it may not be suitable for everyone.
Yes, you may be able to extend your interest-only mortgage past retirement age by switching to a RIO mortgage.
However, this will depend on whether you meet the lender’s criteria for income, affordability, and property value.
You may also have to pay fees to switch to a new deal.
The age limits on retirement interest-only mortgages can vary depending on the lender but in general, you will need to be over 55 to qualify.
Some lenders may also impose an upper age limit of between 85 and 90.14
Yes, your home could be repossessed with a RIO mortgage if you fail to keep up with the monthly interest payments or breach the terms and conditions of the mortgage.
However, the lender will try to work with you to find a solution before taking this step.
You should always contact your lender as soon as possible if you are struggling to pay your mortgage.
A RIO mortgage can offer more flexibility than other later-life borrowing options, as you can choose, switch and repay your loan as you wish (subject to fees and lender’s terms and conditions).
However, you will still need to pay interest every month and the loan will have to be repaid when you pass away or move into long-term care.
In Conclusion
A retirement interest-only mortgage can be a useful way of borrowing in later life, as it can help you stay in your home, reduce your monthly payments, and release some equity.
However, it also has some drawbacks, such as reducing the amount of equity in your property, affecting your inheritance plans, and potentially costing more than other types of later-life lending.
You should consider all options available and seek independent advice before applying for a RIO mortgage.
Disclaimer: This article is intended for general information purposes only and does not constitute financial advice. RIO mortgages are regulated by the Financial Conduct Authority (FCA) and may affect your eligibility for means-tested benefits or tax credits. You should always seek independent advice before making any decision about your retirement finances.
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