There are two main types of mortgages that you should consider for retirement: Retirement Interest Only (RIO) mortgages, and lifetime mortgages.
We’ll go into what lifetime mortgages are and what they have to offer a little later on, but for now we’ll focus on what a RIO mortgage is and how they’re repaid.
What is a Retirement Interest Only (RIO) Mortgage?
A RIO mortgage is one of the options available for retirees. It only requires you to pay the interest on your mortgage each month, meaning the total amount owed will remain the same. These repayments last for a fixed amount of time as discussed with your mortgage provider.
Due to their nature, retirement interest only mortgages are only available to:
- People over the age of 55
- People who are retired
- People who are planning to retire soon
This makes RIO mortgages a good option to consider for people who are considering retirement and want to work towards lowering their monthly expenditure.
One thing to take note of: before you’ll become eligible for a RIO mortgage, you must first prove to your lender that you’ll be able to make the monthly interest payments, alongside passing affordability checks.
Repaying a RIO Mortgage
When you’re paying for a retirement interest only mortgage, you will only be paying the interest on the amount you owe each month. This means the total sum of your mortgage will not change with your repayments.
Later on, the money from selling the house will typically go towards paying off any outstanding mortgage you may have.
You may also be able to pay off some of your actual mortgage alongside the interest payments, depending on the deal. Before you do this, you’ll first need to discuss with your lender. It may also be useful to talk to a financial consultant to help you determine what the right course of action may be.
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