Comparing interest only mortgages with retirement interest only mortgages

You can reduce your monthly costs with both products. But which might suit you better?

When you need a hand with the cost of life, you could look to save money on your mortgage. With both of the mortgages we explore in this article, you only need to pay interest each month. This means your monthly costs should be less than with a standard mortgage.

Here we look at the features of standard interest only mortgages and retirement interest only mortgages – and what’s similar or different about them. Both mortgages are loans secured against your home. If you don't keep up with payments, you could lose your home.

What’s an interest only mortgage?

With an interest only mortgage, you only pay back the interest each month. At the end of the mortgage term, you need to repay the full loan amount. You could do this by using savings, investments, or selling your property.

As you don't reduce the loan balance during the mortgage term, your monthly costs are lower than with a standard mortgage. But you will need a plan for how you’ll pay off the loan at the end of the mortgage.

Providers have their own eligibility terms, but interest only mortgages are typically for people who have:

A large income – for example, over £75,000.
Enough money for a large deposit – for example, over 25%.
Proof they can pay off the loan in the future.

What’s a retirement interest only mortgage?

With a retirement interest only (RIO) mortgage, you also only pay back the interest each month. As a result of this, your monthly payments tend to be lower than with a standard mortgage.

There’s no fixed end date with a RIO mortgage, and the loan is usually paid off when your home is sold. This could be when you pass away or enter long-term care. If you have a joint RIO mortgage, the loan tends to be repaid when you have both died or entered care.

Providers have their own eligibility terms, but RIO mortgages are typically for people who are:

Aged 55 or over.
Have their own home.
Show they can afford the monthly payments for the loan term.

What are the similarities?

Interest only mortgages and retirement interest only mortgages share some similar features.

1. Your monthly costs are lower

With both mortgages, you only make an interest payment each month. This means you can expect lower monthly costs than with a standard mortgage.

2. Your home is used to secure the loan

With both an interest only mortgage and a retirement interest only mortgage, the loan is secured against your property. This means that if you don’t keep up with payments, you risk losing your home.

3. You get to stay in your own home

We all want to keep living in the place we know and love. As long as you make your interest payment each month, you can stay in your home – avoiding the need to move or downsize.

4. Your loved ones may inherit less

Due to the amount owed in the future with both these mortgage products, it’s possible your estate will be reduced. This means your friends and family could inherit less than you once intended.

What are the differences?

There are some key differences between interest only mortgages and retirement interest only mortgages. Knowing what these are might help you decide which product could suit you better.

1. Length of the loan term

Interest only mortgages tend to come with a fixed end date. This is often no more than 25 years. When the term ends, you will need to pay off the full loan amount.

RIO mortgages don’t come with a fixed term. The loan is usually paid off when the mortgage holder dies or enters long-term care. Funds from the sale of the property can be used to cover the cost.

2. Having a repayment plan in place

When you apply for an interest only mortgage, your lender will ask for a repayment plan. You will need to show how you’re going to pay off the loan amount at the end of the term. Payment strategies could include:

Savings or investments.
Plans to downsize and free up some funds.
Inheritance or trust fund money.

With a RIO mortgage, you won’t need to show your provider a repayment plan. This is because the loan tends to be paid off when the property is sold in the future.

3. Eligibility

Interest only mortgages are available to a wide range of borrowers. But providers will often have upper age limits at the end of the term. It's also likely you will need a big income, a deposit of at least 25%, and an agreed repayment plan in place.

Retirement interest mortgages tend to be eligible to people over the age of 55. But each lender will have their own criteria, including proof that you can afford the monthly costs.

Both interest-only and retirement interest-only mortgages have benefits and risks. Which is suitable depends on your circumstances, affordability, and long-term plans. A mortgage adviser can help assess what is right for you.

Explore your options with Saga Mortgages

If you’re thinking about an interest only or retirement interest only mortgage, Saga Mortgages is here to help. We partner with award-winning broker Tembo to bring you expert advice and thousands of deals. Your dedicated adviser will support you and your loved ones every step of the way, helping you secure the right mortgage for your needs.

Get started today with your free personalised mortgage plan . And if you're eligible, one of our team will get your plans moving quickly and securely.

Important

Your home may be repossessed if you fail to repay your mortgage. Saga Money may receive payment from Tembo if you get a mortgage offer via the Saga Mortgages service. This will not affect the amount you pay for the service.

Saga is a registered trading name of Saga Personal Finance Limited, which is registered in England and Wales (company number 3023493). Registered office 3 Pancras Square, London, N1C 4AG. Saga Personal Finance Limited is authorised and regulated by the Financial Conduct Authority under the registration number 178922.

Tembo Money Limited (12631312) is a company registered in England and Wales with its registered office at 18 Crucifix Lane, London, SE1 3JW. Tembo is authorised and regulated by the Financial Conduct Authority under the registration number 952652. Tembo Money was awarded Best Mortgage Broker at the British bank awards in 2022, 2023, 2024 and 2025.