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Retirement Interest-Only

Borrow into later life through a Retirement Interest-Only mortgage.

Retirement Interest-Only

Are you thinking of borrowing into retirement? There are various ways to do this, including Retirement Interest-Only mortgages.

The team at Saga Mortgages, provided by Tembo, are here to help our customers who want to explore Retirement Interest-Only mortgages and other later life lending options, so you can discover the best option for you and your family.

How does it work?

Retirement Interest-Only mortgages, often abbreviated to RIO mortgages, are a type of mortgage loan designed specifically for retirees or older individuals who are looking to release equity from their homes or manage their finances in retirement.

These mortgages allow you to borrow money against the value of your property while making interest-only payments throughout the mortgage term. 

It’s important to know that as with any mortgage, a loan that is secured against your home; if you cannot keep up with your monthly payments, your home may be repossessed.

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Knowing your mortgage options

Saga Mortgages can help you understand and navigate your mortgage options.

Finding out which products are available starts with knowing which ones you're eligible for and we can help with that.

Am I eligible?

Benefits

  • Borrow into later life. Retirement Interest-Only mortgages are products specifically created to allow retirees and older homeowners to borrow into retirement when age restrictions cross out other options. 
  • Manageable monthly repayments. Because you will only be paying the interest portion of the loan, the repayments on a Retirement Interest-Only mortgage are lower than those on a normal repayment mortgage. 
  • Access equity in your home. Retirement Interest-Only mortgages can provide an avenue to access the equity in your property, offering financial flexibility for travel plans, home improvements or even helping a loved one buy a home of their own.
  • You can stay in your home. Our homes are important to us, especially when we have lived in one place for a number of years. A Retirement-Interest Only mortgage allows you to unlock equity from your property without having to downsize or move. So you can stay in the home you love, while still accessing the funds you need.
  • There’s flexibility on the repayments. There are some deals that will allow you to repay the capital too, or overpay to reduce the size of your loan. This can be a good solution if you are worried about repaying the loan sum in retirement.
  • RIOs are portable. You may be able to move home and port your Retirement Interest-Only mortgage. This means your mortgage product will be transferred to your new property, up to the outstanding loan value. This could allow you to avoid any early repayment fees you may have incurred if you repaid it early or remortgaged.

Risks and considerations

  • Affordability is based on the lowest earner. When assessing your affordability for a Retirement Interest-Only mortgage, lenders will typically base their calculations on the lowest earner of the household. An alternative option is to consider a standard interest only mortgage, which will look at the affordability of joint applicants instead.
  • You must be over 55 to be eligible. Borrowers must be at least 55 or sometimes 60 years old to qualify for a Retirement Interest-Only mortgage, depending on the lender you go for. However, some lenders may set a higher age threshold than this. If you do not meet a lenders’ age requirements, an alternative is to consider a standard interest only mortgage.
  • Your home’s value will need to be sufficient. When your affordability for a Retirement Interest-Only mortgage is assessed, the value of your property plays a role. Lenders can have minimum property value requirements to ensure that the property provides adequate security for the mortgage. If your home does not meet these requirements, you may not be able to get a Retirement Interest-Only mortgage.
  • Standard interest only may be a better option for some. With a Retirement Interest-Only mortgage, you pay a premium for having a mortgage with no end date. Instead, the mortgage will continue until the property is sold, you pass away, or move into long term care. This can often mean that interest rates on Retirement Interest-Only mortgages are higher than a standard interest only mortgage. If you are eligible for a standard interest only deal, it can be better to go for this option instead of a Retirement Interest-Only mortgage to access a lower mortgage rate.
  • The outstanding loan balance remains. Because you only pay back the interest each month, the full repayment of the loan is deferred until the sale of the property, when you move into long-term care, or you pass away. This can lead to concerns about the eventual repayment and its potential impact on any loved ones you want to be beneficiaries of your estate. If you become concerned that you will not be able to repay the full loan amount, get in touch with your mortgage lender. There are options you could consider to reduce the loan size, such as paying off some of the debt using savings or investments. However, to prevent this happening lenders set minimum equity requirements for Retirement Interest-Only mortgages to ensure you have enough equity in the property to cover the loan.
  • Interest rates can fluctuate. If you choose a variable rate set up, your interest rate could change, potentially affecting the affordability of the loan over the long term. For example, when you first start the loan you could have an interest rate of 3%, but if rates increase to 5% this will increase the amount you pay each month. It’s important to consider how you would afford your monthly costs if interest rates were to increase to ensure you can keep up with future repayments.
  • Your home is at risk if you do not keep up repayments. As with any mortgage, there is a risk that if you do not keep up with your interest repayments, your home may be repossessed. Note that repossession is always a last resort, your lender is legally obliged to try to find an alternative solution for you.
  • Your means-tested benefits could be impacted. If you take out a Retirement Interest-Only mortgage, this could impact the amount of means-tested benefits or pension credit you receive.
  • Your estate will be smaller. As you are sacrificing some of your future estate, if you don't repay this yourself and instead it’s repaid when you die or move into long-term care, this will reduce any inheritance you can leave behind to your loved ones.

Here and ready when you are

Whether you have questions about Retirement Interest-Only mortgages or just want to find out more, the expert team are on hand to help.

0330 018 3071

Mon-Thu 9am-8pm
Fri 9am 5:30pm
Sat-Sun 10am-3pm

Am I eligible?

Frequently asked questions

Here are some of our most frequently asked questions
Who is eligible for a Retirement Interest-Only mortgage?

Retirement Interest-Only mortgages are normally only available to borrowers over the age of 55 or 60, who live in or are buying a property in England, Wales or Scotland. Your eligibility will depend on the lender’s criteria, which vary from provider to provider. 

How much can I borrow?

Depending on your affordability, with a Retirement Interest-Only mortgage you could borrow up to 85% of your home’s value, although some lenders may offer lower than this.

Your income will also be taken into consideration, as well as what your expenses are and your credit score.

Do you have to be retired to get a Retirement Interest-Only mortgage?

No, despite its name you do not have to be retired to apply for a Retirement Interest-Only mortgage. You can be fully retired, working, or semi-retired.

Are Retirement Interest-Only mortgages my only option?

There are alternatives to Retirement Interest-Only mortgages you can consider. For some borrowers, a standard interest-only mortgage may be more suitable as this could allow you to access lower rates, making your monthly costs more affordable.

Borrowers who have a generous pension income and want to remortgage their property, but exceed the maximum age of a traditional mortgage could also consider a Retirement Capital and Interest (RCI) mortgage. This works like a standard repayment mortgage because it has a fixed end date and you repay the debt as well as the interest, but it has a flexible upper age limit based on your life expectancy. 

If you want to release money to supplement your children or grandchildren’s house deposit, you could also consider a Deposit Boost or Savings as Security mortgage. If you are under the age of 60, another way you could help your loved ones get their first home is by becoming their guarantor through an Income Boost.

For others, a lifetime mortgage, or equity release product may be more suitable.

What’s the difference between Retirement Interest-Only and standard interest-only mortgage?

The main difference between a Retirement Interest-Only and standard interest-only mortgage is that a Retirement Interest-Only mortgage has no end date, while a standard interest-only mortgage has a mortgage term that will end after a certain number of years, normally when you reach 80 or a similar age.

Because Retirement Interest-Only mortgages have no end date, this allows you to borrow into later life.

However, you pay a premium for this, which means Retirement Interest-Only mortgages tend to have higher mortgage rates than standard interest-only mortgages. So sometimes it is more affordable to choose a standard interest-only mortgage instead of a Retirement Interest-Only set up.

The expert team at Saga Mortgages will look at both options to work out which is the most suitable option for you.

What sources of income will be considered?

When assessing your income for a Retirement Interest-Only mortgage, lenders will usually consider a diverse range of income sources. This typically includes earnings from a permanent job, self-employment, pensions, rental income as well as others.

The key is to ensure you can evidence these income sources to the lender, for example supplying bank statements and payslips.

Can you move house if you have a Retirement Interest-Only mortgage?

Yes, it is possible to move house if you have a Retirement Interest-Only mortgage, which is good news if you plan on downsizing or moving in the future. 

Can you remortgage with a Retirement Interest-Only mortgage?

Yes, it is possible to remortgage if you have a Retirement Interest-Only mortgage. But if you switch lenders or want to increase the size of your mortgage loan, you will have to undergo another full affordability assessment to determine if you can remortgage.

If you do not pass the assessment, the lender will not approve your remortgage. Working with experts in mortgages like the Saga Mortgages team can help you avoid this happening, as they’ll know which lenders are most likely to approve your application.

Can you repay your Retirement Interest-Only mortgage?

Although Retirement Interest-Only mortgages do not have an end date, it is possible for you to repay the mortgage loan early through selling the property. However, some lenders may let you make capital repayments, but this is not guaranteed.

What happens if my repayments become unaffordable?

Similar to a normal residential mortgage, if your repayments become unaffordable your lender will try their best to help you find a way to manage your costs. However, if you still cannot afford your repayments as a last resort the lender may repossess your property. 

Why choose Saga Mortgages?

Saga Mortgages is a service provided by Tembo, available exclusively to Saga. You’ll benefit from their award-winning advice from a friendly, experienced team of mortgage professionals, who are available 7 days a week.

They’ll search all the available options to find the best option and mortgage rate for you, including specialist products bespoke to Saga Mortgages.

Will I be able to talk to an advisor?

The Saga Mortgage service enables you to book an appointment with Tembo's award-winning mortgage advisors. Simply complete our online fact find and, if you’re eligible, you’ll be directed to book an appointment.

The team is available 7 days a week, ready to answer any questions you may have.

What lenders will you get access to?

With Saga Mortgages, you will have access to mortgage advice through our partner Tembo. Their award-winning mortgage advisors will search over 20,000 mortgage products and over 100 lenders to find the most suitable and best priced deal for you.

This includes all the high-street lenders you’ll be familiar with, like Nationwide, Halifax, Lloyds, Barclays and HSBC, as well as smaller, specialist lenders like Livemore and Generation Home.

Is Saga Mortgages FCA regulated to give mortgage advice?

All mortgage advice through Saga Mortgages is provided by Tembo Money Limited, who are regulated by the Financial Conduct Authority (FCA) under the registration number 952652. Their team of award-winning mortgage advisors are experienced in providing mortgage advice, including guidance on remortgaging, family supported mortgages and later life lending.

What happens if one or more of the borrowers dies?

Once all the people named on the mortgage have died, the property will be sold and the funds will be used to settle the loan. Alternatively, the loan could be repaid through other means by the beneficiaries of the will.

If one person dies, but the other mortgage holder(s) are still alive, then they would continue to repay the interest if possible. The mortgage affordability is calculated on the lowest earner’s income to avoid situations where the surviving mortgage holder cannot afford the loan. 

However, if circumstances have changed and it is no longer affordable, you should contact your lender as soon as possible - ideally before missing a single payment - to discuss what options are available. As a last resort, this could mean selling the home to repay the loan. 

Important information

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 Banking Awards in 2022 and 2023.