28 September 2021

Borrowing when over-55: Lifetime Mortgage or Retirement Interest-Only Mortgage?

6 min read


Borrowing money when over the age of 55 can be a daunting prospect. As you look towards your retirement, passing affordability checks can become more difficult. Here, we look at two options available to you - Lifetime Mortgage and a Retirement Interest-Only (RIO) mortgage.

Both a Lifetime Mortgage and a Retirement Interest-Only (RIO) mortgage can help you to purchase a property or borrow a tax-free cash lump sum against the value of your home. Bear in mind that if you are in receipt of means-tested benefits, boosting your disposable income with a cash sum may affect your entitlement to them.

A Lifetime Mortgage and a RIO compared:

  • A RIO requires you to pay the interest each month and comes with a risk of repossession if you miss those payments. A Lifetime Mortgage does not require you to make any payments
  • By borrowing against your home with either product, you will be securing a debt against your home that won’t be repaid until you die or enter permanent long-term care. Naturally, by doing this the future value of your estate will be reduced
  • A Lifetime Mortgage can come with a variety of flexible features, including inheritance guarantee and the ability to borrow your money in stages by utilising a reserve facility
  • When dealing with our Later Life Lending service, provided by Responsible Life, you will benefit from a hand-picked panel of Lifetime Mortgage lenders who offer products that all come with an interest rate fixed for life. With a RIO however, only a few products will offer fixed for life interest rates, with most offering much shorter time periods
  • Provided that you meet all of your monthly payments with a RIO, the amount that you owe will not increase, which can be valuable for those with a defined income in retirement. With the impact of interest roll-up on a Lifetime Mortgage however, the amount that you owe will increase over time.

Comparison table: Lifetime Mortgage and Retirement Interest-Only Mortgage (RIO)

Product Required payments Optional payments Fixed interest rates Runs for your lifetime Requires affordability checks
Lifetime Mortgage No Yes Yes Yes No
Retirement Interest-Only Mortgage Yes Yes Yes Yes Yes

How to decide what is best for you?

Deciding which product is best for you is not always easy, which is why it’s best to receive advice from a fully qualified expert. At Royal London, we have chosen Responsible Life to provide our Later Life Lending Service so that they can offer our customers just that; access to quality advice across a range of financial products for over-55s.

An adviser is there to get to know more about your personal circumstances, so that they can help you to assess your goals and recommend the right solution for you. There are never any obligations when dealing with Responsible Life, as you will only ever move forward at a pace you are comfortable with. Additionally, you can be sure that if a Lifetime Mortgage or RIO isn’t right for you, they will tell you.

Why not give Responsible Life a call today on 0800 023 9311 and speak with their friendly Information Team? Their Plymouth-based team are there for an informal chat about your needs and can take you through your eligibility for the various products.

If you choose a mortgage with required repayments during your lifetime then your home may be repossessed if you do not keep up with the payments. A lifetime Mortgage will impact the value of your estate and could affect your entitlement to means-tested benefits. Think carefully before securing other debts against your home. If either a Lifetime Mortgage or RIO sounds right for you, then they can also book you a free, initial no-obligation appointment with a fully qualified adviser.

Got a question about Lifetime Mortgages? The Responsible Life team are here to help

0800 023 9313

Free from UK landlines and mobiles

Mon to Fri: 9am-8pm. Sat: 9am-5pm.

Royal London have chosen Responsible Life to provide our customers with advice on Later Life Lending products. The Royal London Mutual Insurance Society Limited has a 30% shareholding in Responsible Life and Responsible Lending (Responsible Group) and are part of the same group under FCA disclosure rules.

Responsible Life Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register under reference 610205.

To understand the features and risks, ask for a Personalised Illustration. Responsible Life’s adviser will talk through the setting up costs of a mortgage before you make any decision to proceed. Only if you choose to proceed and your case completes will Responsible Life charge an advice fee, currently not exceeding £1,490.

If you take out a product recommended by Responsible Life, Royal London Marketing Limited will receive a fee, for this introduction. If you would like further details about this fee, Responsible Life will be able to provide you with this. More information about Responsible Life and how your information is processed is available on their privacy notice. Find out how Royal London manages your personal data.

Royal London Marketing Limited is authorised and regulated by the Financial Conduct Authority, registration number 302391. Registered in England and Wales number 4414137.

Responsible Life's registered office is: Units 11-24, Mills Bakery, Royal William Yard, Plymouth, Devon, PL1 3GE.