Borrowers in retirement! Equity Release is not the only option.

 

A RIO is an interest-only mortgage for clients aged 55 and over. It enables them to take out a new mortgage or replace their current interest-only mortgage with one that allows them to continue making interest only repayments for the remaining time that they live in their home. They may also choose to take a larger mortgage than they currently have, subject to affordability checks, to use for things that they need or want. The lenders allow people to release money from their homes, and only repay the full amount once all parties have either passed away or entered long-term care.
RIOs, which are like Lifetime mortgages, may offer the option of flexible overpayments which means there may also be an opportunity to repay the capital amount over the duration of the loan.
In contrast to Equity Release, plan-holders are contracted to repay the interest monthly and during the application process will be subject to affordability and credit history assessments. For joint applicants, this includes income tests to demonstrate that each party can afford the repayments if the other were to die or enter care.

RIOs have the potential to allow applicants to leave all of the equity in their home to their beneficiaries when they pass away, when compared to an interest roll-up lifetime mortgage, because the interest will be managed throughout the duration of the plan, avoiding any compounding interest. However, plan holders are required to make mandatory repayments, and the property may be repossessed if repayments are not made to a RIO mortgage.
Another type of product available to post retirement applicants is a Retirement Mortgage. Retirement mortgages are a long term secured loan, available to those over 50. The term you can borrow over depends on individual circumstances and these plans have a maximum term. For customers with a clear repayment strategy plan and an understanding of the point at which they wish to repay, they can offer more flexibility over a RIO / Lifetime mortgage.
Over the term of the mortgage applicants will make repayments, with the term either being fixed (i.e. 10 years) or remain active to a specific age with the maximum term limited to the age of the youngest borrower, (if borrowing with a partner) which can be up to 95. Owing to the repayment structure, as with RIOs, proof of income/affordability will need to be provided during the application process, and with it being a secured loan applicants can risk losing their home if they are unable to keep up with repayments.
Retirement mortgage holders, like RIO and Lifetime mortgages, may offer the option of flexible overpayments which means there may be an opportunity to repay the capital amount over the duration of the loan. This could leave beneficiaries with no outstanding debts. However, as with RIOs they are a secured loan, and the mandatory repayments will limit their suitability. Please remember the property may be repossessed if repayments are not made to a RIO or Retirement Mortgage.