Retirement Interest-Only Mortgages: Is the Payment Affordable in Retirement?

A RIO mortgage is affordable only if the interest fits comfortably inside retirement income. This guide shows the share-of-income test lenders care about.

What is the Retirement Interest-Only Mortgage Calculator?

A RIO mortgage works like an interest-only mortgage but is designed for older borrowers: you pay the interest each month from retirement income, the balance stays the same, and the loan is repaid when you die, move into care, or sell the property. Unlike a lifetime mortgage, affordability is checked against your income, so this calculator tests the payment against the annual retirement income you enter, including pensions and any other regular income, and shows what share of your monthly income the payment takes. Missed interest may be added to the loan or the lender may take action, depending on the product terms, so talk to the lender and an adviser early if payments become difficult.

How to use it

1. Enter the property value and the loan amount you are considering.
2. Enter the interest rate and your annual retirement income, including pensions and any other regular income.
3. Enter how many years to compare total interest over.
4. Click Check RIO Affordability to see the monthly payment, its share of income, the loan-to-value and the total interest.

Worked example

An £80,000 loan at 5.5% costs about £367 a month in interest. Against £24,000 of annual retirement income (£2,000 a month), that payment is about 18.3% of monthly income, and the total interest over 15 years is about £66,000 if the rate never changes.

How is RIO affordability tested?

The monthly interest is compared with monthly retirement income. £80,000 at 5.5% costs about £367 a month, which is about 18.3% of £2,000 a month of pension income. A higher share leaves less room if income falls or rates rise.

Frequently asked questions

How is a RIO mortgage different from a lifetime mortgage?

With a RIO mortgage you must pay the interest and affordability is checked against your income. With a lifetime mortgage there is usually no required monthly payment and interest can roll up.

What income counts for a RIO mortgage?

Pensions are the main source, but lenders may also count investment income and other regular income. The exact rules vary by lender.

Try the Retirement Interest-Only Mortgage Calculator free · All guides