Retirement Interest- Only Mortgages (Rio)

[Tarser]

Before I talk to someone in the business, I would like to know what people in general feel about taking out a Retirement Interest only mortgage. A lot of these things often hide traps and pitfalls that you only learn about when it's too late to change your mind.

I understand that you are given a loan of about half the value of your property and you pay back only the interest. Then, as a couple, when one of you dies or goes into long term care, the mortgage is paid back. So the surviving spouse must then sell the property and maybe buy a small flat on what's left after the loan is paid back. Is that correct? Presumably, the value of the property will have increased by then, so there would be enough to do this.

I'm 63 and my wife is 51 and I have read that some lenders would accept these ages. I'm tempted to do it so that I can and give up most of my work, take my state pension in three years time and have a better life with a good lump sum in the bank.

Is there a good reason why I should stay clear of it? Thanks

[goodgoalie]

Good, reliable advice here:
https://www.moneysavingexpert.com/mortgages/equity-release/

[jamessdonald]

Taking out a Retirement Interest Only (RIO) mortgage can be a good option for some people, but it's important to carefully consider the potential risks and benefits before making a decision.

One of the key advantages of a RIO mortgage is that it allows you to borrow money against the value of your property without having to make monthly repayments on the principal. Instead, you only need to make interest payments, which can be more affordable for many retirees. Additionally, the loan is typically repaid when the last borrower dies or moves out of the property permanently, which means that you don't have to worry about making large repayments during your lifetime.

However, as you mentioned, there are also potential pitfalls to be aware of. One of the biggest risks is that the value of your property may not increase enough to cover the amount of the loan when it becomes due. This could leave your surviving spouse or heirs with a significant shortfall that would need to be paid out of pocket. Additionally, if you need to sell the property before the loan is repaid, you may not be able to sell it for enough to cover the outstanding debt.

Another potential downside is that RIO mortgages can be relatively expensive, with higher interest rates than traditional mortgages. This means that you may end up paying more over the lifetime of the loan than you would with a conventional mortgage.

Overall, whether or not a RIO mortgage is a good option for you will depend on your individual circumstances and financial goals. It's important to speak with a qualified financial advisor who can help you understand the risks and benefits of this type of mortgage, and who can help you determine whether it's the right choice for your retirement plans.