A retirement interest-only mortgage is regulated as a different product from a lifetime mortgage rather than a variation on one. You pay the interest monthly so the debt does not grow, and you are assessed on whether you can afford to.
The regulator treats these as a different product from a lifetime mortgage, not a variation on one. The difference is whether your income is assessed, and it decides which is even available to you.
Equity release may involve a lifetime mortgage, secured against your property, or a home reversion plan. It will reduce the value of your estate and impact funding long-term care.
The Financial Conduct Authority created the term “retirement interest-only mortgage” in rules that came into force on 23 March 2018, and deliberately excluded it from the definition of a lifetime mortgage. They are regulated as different things.
The FCA rules allow a lender to assess affordability on the basis of paying interest only over the term, and list the sale of the property as an acceptable repayment strategy. That is the concession that makes the product possible; it does not remove the assessment.
| Retirement interest-only | Lifetime mortgage | |
|---|---|---|
| Do you make payments? | Yes. You pay the interest every month, so the debt does not grow. | Not unless you choose to. The interest is added to the debt. |
| Is your income assessed? | Yes. The lender assesses whether you can afford the interest over the term. | No. It is assessed on your age and your property. |
| What happens to the debt? | It stays at what you borrowed, for as long as you keep paying. | It compounds. |
| What if you cannot pay? | It is a mortgage with payments due. Missing them has the consequences that follow from that. | There is nothing to miss. |
| When is it repaid? | On death or a permanent move into care, usually from the sale of the property. | The same. |
A RIO is not automatically better. It stops the debt growing, which is a genuine advantage, and it requires you to keep making payments for the rest of your life, which is a genuine commitment. If the income that supports it stops, the position changes. Neither product is the safe one.
The rules also require a firm issuing an illustration for a RIO used to release capital to inform the customer of any restrictions as to who may live in the property. Worth asking about early if anybody else lives with you.
Equity release requires repaying any existing mortgage. Money released, plus accrued interest, would need to be repaid upon death or moving into long-term care.
The first decides whether this is available to you at all. The second is the one that gets least attention.
Would I pass the affordability assessment?
The question that decides whether this is even available. An adviser can tell you quickly.
What happens if my income falls later?
The real risk on this product, and the one that gets least attention when it is being sold as the safer option.
Are there restrictions on who may live in the property?
The FCA requires this to be disclosed on a RIO used to release capital. Ask, especially if somebody lives with you.
Can I see both illustrated side by side?
A whole-of-market adviser can show you the payments on one against the roll-up on the other. That comparison is the decision.
Short answers to the things that come up most. None of it is advice, and every figure on this page carries its source.
You pay the interest every month, so the debt does not grow. On a lifetime mortgage there is nothing to pay unless you choose to, and the interest is added to the debt.
Yes. The lender assesses whether you can afford the interest over the term. That is the main practical difference in who can get one.
No. The FCA created the defined term in rules that came into force on 23 March 2018, and specifically excluded it from the definition of a lifetime mortgage. The regulator treats them as different products.
That is the risk that comes with the lower cost, and it is the question to put to an adviser about your own circumstances rather than one a page can answer. The payments run for as long as the mortgage does.
Equity release may involve a lifetime mortgage, secured against your property, or a home reversion plan. It will reduce the value of your estate and impact funding long-term care.
One qualified equity release adviser. They will go through your figures and tell you if there is a better answer. It costs nothing and commits you to nothing.
Google Analytics, Microsoft Clarity and Vimeo. Say no and none of them loads. What each one stores, and what Microsoft use theirs for.