Interest-Only vs. Retirement Interest-Only Mortgages

You will likely come across two options: Interest-Only (IO) and Retirement Interest-Only (RIO) mortgages. 

They may sound similar, but they have key differences that can affect which one is right for you. 

Let us break them down and help you choose the right fit for your future! 

What is an Interest-Only mortgage? 

An Interest-Only mortgage means you only pay the interest each month, so your payments are lower. It lasts for a set time. 

When the loan term ends, you will need to pay the loan amount back, often by selling your home, remortgaging, or using savings. 

Key features: 

• You pay only the interest each month, keeping payments low. 

• The loan must be repaid at the end of the term. 

• Borrowers need to have a specified way of repaying the loan at the end of the term, which is provable from the outset.  

• Available to all ages but may have strict requirements. 

• Making overpayments over the life of the loan is not an acceptable plan to repay the loan at the end of the term.  

As you only pay the interest, you need a plan to pay back the loan later. This plan is called a “repayment vehicle,” and lenders have rules about what is allowed. 

What is a Retirement Interest-Only mortgage? 

A Retirement Interest-Only mortgage lets you pay only the interest each month, so your payments stay low. 

There is no set end date. The loan is paid back when you pass away, move into long-term care, or sell your home. 

Key features: 

• Pay only the interest each month, keeping payments low. 

• No fixed end date – the loan is repaid when you pass away or sell your home. 

• Available to older borrowers (aged 50+ with Perenna). 

• No need for a repayment plan, as the loan is repaid from the sale of the home. 

A Retirement Interest-Only mortgage is a great choice if you want to stay in your home without a repayment deadline. It helps keep your payments low and lets you stay in your home as long as you want. 

Interest-Only vs. Retirement Interest-Only: Which one is right for you? 

Both mortgages let you pay only the interest each month, but they differ in when the loan is repaid. 

With an Interest-Only mortgage, the loan must be repaid at the end of the mortgage term. You will need a clear plan for how to repay it from the start. 

A Retirement Interest-Only mortgage has no fixed end date. The loan is repaid when you pass away or move into long-term care, usually from the sale of your home. 

How Perenna can help 

At Perenna, we make borrowing in later life simple and fair. That is why we offer a Retirement Interest-Only mortgage with a fixed rate of interest for as long as you need it, so you can feel confident and at ease. 

With our Retirement Interest-Only mortgage, you will get: 

• A fixed interest rate for the long term, so your payments stay the same. 

• Available to borrowers aged 50+, offering more flexibility. 

• No age limit – because borrowing should not depend on your age. 

• The option to overpay after five years with no charge. 

We are here to help you stay in your home and enjoy a worry-free retirement. 

Want to learn more? 

Thinking about your later-life mortgage options? A mortgage broker can help you find the best solution for your needs. Make sure you seek advice to understand your options.  

You could lose your home if you don’t keep up your mortgage repayments. 

Correct at time of publishing.