Later Life

Retirement interest-only vs over 55 mortgages - what's the difference?

Marsden Building Society explains the difference between its retirement interest-only and older borrower products.

Rozi Jones
|
4th December 2018
Steve Robinson Marsden
"If the client has no plans to sell their home in the future but they’re looking for a mortgage, then the RIO may be the one for them."

A number of lenders have added retirement interest-only mortgages to their ranges since the FCA reintroduced the product earlier this year.

Marsden Building Society says it has received a number of broker enquiries on the differences between its older borrower and retirement interest-only mortgages.

The Society's head of lending, Steve Robinson, says some customers may be eligible for both products, however with its retirement interest-only mortgage each applicant must demonstrate that the mortgage is affordable throughout the term, whereas affordability for its older borrower range is assessed on joint income.

The second difference is the repayment strategy. A RIO mortgage is normally repaid when the property has been sold following the occurrence of a life event, whereas the over-55s product has a term end date and is suitable for clients who have a repayment strategy such as downsizing to a smaller property in the future.

A RIO mortgage, Steve says, therefore enables clients to stay in their home for longer.

He continued: “It completely depends on client circumstances. If the client has no plans to sell their home in the future but they’re looking for a mortgage, then the RIO may be the one for them. If however, they want an interest-only mortgage and have future plans to downsize then it’s a great opportunity for them to look at later life mortgages.

“We really welcome the innovation in the market and it seems to be the building society sector that is leading the way in embracing new opportunities for later life lending. The key thing is to ensure we make products straightforward and accessible for intermediaries and their clients so it’s clear what the benefits for their clients across a wide range of lenders.”

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