Lifetime mortgage vs Retirement Interest-Only mortgage: what advisers need to know

As more clients look for flexible ways to use their property wealth later in life, later life lending options continue to evolve. Two of the most common solutions you’ll come across are the lifetime mortgage and the Retirement Interest-Only (RIO) mortgage.

At first glance, they might seem similar: both are designed for older homeowners and secured against their property; but their structures, repayment terms, and suitability differ significantly.

Here’s a breakdown of the key differences you should know.

What is a lifetime mortgage?

A lifetime mortgage is a type of equity release product that allows homeowners aged 55 and over to access tax-free cash from their property while continuing to live there.

The loan and any accrued interest are repaid only when the client dies or moves into long-term care, usually through the sale of the property.

Key Features

• Available from age 55+
• No mandatory monthly repayments (though voluntary payments can be made to reduce interest roll-up)
• Interest rolls up and compounds over time
• Borrower retains full ownership of the property
• Includes a “no negative equity” guarantee when arranged through a member of the Equity Release Council
• Flexible structures: lump sum, drawdown, or interest-serviced options

Lifetime mortgages may suit clients who want to pay off an interest only mortgage, supplement retirement income, gift to family, or fund home improvements without the pressure of ongoing payments.

What is a Retirement Interest-Only (RIO) mortgage?

A Retirement Interest-Only (RIO) mortgage is a later life lending product that bridges the gap between standard residential and lifetime mortgages.

It allows homeowners, typically aged 55 and over, to borrow against their property and pay the interest monthly for the rest of their lives. The capital is repaid only when the borrower dies, moves into long-term care, or sells the property.

Key Features

• Available from around 55+
• Monthly interest payments required throughout the term
• The loan balance remains level (no compounding interest)
• Affordability assessment based on income
• Usually on a lifetime term, not fixed (continues until death or care move)
• The borrower retains ownership of the home

RIO mortgages are best suited to clients who have retirement income to cover monthly interest payments and want to manage the amount left behind to beneficiaries.

Lifetime Mortgage vs RIO Mortgage: Key Differences

Feature	Lifetime Mortgage	Retirement Interest-Only (RIO) Mortgage
Product type	Equity release loan	Later life residential mortgage
Eligibility age	55+	Usually 55+
Repayments	No mandatory repayments; interest rolls up	Monthly interest payments required
Loan term	Lifetime of borrower, or until care/death/sale	Lifetime of borrower(s) or until care/death/sale
Affordability checks	Based on age, property value, and health	Based on income and expenditure
Interest	Compounds over time	Simple interest - balance remains level
Ownership	Borrower retains full ownership	Borrower retains full ownership
Impact on inheritance	Reduces estate due to rolled-up interest	More predictable inheritance value
Flexibility	Can make voluntary payments, port the mortgage	Can remortgage or switch products
Typical use	Release equity for income or one-off costs	Refinance an existing mortgage into later life

Advantages and considerations

Lifetime mortgage Pros

• No required repayments — cashflow flexibility
• Range of drawdown and payment options
• No affordability testing
• “No negative equity” protection

Lifetime mortgage considerations

• Interest compounds over time, increasing the total owed
• Reduces estate value and may affect benefits
• If a lifetime mortgage is repaid early, Early Repayment Charges (ERCS) may apply

RIO mortgage Pros

• Control over debt - only interest paid, so balance stays level
• May be cheaper than a lifetime mortgage over time
• Keeps more inheritance potential
• Similar process to a traditional mortgage

RIO mortgage considerations

• Requires proof of income and affordability checks
• Missed payments can lead to arrears
• If income stops, refinancing options may be limited

Which option is right for your client?

Both products can support clients looking to stay in their homes while accessing or maintaining liquidity, but their suitability depends on financial circumstances and lifestyle goals.

A lifetime mortgage might be more suitable if your client:

• Doesn’t have sufficient income to make regular payments
• Wants flexibility in releasing funds
• Prefers no mandatory repayments

A RIO mortgage might be more suitable if your client:

• Can comfortably afford monthly interest payments
• Wants to preserve equity for inheritance
• Is transitioning from a traditional mortgage into retirement

While both lifetime and RIO mortgages are designed for older homeowners, they cater to very different needs.

• Lifetime mortgages provide flexibility and no repayment obligations.
• RIO mortgages offer structure and control for clients who can manage monthly payments.

By understanding the key differences between lifetime and retirement interest-only mortgages, you can tailor recommendations that protect clients’ homes, income, and long-term financial wellbeing.

How Advise Wise supports you

At Advise Wise, we help advisers confidently navigate the later life lending market.

• Compare lifetime and RIO mortgages side by side
• Access exclusive products and rates from leading lenders
• Use smart tools for sourcing and compliance
• Stay informed with market news feed, regular updates, educational guides and much more