What’s the difference between RIO and an Older Borrower mortgage?

04 December 2018

With many building societies supporting the Later Life Mortgage market since 2014, what does the recent introduction of the Retirement Interest Only mortgage mean for intermediaries and their clients?

Steve Robinson, Head of Lending at Marsden Building Society talks about the need for constant innovation in the Later Life Lending market and how intermediaries can navigate the array of products available.

“The over 55 population is increasing significantly, highlighting a growth in demand for Later Life mortgages. Many lenders re-entered this market in 2014 offering mortgage solutions for the 55+ which considers pension income and has interest only and repayment options. So, when the introduction of Retirement Interest Only came along, what’s the difference?”

“Some customers may be eligible for both products and have the choice around which is most suitable for their needs. Starting with affordability, with a RIO mortgage, each applicant must demonstrate that the mortgage is affordable throughout the term, whereas affordability for our 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 to repay the mortgage following the occurrence of a life event compared to our Older Borrower product which 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 therefore enables clients to stay in their home for longer.”

“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.”