Retirement Interest Only (RIO) Mortgages

Retirement Interest Only (RIO) mortgages are now available - but they are not Equity Release plans and have restrictive affordability conditions
Andy Wilson Financial Services

Andy Wilson


Retirement Interest Only (RIO) mortgages are a relatively new option for borrowing money in later life. The Financial Conduct Authority lifted the requirement for them to fall under ‘lifetime mortgage’ regulation in 2017. This has allowed lenders to offer products which have similarities to both existing interest only plans, but can run until the borrowers die.

Borrowers will pay the monthly interest on loans, for life, and the debt is only repayable when a specified ‘life event’ occurs. These events are mainly the death of the borrower(s) or they go into long-term care. In that sense, they share some traits with Equity Release Interest Only Lifetime Mortgages, which are also payable on a specified life event. However, there are some very important differences.

RIO and Lifetime Mortgages – what are the differences?
  • The minimum age for a RIO mortgage will typically be 55, the same as lifetime mortgages. However, some lenders have higher minimum ages.
  • RIO mortgages require monthly payments of interest throughout the term; lifetime mortgages don’t. Some lifetime mortgages do allow interest payments, or ad-hoc partial repayments, but they are not a requirement.

The interest due on a lifetime mortgage can be rolled-up onto the debt and is only repaid when the property is sold. However, RIO mortgage interest charges must be paid monthly. Therefore, RIO mortgages require an affordability check to be completed to make sure that payments are affordable throughout the term. This is not the case with lifetime mortgages.

For joint borrowers, an individual income assessment is made on each person. This is to ensure the loan remains affordable if either dies. Therefore, a lender will also look at the amount of any widow or widowers pension that could be payable if the partner dies. The total pension income must be enough to afford the loan in a sole name. Lenders will not consider employment or self employment income, as the borrower could stop working and retire at any time. These checks will need to be carried out even if you switch to a RIO mortgage with your current lender.

It is this affordability factor that has caused many enquiries for a RIO to fail. Other reasons for applications failing are that the maximum loans can be capped at around 50% – 55% of the property value, although some lenders offer slightly more.

Who might Retirement Interest Only (RIO) mortgages appeal to?

A large number of interest only mortgage customers are coming to the end of their term with no means of paying the loan. Despite not having funds available, they often want to stay in their home instead of ‘downsizing’ at retirement. Therefore, as long as there is enough retirement income to afford the interest payments, they can remain in their homes.

RIO mortgages are also available to those who are currently mortgage-free. The money raised can be used for a variety or purposes. including gifts to family. This can sometimes be helpful for children who need a deposit to buy their own home. Funding the purchase of a holiday home could be another use..

It is also possible to use a RIO mortgage to buy a property, it does not have to be on a property you already own. This could bridge the gap between the value of the home you sell, and a higher priced new home.

Other points to note 

The interest rate you are offered on a RIO mortgage will not be ‘fixed for life’ as it can be with a lifetime mortgage. You may be offered a fixed rate for a fixed period, but will be at the mercy of the market rates when it ends.

The ‘Safe Home Income Plans guarantees‘ available on lifetime mortgages do not apply to RIO mortgages. This is because payments of interest must be made each month. You will go into arrears if you default on payments meaning your home could be at risk of repossession. So the risk factors for a RIO are broadly the same as for any ‘normal’ residential mortgage.Taking out a mortgage could affect your eligibility to any state means tested benefits. It can also affect your tax position. Specialist advice may need to be sought before proceeding with such a mortgage.

One significant final point is to consider which advisers are able to arrange RIO mortgages. Currently, any qualified mortgage adviser can do so. However, they are not obliged to tell you if an equity release lifetime mortgage could be better for your circumstances. It may therefore be more appropriate to consider using an adviser who holds both the normal mortgage qualification, but also the specialist Equity Release qualifications. This will allow them to consider all options for you and not be restricted to just RIO mortgages. Our adviser Andy Wilson is qualified and experienced in both types of borrowing.

To discuss your requirements please use the ‘Contact Us’ button.

 

A MORTGAGE IS A LOAN SECURED AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

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I provide my consent for Andy Wilson Financial Services to contact me regarding my enquiry. We will use your name, email address and contact number (‘personal information’) to contact you about the services you have requested or respond to an enquiry you have submitted, which will require us to share your personal information with our advisers and supervisors. For further information on how your information is used, including disclosure to third parties, how we maintain security of your information and your rights in relation to the information we hold about you, please see our Privacy Policy.

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Equity Release may require a lifetime mortgage or Home Reversion Plan. To understand the features and risks, ask for a personalised illustration.

Andy Wilson Financial Services Ltd is an appointed representative of TenetLime limited, which is authorised and regulated by the Financial Conduct Authority. TenetLime limited is entered on the Financial Services Register (www.fca.org.uk/register) under reference 311266.

Andy Wilson Financial Services Ltd is Registered in England and Wales under reference no: 07547809. Registered Office: Landmark House, 1 Riseholme Road, Lincoln, LN1 3SN.

The information contained in this website is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK.

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Privacy Policy

1 – General

(1.1)

Andy Wilson Financial Services Ltd (“we” “us” “our”) is committed to protecting and respecting your privacy. We are the data controller and will process your personal data in accordance with the Data Protection Act 1998 as amended or replaced by the General Data Protection Regulation 2016 and any national laws which relate to the processing of personal data (“data protection legislation”).

(1.2)

Please read the following carefully to understand our views and practices regarding Your Data and how we will treat it.

This policy applies to information we collect about:

  • Visitors to our website
  • Customers
  • Introducers
  • Suppliers

2 – Visitors to our Websites

(2.1)

We may collect and process personal data about you in the following circumstances:

  • (2.1.1) – When you complete the online contact forms on our website (“Site”) providing us with your name, address, email address and contact number;
  • (2.1.2) – whenever you provide information to us when reporting a problem with our Site, making a complaint, making an enquiry or contacting us for any other reason. If you contact us, we may keep a record of that correspondence;
  • (2.1.3) – when you visit our Site we will retain details such as traffic data, location data, weblogs and other communication data, and the resources that you access (see section 2.2.2 on Cookies below); and
  • (2.1.4) – whenever you disclose your information to us, or we collect information from you in any other way, through our Site.

(2.2)

We may also collect data in the following ways:

  • (2.2.1) – IP ADRESSES: We may collect information about your device, including where available your Internet Protocol address, for reasons of fraud protection. We may also collect information about your device’s operating system and browser type, for system administration and to report aggregate information to our advertisers. This is statistical data about our users’ browsing actions and patterns, and does not identify any individual.
  • (2.2.2) – COOKIES: Our Sites uses cookies to distinguish you from other users of our Sites. This helps us to provide you with a good experience when you browse our Sites and also allows us to improve our Sites. A “cookie” is a small text file that’s stored on your computer, tablet or phone when you visit a website. Some cookies are deleted when you close down your browser. These are known as session cookies. Others remain on your device until they expire or you delete them from your cache. These are known as persistent cookies and enable us to remember things about you as a returning visitor.We use cookies (and sometimes other similar technologies) to:
    • Monitor your use on our website and gather analytics to help us improve your browsing experience
    • Remember your preferences to personalise your visit
    • Identify whether you are signed in to our website
    • Personalise our website and display information relevant to you
    • Help us improve the usability of our website

Cookies do not provide us with access to your computer or any information about you, other than that which you choose to share with us.

  • COOKIES ON THIS WEBSITE:
    Cookie Provider Description Expiration
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(2.3)

We may use your personal data for our legitimate interests in order to:

  1. provide you with information or services that you requested from us;
  2. respond to an enquiry submitted via  our online contact forms; 
  3. allow you to participate in interactive features of our Site, when you choose to do so;
  4. ensure that content from our Site are presented in the most effective manner for you and for your device;
  5. improve our Site and services;
  6. process and deal with any complaints or enquiries made by you; and
  7. contact you for marketing purposes where you have signed up for these (see section 5 for further details).

Website Links:

Our Site may, from time to time, contain links to and from the websites of third parties. Please note that if you follow a link to any of these websites, such websites will apply different terms to the collection and privacy of your personal data and we do not accept any responsibility or liability for these policies. Please check before you submit your information to these websites.

3 – Customers

(3.1)

We will collect details such as name, address, email address, contact number, date of birth, national insurance number and financial information in order to provide services to customers. We may also receive details of credit checks undertaken where you have supplied these to us.

(3.2)

We will share customer personal information with our employees to manage our relationship with you and we will retain customer personal data for 80 years.

(3.3)

We will use your personal data provided to comply with our contractual obligations arising from the agreements we enter into with our Customers and share the data with financial institutions who can assist in the provision of financial services to customers including product providers, lenders, banks, insurers and third party para-planners (including Tenet* paraplanners).

(3.4)

We will use customer personal data for our legitimate interests including:

  • (3.4.1) – sharing personal data with Tenet* as they are responsible for the services we provide to our clients and have a legal obligation to monitor our compliance with the FSMA and Financial Conduct Authority rules. Further details regarding how Tenet will use customer personal data can be found on it’s website at www.tenetgroup.co.uk or by contacting Tenet on 01132-390011;
  • (3.4.2) – with your consent, marketing our other products and services by mail and email; and
  • (3.4.3) – with your consent, obtaining your sensitive personal data from third parties including your health, ethnic origin, or criminal prosecutions from third parties such as employers and credit reference agencies, fraud prevention agencies and other similar organisations.

(3.5)

We will not transfer any customer personal data outside the European Economic Area (“EEA”).

*Tenet  means Tenet Group Limited, Tenet Limited, TenetConnect Limited, TenetConnect Services Limited, TenetLime Limited, its associated companies.

4 – Customers

We will collect details such as contact names, address, email address and telephone number in order to contact you about goods and/or services we have ordered from you, to comply with our contractual obligations and to place further orders. We may share your personal data with our employees to manage our relationship with you and we will keep your personal data for as long as we require your goods and/or services subject to a maximum of six years from the date of our last contact with you. We will not transfer your personal data outside the EEA.

5 – Marketing

(5.1)

We may use customer personal data to provide you with details about our services, products,  business updates and events which we think may be of interest.

(5.2)

You have the right to opt-out of receiving the information detailed in section 5.1 at any time. To opt-out of receiving such information you can:

  • (5.2.1) – tick the relevant box situated in the form on which we collect your information;
  • (5.2.2) – clicking the unsubscribe button contained in any such communication received; or
  • (5.2.3) – email us at office@andywilsonfs.co.uk or call 01522-590015 providing us with your name and contact details.

(5.3)

Where you have subscribed to receive marketing correspondence from us we will keep your personal data for six years from when you subscribed to receiving marketing information from us or until you unsubscribe from receiving such correspondence from us (whichever is earlier).

6 – Legal Basis for Processing your Personal Data

(6.1)

In accordance with data protection legislation we are required to notify you of the legal basis upon which we process your personal data. We process your personal data for the following reasons:

  • (6.1.1) – for performance of a contract we enter into with you;
  • (6.1.2) – where necessary for compliance with a legal obligation we are subject to; and
  • (6.1.3) – for our legitimate interests (as described within this policy).

(6.2)

We will also process your personal data including personal sensitive data  where we have obtained your explicit consent.

7 – Disclosure of your Data to Third Parties

(7.1)

In addition to the third parties mentioned previously in this policy, we may disclose your personal data to third parties for the following legitimate business purposes:

  • (7.1.1) – staff members in order to facilitate the provision of services to you;
  • (7.1.2) – IT software providers that host our website and store data on our behalf; and
  • (7.1.3) – to a prospective buyer of some or all of our business or assets, in which case personal data including Your Data will also be one of the transferred assets.

(7.2)

We may disclose your personal data to the police, regulatory bodies, legal advisors or similar third parties where we are under a legal duty to disclose or share your personal data in order to comply with any legal obligation, or in order to enforce or apply our agreements; or to protect our rights, property, or safety of our customers, or others. This includes exchanging information with other companies and organisations for the purposes of fraud protection and credit risk reduction.

(7.3)

We will not sell or distribute your personal data to other organisations without your approval.

8 – Cross-Border Data Transfers

We do not transfer personal data outside the EEA.  Where this is required in the future, we will ensure that safeguards are in place so that such transfers comply with data protection legislation.

9 – Data Security

(9.1)

Information you provide to us is shared on our secure servers. We have implemented appropriate physical, technical and organisational measures designed to secure your information against accidental loss and unauthorised access, use, alteration or disclosure. In addition, we limit access to personal data to those employees, agents, contractors and other third parties that have a legitimate business need for such access.

(9.2)

Where we have given you (or where you have chosen) a password which enables you to access certain parts of our Site, you are responsible for keeping this password confidential. We ask you not to share a password with anyone.

(9.3)

Unfortunately, the transmission of information via the internet is not completely secure. Although we will do our best to protect your personal data, we cannot guarantee the security of your information transmitted to our Site; any transmission is at your own risk.

10 – Access to, updating, deleting and restricting of your data

(10.1)

It is important that the personal data we hold about you is accurate and current.  Please keep us informed if the personal data we hold about you changes. 

(10.2)

Data protection legislation gives you certain rights in relation to your personal data. You have the right to object to the processing of your personal data in certain circumstances and to withdraw your consent to the processing of your personal data where this has been provided.

(10.3)

You can also ask us to undertake the following:

  • (10.3.1) – update or amend your personal data if you feel this is inaccurate;
  • (10.3.2) – remove your personal data from our database entirely;
  • (10.3.3) – send you copies of your personal data in a commonly used format and transfer your information to another entity where you have supplied this to us, and we process this electronically with your consent or where necessary for the performance of a contract;
  • (10.3.4) – restrict the use of your personal data; and
  • (10.3.5) – provide you with access to information held about you and for this to be provided in an intelligible form.

(10.4)

We may request specific information from you to help us confirm your identity. Data protection legislation may allow or require us to refuse to provide you with access to some or all the personal data that we hold about you or to comply with any requests made in accordance with your rights referred to above. If we cannot provide you with access to your personal data, or process any other request we receive, we will inform you of the reasons why, subject to any legal or regulatory restrictions.

(10.5)

Please send any requests relating to the above to our Privacy Officer, Andy Wilson, at 2 Claudius Road, North Hykeham, Lincoln, LN6 9PH or andy@andywilsonfs.co.uk specifying your name and the action you would like us to undertake. Note that in relation to requests to access personal data, we reserve the right to charge a reasonable fee to comply with your request.

11 – Right to Withdraw Consent

Where you have provided your consent to the collection, processing and transfer of your personal data, you may withdraw that consent at any time. This will not affect the lawfulness of data processing based on consent before it is withdrawn. To withdraw your consent please contact us at andy@andywilsonfs.co.uk or by writing to Andy Wilson, 2 Claudius Road, North Hykeham, Lincoln, LN6 9PH

12 – Changes to our Privacy Policy

We reserve the right to update this privacy policy at any time, and any changes we make to our privacy policy will be posted on this page. We will notify you if there are any changes to this policy that materially affect how we collect, store or process your personal data. If we would like to use your previously collected personal data for different purposes than those we notified you about at the time of collection, we will provide you with notice and, where required by law, seek your consent, before using your personal data for a new or unrelated purpose. We may process your personal data without your knowledge or consent where required by applicable law or regulation.

13 – Contact Us

We have appointed a Privacy Officer to oversee compliance with this privacy policy. If you have any questions, comments or requests regarding this policy or how we use your personal data please contact our Privacy Officer at andy@andywilsonfs.co.uk or tel: 01522-590015. This is in addition to your right to contact the Information Commissioners Office if you are unsatisfied with our response to any issues you raise at https://ico.org.uk/global/contact-us/

 

Last updated: 1 April 2018.

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I provide my consent for Andy Wilson Financial Services to contact me regarding my enquiry. We will use your name, email address and contact number (‘personal information’) to contact you about the services you have requested or respond to an enquiry you have submitted, which will require us to share your personal information with our advisers and supervisors. For further information on how your information is used, including disclosure to third parties, how we maintain security of your information and your rights in relation to the information we hold about you, please see our Privacy Policy.

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