Is it cheaper to remortgage to a RIO mortgage than stay with a traditional mortgage?

13th February 2026

By Simon Carr

Determining whether remortgaging to a Retirement Interest-Only (RIO) mortgage is cheaper than staying with a traditional residential mortgage depends heavily on your current circumstances, particularly the maturity status of your existing mortgage and your long-term financial goals. While RIO mortgages typically carry slightly higher interest rates than standard residential products, they can offer a significantly cheaper monthly payment compared to converting to a Standard Variable Rate (SVR) or being forced onto a full capital repayment plan later in life, because only the interest needs to be paid monthly.

Is It Cheaper to Remortgage to a RIO Mortgage Than Stay with a Traditional Mortgage? A Cost and Risk Analysis

The decision to switch from a standard traditional mortgage product to a Retirement Interest-Only (RIO) mortgage is a complex one, usually faced by homeowners nearing or already in retirement. The concept of “cheaper” needs careful definition—are we talking about the lowest monthly outflow, or the lowest total cost over the entire lifespan of the loan?

For many older borrowers, the motivation to switch is less about achieving the lowest interest rate and more about solving an immediate problem: the maturity of their existing interest-only mortgage, or the difficulty of meeting affordability criteria for a standard residential remortgage when relying solely on retirement income.

Understanding the Mechanics: RIO vs. Traditional Mortgages

To compare costs accurately, it is essential to understand how these two product types operate, particularly regarding capital repayment.

Traditional Mortgages (Residential)

Repayment Mortgages: These amortise the debt, meaning both capital and interest are paid down over a fixed term (e.g., 25 years). At the end of the term, the debt is completely cleared. They are typically the cheapest overall option if you can afford the monthly payments, as interest only accrues on a reducing balance.
Interest-Only Mortgages: Popular decades ago, these require only interest payments monthly. Crucially, the borrower must have a credible repayment vehicle in place (e.g., an investment portfolio, endowment, or pension lump sum) to clear the entire capital balance on a fixed maturity date. If the repayment vehicle fails or the maturity date arrives and the capital cannot be paid, the lender will force the borrower onto a high Standard Variable Rate (SVR) or seek immediate repayment.

Retirement Interest-Only (RIO) Mortgages

RIO mortgages are designed specifically for older borrowers (typically 55+) who may struggle to meet the strict affordability rules of standard mortgages but can comfortably afford the monthly interest payments.

Repayment Mechanism: Only the interest is paid monthly. The capital is repaid via the sale of the property, triggered by a specific life event, usually the death of the last borrower or their move into long-term care.
Affordability: Lenders assess affordability based on retirement income (pensions, investments, etc.) to ensure the borrower can afford the interest payments for the rest of their expected life, unlike standard mortgages which assess income against a fixed term.

For more details on later life lending options, the government-backed MoneyHelper service provides impartial guidance on mortgages for older borrowers.

Analysing the Remortgaging Costs

When comparing the expense of remortgaging to a RIO versus maintaining or refinancing a traditional mortgage, several costs must be factored in:

1. Interest Rates

Generally, traditional residential fixed-rate mortgages currently offer the most competitive interest rates. RIO mortgages are specialist products and often have rates that are slightly higher than the best standard fixed rates.

RIO Benefit: If your traditional mortgage has matured and you have been moved onto the lender’s SVR, the RIO rate will almost certainly be significantly cheaper on a monthly basis. SVRs can be several percentage points higher than specialist fixed rates.
The Drawback: If you switch to RIO, you will pay interest for a potentially much longer period (the rest of your life) than the original traditional mortgage term. Even a slightly lower rate, if applied over decades, can result in a far greater total interest paid compared to a loan that pays off its capital within a fixed 25-year term.

2. Fees and Charges

Remortgaging always incurs upfront costs, regardless of the product type:

Arrangement/Product Fees: These are charged by the lender to secure the rate. They can often be added to the loan, but this increases the interest accrued.
Valuation Fees: The property must be re-valued, often at the borrower’s expense.
Legal Fees: Solicitors must handle the transfer of the charge from the old lender to the new RIO provider.

The cheapest option in the short term might be to stay put, as moving always involves these costs. However, if staying put means moving onto an SVR, the high monthly interest charges will quickly outweigh the one-off remortgaging fees.

3. Affordability and the Risk of Default

The primary financial benefit of a RIO often relates to affordability stability.

If you cannot pass the affordability checks for a standard residential remortgage (due to reduced retirement income), your only alternative to RIO might be equity release (which typically has higher interest rates and compound interest) or selling your property. RIO provides a cheaper monthly solution than being forced to sell your home.

Lenders carry out stringent checks on income and expenditures to assess whether you can manage the monthly interest payments on a RIO mortgage. Understanding your current financial health is crucial before applying for any new mortgage product.

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When is RIO Cheaper Than Staying Put?

It is almost always cheaper to remortgage to a RIO mortgage if you fall into one of the following categories:

Mortgage Maturity Crisis: Your existing interest-only mortgage is maturing, and you cannot repay the capital, leaving you stuck on an expensive SVR. Switching to a RIO offers a defined fixed rate and avoids the immediate pressure of capital repayment.
SVR Trap: You have been on your lender’s SVR for a long time following the end of a fixed term, and the interest rate is significantly higher than the RIO rate available.
Standard Refinancing Failure: You tried to remortgage onto a traditional product but failed the affordability checks due to pension income constraints. RIO mortgages specifically cater to later life incomes, making the monthly payment manageable, which is cheaper than selling your property entirely.

If you currently hold a competitive fixed-rate traditional mortgage that still has several years left on its term, remortgaging to a RIO would likely involve early repayment charges (ERCs) and potentially a higher interest rate, making it more expensive in the short term.

Risks and Long-Term Financial Impact

While RIOs provide relief from immediate capital repayment pressure, they introduce specific risks that affect the overall long-term cost:

Compounding Interest Over Time: While RIO interest is paid monthly, the capital remains constant. The longer the borrower lives, the more total interest is paid, meaning the total financial cost of the debt is potentially higher than a traditional loan that pays off the principal.
Impact on Inheritance: Since the capital is only repaid when the property is sold, RIO mortgages significantly reduce the equity available to beneficiaries upon the borrower’s death. This must be weighed against the benefit of being able to stay in the home during retirement.
Ongoing Affordability Risk: Although initial affordability is proven, the borrower must maintain the ability to pay the monthly interest for the duration of the loan. If income sources decline (e.g., if a spouse passes away and their pension income ceases), the lender must be notified, and the remaining borrower must prove they can afford the payments. If repayments are not made, your property may be at risk. Possible consequences of default include legal action, repossession, increased interest rates, and additional charges.

Conclusion: Defining the True Cost

The question of whether remortgaging to a RIO mortgage is cheaper than staying with a traditional mortgage cannot be answered solely by comparing interest rates. The financial relief offered by a RIO is primarily tactical: it provides a stable, manageable monthly payment in retirement and prevents the highly expensive transition to an SVR, or worse, being forced out of your home.

If your goal is to maximise monthly cash flow and secure your home ownership in later life, a RIO can certainly be cheaper than the high monthly costs associated with an SVR or the emotional and logistical costs of having to sell. However, borrowers must be aware that by not reducing the capital, the total amount of interest paid over the very long term will be higher, leading to a smaller eventual inheritance.

It is highly recommended to seek professional, independent financial advice tailored to your specific retirement income and equity position before committing to any later life lending product.

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