As property wealth continues to dominate the balance sheets of UK retirees, finding safe and sustainable ways to release value has become one of the most important questions facing older homeowners. By 2025, two products stand out as leading options: the lifetime mortgage, usually referred to as equity release, and the retirement interest-only mortgage, known as a RIO.
On the surface, both allow homeowners in later life to unlock capital without leaving the family home. Both are regulated by the Financial Conduct Authority, widely available across the market, and specifically designed with older borrowers in mind. Yet in practice they are very different. One is built on the principle of flexibility and security without the need for ongoing repayments. The other looks much closer to a traditional mortgage, with monthly interest payments continuing for life.
Understanding how these products diverge, and which circumstances they suit best, is essential. The choice between equity release and a RIO mortgage has long-term consequences for inheritance, affordability, and peace of mind in retirement.
Equity release has grown from a niche product into a mainstream retirement planning tool. At its heart is the lifetime mortgage, which allows homeowners over 55 to borrow against the value of their property while continuing to live there. Crucially, no monthly repayments are required. Instead, interest is rolled up and repaid, along with the capital borrowed, when the borrower dies or moves permanently into long-term care.
This structure has clear advantages. It frees borrowers from the pressure of monthly commitments, offering flexibility and reassurance that they can remain in their home regardless of changes to income or health. Modern products also allow voluntary repayments if the borrower wishes to manage the balance. This adaptability makes equity release especially attractive to retirees with limited or unpredictable income streams.
The trade-off, however, is the effect of compound interest. Over time, the balance can grow substantially, reducing the value of the estate passed on to beneficiaries. While the Equity Release Council’s safeguards, including the no-negative-equity guarantee, provide important protections, inheritance will almost always be impacted. For some families this is a price worth paying to secure stability and quality of life in retirement.
Retirement interest-only mortgages share some similarities with the lifetime mortgage but operate on very different principles. Like equity release, they are available to older borrowers and repaid only when the property is eventually sold. Unlike equity release, however, they require monthly interest payments for as long as the borrower remains in the property.
This repayment structure means that the loan balance does not grow over time. By covering the interest each month, borrowers ensure that the debt remains static until repayment. For families concerned about protecting inheritance, this is a powerful advantage.
Yet it comes with its own challenges. RIO mortgages involve affordability checks, with lenders assessing whether the borrower’s retirement income is sufficient to cover payments for life. This may exclude those with modest pensions or irregular earnings. Moreover, the obligation to make monthly payments carries risk: if income falls or health deteriorates, maintaining repayments could become difficult, potentially resulting in repossession. For this reason, a RIO mortgage is most suitable for borrowers with strong, predictable income who are comfortable with long-term commitments.
The contrast between equity release and RIO mortgages becomes clear when looking at how borrowers use them.
Consider Sarah, a 72-year-old widow with limited pension income but a home worth £400,000. Her priority is to remain in her property and access funds to improve her quality of life without the worry of bills she cannot afford. For Sarah, equity release offers a lifeline. She can access cash through a drawdown facility, pay for home adaptations and modest living costs, and live with the security of knowing she can never be forced to sell or leave her home prematurely. The cost is that her children may inherit less, but the value to her daily life is immediate and substantial.
By contrast, David, a 70-year-old retired professional, has a secure pension income and wants to release £100,000 to help his children onto the property ladder. A RIO mortgage is ideal for him. By paying the monthly interest comfortably from his pension, he ensures that the loan balance remains fixed, leaving the majority of his estate intact for inheritance. For David, the stability and predictability of a RIO mortgage outweigh the convenience of a repayment-free equity release plan.
Both scenarios demonstrate that neither product is “better” in absolute terms. The right choice depends on the borrower’s income, priorities, and family considerations.
The decision between equity release and a RIO mortgage is ultimately about trade-offs. Equity release offers freedom from payments but reduces inheritance due to compound interest. RIO mortgages protect inheritance but rely on lifelong affordability. Both products are regulated, safe, and transparent when arranged through reputable advisers, but each comes with consequences that must be fully understood.
Equity release may be less suitable for those who could afford and prefer to preserve estate value, while RIO mortgages may be risky for those with uncertain or declining income. Families should also consider how either option interacts with means-tested benefits, tax planning, and future care costs.
Choosing between equity release and a RIO mortgage is not something to attempt alone. Advice is mandatory for equity release and strongly recommended for RIO mortgages. At Willow Private Finance, we regularly encounter clients who begin the process with a strong view on which product they want, only to discover after careful analysis that another solution is better aligned with their circumstances.
Professional advisers examine income, health, inheritance goals, and long-term plans to assess suitability. They also present alternatives such as downsizing, blended strategies, or hybrid products that combine elements of both. Solicitors provide an additional safeguard, ensuring contracts are clear and that borrowers understand their obligations fully.
The line between equity release and RIO mortgages is already blurring. Some lenders now offer products that allow voluntary interest payments without mandating them, effectively bridging the two models. This innovation reflects the reality that retirees’ needs change over time: income may be strong at 65 but weaker at 80, or inheritance priorities may evolve.
The future of later-life lending will likely see even more flexibility, with products tailored not just to property value but also to the borrower’s long-term financial trajectory. What remains constant is the need for advice and planning, ensuring that homeowners choose the path that provides stability, dignity, and confidence in retirement.
Equity release and retirement interest-only mortgages both provide solutions for unlocking property wealth in retirement, but they do so in very different ways. Equity release prioritises flexibility and security without ongoing commitments, making it suitable for those with limited income who value peace of mind. RIO mortgages prioritise inheritance protection, making them ideal for those with strong, reliable income who are willing to commit to payments for life.
The right choice is deeply personal, shaped by income, family priorities, and lifestyle goals. With the right advice, retirees can navigate these options confidently and choose the product that best supports their later-life plans.
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About the Author
Wesley Ranger is the Founder and Director of Willow Private Finance, where he also serves as a senior mortgage and protection specialist. With over 20 years of experience, Wesley has advised clients across every area of later-life lending. His expertise in both equity release and retirement interest-only mortgages helps families make informed, balanced decisions that protect their financial security while honouring inheritance wishes.
Important Notice
Equity release and retirement interest-only mortgages are regulated financial products. They may not be suitable for all borrowers and will reduce the value of your estate. Taking out either type of plan may affect your entitlement to means-tested benefits. Failure to maintain monthly payments on a RIO mortgage may result in repossession. Independent legal advice is mandatory, and all products must be considered in line with FCA regulation and ERC safeguards. This article is for information purposes only and does not constitute personalised financial advice.
