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Older-style loans allow you to roll up interest but, with RIOS, you must make interest payments as you go.
Borrowers also have to show that they can afford to pay all the interest for the rest of their lives, even if interest rates rise.
With joint loans, both partners must be able to afford all the interest due in case one dies, though any inherited pension is taken into account. With other loans, eligibility is assessed on a joint basis.
Old-style interest-only loans last for a set number of years. RIOS can last an indefinite length of time: you repay the loan when the house is sold, on your death or if you move to a care home.
Some RIOS are portable, meaning you can keep the loan if you want to downsize, but others aren’t – so you need to check with the lender.
The other choice for older borrowers who need to raise money from their house is equity release. You have no need to prove you can afford repayments, as interest is rolled into the loan which is repaid when you die.
This makes them expensive because you pay compound interest – you are charged interest on the interest – indefinitely until the house is sold, by which time there might not be much equity left.
A few lenders have also improved access for older borrowers to their standard mortgages. The Post Office sells interest-only loans that can be repaid until you are 80, and repayment mortgages up to the age of 90. Aldermore allows repayments to the age of 99.
When making such a big commitment, it is sensible to take advice. Brokers selling equity-release products must have specialist training, but general mortgage-brokers can sell RIOS, although they must tell you that equity release is an option.