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A mortgage is a loan secured against your property and most tend to run for 25 years. If you thought you were too old or can't find a conventional one to meet your needs, speak to our expert advisers about a retirement repayment mortgage.
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Retirement mortgages are available to borrowers aged 50+
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The loan term is based on your needs
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It's a loan secured against your home
Mortgages can be used to buy a new property, re-mortgage an existing one, or release additional funds.
You make monthly repayments until the end of your term and the total amount of capital and interest has been repaid. it's important to know that your home may be repossessed if you do not keep up repayments and you should always think carefully before securing a loan against your home.
Your retirement mortgage loan amount is based on affordability. We’ll calculate how much you can borrow based on your circumstances and see what payments you can make each month.
While the repayments are higher than with a retirement interest-only mortgage, you'll have an end date because you're paying off the capital and interest. With a RIO, you will be making repayments for the rest of your life.
Once you reach the end date and make all your repayments, you'll be able to pass on more of your property wealth to your beneficiaries, giving them more stability for the future. Plus, the overall cost of borrowing works out cheaper than if you choose a RIO. However, mortgage suitability will depend on your financial circumstances and capacity to commit to repaying certain quantities each month.
As a minimum, you’ll need to prove your income through employment and/or pensions to show you can afford the monthly repayments for your retirement mortgage. One of our friendly qualified mortgage advisers can tell you if you qualify over the phone.
You can also use our free, no-obligation mortgage finder to find out your possible options.
You'll also need to think about which type of interest rate would work best for you when looking at mortgages when retired: fixed or variable.
Retirement repayment and retirement interest-only mortgages both allow you to release tax-free cash from your home and are also similar in several other ways. For example, both are loans secured against your property, require affordability checks, and have mandatory repayments.
The main difference is that you only pay the interest each month with an RIO. With a retirement repayment mortgage, your monthly repayments contribute towards both the capital and the interest. As a result, the monthly repayments are usually higher.
However, a RIO is designed to last for the rest of your life while a retirement repayment mortgage has a set end date. This means you'll be mortgage-free by that date if you make all your scheduled repayments. This will allow you to pass on more of your property wealth to your beneficiaries.
Because of this, the overall cost of borrowing for a retirement repayment mortgage is usually lower than that of a RIO. So, while you typically pay more monthly, it’s usually a cheaper borrowing option in the long run – provided you can commit to the higher monthly outgoing.
If you're unsure whether a retirement repayment mortgage is suited to your circumstances, we recommend using our mortgage finder.
We also encourage you to speak with our experts, who will be able to check whether you meet our eligibility criteria and give you any further information that will help you make your decision. Either way, we're confident we can match you up with the best solution for your circumstances.
A lifetime mortgage is a form of equity release. It involves borrowing money secured against your home. When the last borrower passes on or moves into long-term care, the home is sold and the money is used to pay off the loan. The amount that's released depends on the value of your home, as well as your age.
With all lifetime mortgages we recommend, you retain ownership of your home and won't face monthly repayments, unlike with a retirement repayment mortgage. However, you can opt for partial repayments to reduce the cost of your plan if you're eligible.
Some might opt for a drawdown lifetime mortgage, which involves only paying interest on the amounts you release. Otherwise, you take a lump sum with interest charged on the full amount from day one.
Something to bear in mind with a lifetime mortgage is that the debt can grow at a fast rate, making it expensive to repay. You may also face early repayment charges if you exit the loan early. This option means you won't be able to pass on your home, unlike with a retirement repayment mortgage.
Back to "What's in this guide?"
If you're considering a later life mortgage, it's recommended you get specialist advice to make sure you find the right product for your needs. So, why should you choose Key as your adviser?
We're committed to offering tailored advice and an award-winning service that will make a difference, whatever your circumstances. If you're a homeowner aged 50 or over, we can help you release some of the tax-free funds from your home, supporting you through each step of the process.
Keen to learn more? Contact our team to discuss our retirement mortgage services today. You can request a callback from one of our experts or call 0808 252 9170.
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Retirement repayment mortgages FAQs
When applying for a new mortgage or remortgaging as a retired person, you need to provide evidence of your income.
Assuming your main source of income is your pension, you will generally need the following:
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Bank statement for the full last month (showing how much you received from your pension in this period)
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Most recent pension payslip
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Annuity statement if needed
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P60
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State Pension statement
You may also have other sources of income. This could be from employment or self-employment. For example, you might have a part-time job or a buy-to-let property. Lenders will want to see evidence of the income these provide.
You may also receive benefit income from the Department for Work and Pensions (DWP). If this is the case, supporting documents will be required.
There are many reasons you might want to take out a mortgage or remortgage when in retirement. You may be considering downsizing if your children have left home or if your partner has passed away. Alternatively, you may simply want a change of scenery or need a home that suits your lifestyle now that you're retired.
Meanwhile, others might choose a buy-to-let mortgage to set up another source of income.
People are living longer and some are retiring earlier. As a result, more people in the UK are seeking a mortgage into retirement. Historically, securing a mortgage later in life was tricky. This was because some lenders implemented age caps. However, this is now less of a hurdle. If you can prove your retirement income meets the criteria set out by the lender, you could be granted a retirement mortgage.
A joint retirement mortgage allows two or more retired persons to buy a home together. Those named on the mortgage will be responsible for the repayments.
Benefits include the fact that lenders may view you as more reliable. You are also more likely to put down a higher deposit and, ultimately, borrow more.
Page last updated: Tuesday 17 December 2024