I Am Retired Can I Get A Mortgage

Retirement-interest only mortgages (RIOs) are a relatively new set of products designed to help older borrowers who may struggle to get a standard residential mortgage. They allow you to borrow against your property and only pay back the interest (and not the loan itself) each month.

A retirement interest-only mortgage is only available on the main residence and is very similar to a standard interest-only mortgage but with two key differences.

the loan is usually only paid-off when you die, move into long term care or sell the house.
you only have to prove you can afford the monthly interest repayments.

While there’s no minimum age requirement, retirement interest-only mortgages are generally aimed at older borrowers, such as the over 55s and pensioners who might find it easier to quality for them than a typical interest-only mortgage.

There are many reasons why older borrowers might want to take out a mortgage:

to purchase a retirement property which better suits their needs as they get older
to release cash from their property to top up their pension income
to gift money to a loved one to help them purchase a property.

Another big motivation for some older borrowers is to remortgage away from their existing interest-only mortgage.

Lenders consider two different ages when you apply for a mortgage: the first is your age at the time of application; the other is the age you’ll be at the end of the mortgage, when the debt will be fully repaid.

There are two parts to paying off a retirement interest-only mortgage: the interest and the outstanding capital.

During the term of the mortgage, you’ll make monthly payments to cover the cost of the interest on your loan.

At the end of the term of the mortgage, the outstanding loan you still owe will be paid off when the house is sold, you die, or when you move into long-term care.

Retirement interest-only mortgages share some similarities to equity release, in that they both allow you to tap into your property's value allowing you to access cash.

Equity release

With equity release, you borrow a portion of the property's value, but are not required to make monthly repayments (although some deals now allow you to do this).

Instead, the debt is repaid once you die or move into long-term care and the property is sold. These products are typically called 'lifetime mortgages'.

As repayments are generally not made, the debt grows over time and can erode the value of the property. However, this is not the case with a retirement interest-only mortgage, where the interest is paid monthly.

With equity release, there will be less equity in your property to pass onto your family after you've died than with a retirement interest-only mortgage.

There are a few reasons why a retirement interest-only mortgage could be a good option for you: the interest does not roll up like it does on an equity release mortgage; providing you can continue to pay the interest you'll avoid having to sell your home and; they are generally cheaper when compared to an interest roll-up lifetime mortgage.

However, you’ll need to pass the mortgage affordability checks to prove you can afford the interest-only repayments and your home may need to be sold off to repay the loan when you die or enter long-term care. The size of the mortgage will be determined on your retirement income.

If you’re coming towards the end of your current interest-only mortgage, and maybe you are retired and want to stay in your home, talk to us and we can advise whether equity release or a retirement mortgage will be a good option for you.