We spend a large portion of our lives working hard to save for retirement, and we should be allowed to enjoy it, right? For many, that means time to relax, explore passions, or plan for long-term care. But for others, owning a home remains a central part of their goals.
Whether you’re looking to downsize to a smaller home, move closer to family, or fund unexpected expenses, we cover all you need to know about getting a mortgage when you retire.
Can retirees get a mortgage in the UK?
Yes! In the UK, many mortgage options are available once you hit retirement, so don’t let age limits and income get you down.
Most lenders are flexible, and some will continue letting you pay your mortgage even after you retire. Their main concern is usually around how you will repay the loan, but with the right mortgage advice and product, you should be able to breeze through the process.
What to consider when getting a retirement mortgage?
While it is possible to get a mortgage when you retire, there are some important things to think about that can affect your finances and the type of mortgage you get.
Firstly, lenders typically offer shorter mortgages due to age, since most people retire later in life. The average retirement age in the UK is around 65.
It’s also important to consider how getting a mortgage can affect your retirement income. If you are retired or know you will retire during the mortgage term, your finances may be less stable. Many lenders are cautious of people nearing retirement age and want to ensure that you can keep up the monthly repayments throughout retirement. This may mean age limits, stricter eligibility criteria and affordability checks, or a more complex application process.
Mortgages available to retirees
Your dream of buying a home doesn’t have to end when you retire. Whether you’ve been a homeowner before or this is your first time, there are several options specifically tailored to retirees.
Retirement interest-only mortgages
If you want to stay in your current home and reduce your monthly payments, then a retirement interest-only mortgage could be for you. Unlike traditional mortgages, RIO mortgages allow borrowers to pay only the interest each month. The remainder of the loan is then paid off when the house is sold, or the borrower passes away.
People in retirement often choose RIO mortgages to keep mortgage repayments low and give them more flexibility over their finances.
| Benefits | Considerations |
|---|---|
| – Monthly interest payments are lower than standard mortgage payments – No ‘fixed date’ to repay the loan, giving more flexibility | – Strict eligibility criteria – Outstanding debt remains the same, which could reduce equity in the property |
Equity release mortgages
An equity release mortgage is a way to access money tied up in your home without having to move out or sell the property. The two main types are lifetime mortgages (a loan secured against your property) and home reversion plans (selling part of your home to a provider).
Most lifetime mortgages are flexible, meaning you don’t have to have already paid off your existing mortgage as the new loan can be used to do this, plus interest can often be fully serviced as well as capital and they can be used for a number of reasons. They are generally the more common option.
| Benefits | Considerations |
|---|---|
| – Access to a lump sum of money without selling your home – Various uses – Remain as the homeowner – No need for monthly payments with a lifetime mortgage | – May reduce the inheritance left behind – Higher interest rates than standard mortgages – You could end up owing more if your property significantly decreases in value |
Joint borrower sole proprietor (JBSP) mortgages
While they have many other benefits, joint borrower sole proprietor mortgages can help older borrowers gain a helping hand from family to buy a retirement property. They enable you to include multiple borrowers on one mortgage application, boosting your affordability when remortgaging or applying for a new mortgage.
We excel in JBSP mortgages and have found them highly beneficial for older borrowers facing complex situations. Read about how we helped one family in particular use a JBSP mortgage to save their home from repossession.
Here’s what the Goldings had to say:
“Where to begin?… When you are at wit’s end and have no open route to follow, it is a huge relief to be wrapped in the secure knowledge that Simmonds Mortgage Services are ready, willing, and more than able to guide you through the mortgage maze toward a successful conclusion.”
Joint borrower sole proprietor mortgages can work both ways. If you want to help your child get onto the property ladder, then a JBSP mortgage could be the ideal solution. It allows you to share responsibility for the mortgage without being on the property deeds.
| Benefits | Considerations |
|---|---|
| – Access to larger mortgages – Strengthens affordability – Helps retirees prevent repossession – Helps younger family members buy property | – Borrowers are equally responsible for the mortgage – May affect future borrowing |
What is the difference between a RIO mortgage and a term interest-only mortgage for older borrowers?
Interest-only mortgages are becoming increasingly popular in the UK and offer numerous benefits for older borrowers who may need more financial flexibility as they reach the end of their mortgage terms. But choosing the right interest-only mortgage will depend on your specific situation and future plans.
Unlike a retirement interest-only (RIO) mortgage, which is repaid when the last person dies or goes into care, a term loan or term interest-only (TIO) mortgage is closer to a regular mortgage in that it must be repaid by a pre-agreed date. This lowers borrowers’ outgoings in the short term, allowing them to pay the principal at the end of the loan term using savings or refinancing.
Some interest-only lenders can lend all the way to age 99, but most lenders cap borrowing at around 80. The lender will look at how the mortgage can be repaid each month from income, pensions, savings, SIPPs, and investments, and as long as the lender deems the mortgage payments affordable, an interest-only loan is usually suitable for applicants in or approaching retirement.
Tips for getting a mortgage in retirement
We understand that finding a mortgage when you retire can be daunting. Take a look at our top tips below.
Speak to a financial adviser
Working out your expected income when you retire is the first step in determining A) how much you can borrow and B) if you can comfortably repay the mortgage. To do this, you should add up your pension income (including State Pension and private) plus any additional income from properties or investments.
Many retirees find it helpful to get professional advice from a financial adviser. They will ensure you don’t miss anything. A broker can also help you determine your income before applying for a mortgage.
Use a specialist mortgage broker
Not only will a specialist mortgage broker be able to calculate your retirement income and affordability, but they’ll also help you make the most informed decision about your mortgage. If you have a particularly challenging situation or want the process to go as smoothly as possible, then a mortgage broker is the best person to contact. Book a meeting with an experienced mortgage broker today.
A professional mortgage broker will also handle the entire application from start to finish. They’ll pull together all the information you need to hand over to the mortgage lender, such as an annuity or pension forecast, State Pension statement, proof of additional income, proof of identity, bank statements, and information about your credit history.
Save for a larger deposit
A larger deposit can increase the likelihood of a successful application or better interest rates, so any additional money from personal savings or investments can go a long way. If you’re downsizing, you could also use equity from your current home to make this achievable.
Seek help from family and friends
If you’re struggling to save for a deposit, manage your monthly income, or research your options, you can seek help from family and friends. They don’t just have to provide financial support. They could also help you gather your documents and navigate the process.
Looking for a post-retirement mortgage? Get in touch with Simmonds Mortgage Services
Simmonds Mortgage Services has years of experience helping retirees choose the right mortgage for later life. With access to a broad selection of high-street and private specialist lenders, we help clients increase their borrowing capacity and buy their dream retirement properties.
If this is something you’re considering, call us now on 01184 693 037 or book a meeting to talk to an adviser.
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