In this guide:

What is a retirement mortgage?

A retirement mortgage is a loan that you can take out against your home. It’ll start either before or during your retirement.

You’ll pay it off in either capital and/or interest payments. 

These types of mortgages will often last until you die or are moved into full time care. 

When this happens your property may be sold and the proceeds will go to your family.

Why get a retirement mortgage

You may choose to get a retirement mortgage as it can be difficult to be approved for a normal mortgage.

This is because some lenders see it as a risk lending to those in later life.

Getting a mortgage once you’ve retired

You can still get a mortgage if you’re retired, but it may be harder.

Lenders often have age limits to mortgages to make sure you can afford to repay your mortgage.

If you’re older, there are 2 types of retirement mortgages that you can get:

  • retirement interest only (RIO) mortgage

  • equity release mortgages

More about mortgages for over 60s.

Retirement interest only mortgages

A retirement interest only mortgage lets you borrow money against your property.

An RIO mortgage is good if you’re looking to downsize or remortgage.

To get an RIO you will need to:

  • already own your own home

  • have equity in your home

You may be able to switch to an RIO from a standard repayment or interest only mortgage

You only have to pay back the interest each month, not the loan. 

Make sure you have a plan for how you’ll pay off the rest at the end of the mortgage term.

They're often paid off when you die, move into a care home or sell the house.

The benefits of an RIO mortgage are that:

  • you only have to pay back interest so you pay less each month than if you were paying off the loan

  • they’re often cheaper than lifetime mortgages

  • they let you release money from your property

  • you only have to prove you can pay off the interest

  • you’re more likely to have something to pass down to family

  • interest will not keep building up

The downsides of RIO mortgages are that:

  • you need a plan to repay the full amount at the end of the mortgage term. Without one you’d have to sell or move to a smaller home

  • you’ll have more to repay at the end as you do not pay monthly repayments

  • how much you can borrow depends on your retirement income and your loan to value (LTV)

Equity release mortgages

Equity release mortgages may be good if you’re older and have equity in your home.

With equity release, you can borrow some of the property’s value but do not have to make monthly payments. This does mean your debt will go up over time. 

You can release equity from your home once you’re 55.

You can choose to take out a lump sum or smaller monthly amounts.

Your debt is paid off if you die or sell the house.

There are pros and cons to equity release but your situation can help you weigh up what’s right for you.

Equity release could work for you if you:

  • need some extra money for your retirement

  • do not have someone you want to pass your inheritance onto

  • do not want to move to a smaller home

Lifetime mortgage

A lifetime mortgage lets you take a lump sum out of your property.

There are 3 main types of lifetime mortgage:

  • drawdown lifetime mortgage

  • roll-up lifetime mortgage

  • flexible lifetime mortgage

You do not have to make any repayments but interest is added to the loan. This means debt can go up quickly.

Some let you pay off some of the interest or loan so make sure you check this before you take one out.

Your mortgage is paid off when you sell, move into full time care or die.

More about lifetime mortgages.

Home reversion

Home reversion lets you sell part of your property for a lump sum or regular payments.

This makes you a co-owner but you can still live in the home for the rest of your life or until you move into full time care.

You can often only get up to 60% of the market value of your home. So make sure you check what percentage of the market value you’ll get before you take one out.

You often need to be 65 or older to be eligible.

The benefits of equity release are that:

  • it gives you money to spend now

  • you can use some of the value of your home but continue to live in it rent free

  • you’ll never have to pay more than the property’s future value. This is because of the no-negative equity guarantee from approved schemes

The down sides to equity release are that:

  • it often costs more than a normal mortgage

  • it can cost more than moving to a smaller home

  • interest rates are often higher

  • if you release equity, you might not have the money you need later in retirement. For example if you need to pay for care

  • the money you get from equity release could affect if you can continue to get state benefits

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