With UK property prices doubling in some areas over the past 20 years, it’s no surprise an increasing number of people are interested in having a mortgage in retirement.
Whether you’re thinking about a mortgage before retirement or carrying one into retirement, this blog will help you explore your options.
There’s much more flexibility with later life mortgages now than in the past. So, if you’re wondering if you can extend your mortgage into retirement, you’ll be pleased to know that all our mortgages are available to apply for – whatever your age.
We may even be able to offer you up to 80% loan to value (LTV) if you’re applying to borrow into retirement. Or up to 70% LTV if you’re already retired.
Can a retired person get a mortgage?
You may be able to remortgage to us from another lender or purchase a new property for your retirement. You might also wish to raise funds for home improvements. Or you might want to help a child or grandchild to buy their own home.
Whatever your motivation, we can lend for a maximum term of 40 years, even if you’re already retired. The term we can offer will depend on what is suitable for your specific needs and circumstances.
Is there an age limit on getting a mortgage?
You’ll be happy to hear that our mortgages do not have a maximum age limit (unless you are taking out a Joint Borrower Sole Proprietor mortgage). If you’re interested in a Joint Borrower Sole Proprietor mortgage, we have a companion piece on how age limits work for family assisted mortgages.
What is a retirement mortgage?
There are specific mortgage types aimed at retirees, such as equity release and retirement interest only mortgages. However, being retired or borrowing into retirement no longer means being restricted only to these specific retirement mortgages. There are now more options available than you might think, which include:
- Standard repayment mortgages – also often referred to as capital and interest repayment mortgages. With these, your monthly payments will cover the interest due, plus a portion of the capital borrowed. This is generally considered the lowest risk mortgage type. At the end of the mortgage term your debt will be repaid in full, if all payments are made in full and on time. Some lenders will offer their whole range of standard repayment mortgages to older borrowers. However, many will only lend up to a certain age, typically 75. We don’t have a maximum age cap though, giving older borrowers more choice.
- Standard interest only mortgages – are another option to consider. You’ll only pay the interest accrued each month, so your monthly payments will be lower. Your mortgage balance won’t reduce though. This means you’ll need to repay the full amount that you initially borrowed at the end of the mortgage term.
- Standard part and part mortgages – combine elements of standard repayment and standard interest only mortgages. Part of the money is borrowed on a repayment basis, while the rest is borrowed on an interest only basis. This means your repayments will be lower than a standard repayment mortgage. It also guarantees that part of the balance will be repaid by the end of the mortgage term, assuming you make your payments in full and on time.
- Equity release mortgages – as with standard mortgages, with an equity release mortgage you can usually raise funds for things such as home improvements or to repay an existing mortgage. However, they can also assist with raising funds for areas such as general living costs, or lifestyle costs. Equity release mortgages don’t require monthly payments. Therefore, no affordability assessments are required when you apply for one. This is useful if you’re looking to use your mortgage to help fund your living costs.
However, if you choose not to pay the interest due, it will be added to the balance you owe, which will grow over time. The interest added will be ‘compounded’, meaning you’ll pay interest on the interest already accrued. Therefore, when the mortgage is due to be repaid, the balance can be much higher than the amount you borrowed. While many providers will offer a no negative equity guarantee, this means you may have nothing to pass on when you die.
- Home Reversion Plan – another option for borrowing in retirement is a Home Reversion Plan. Much like an equity release mortgage no monthly payments are due on the amount borrowed, and the debt is only repaid upon the last remaining borrower passing away or moving into care. However, the important difference with a Home Reversion Plan is that unlike any kind of mortgage, the borrower gives up ownership of their home.
Take a look at our blog to find out more about the different types of equity release and home reversion plans.
What is a retirement interest only mortgage?
Retirement interest only (RIO) mortgages differ from standard interest only mortgages, as they’re only available to older borrowers, typically 55.
Rather than repaying the loan at the end of an agreed term, it isn’t repaid until a significant life event. This could be:
- Selling the property
- When the last remaining borrower dies
- If the last remaining borrower goes into long-term care.
Typically, you’ll need to be over 55 to qualify for a RIO and fewer lenders offer them compared with other types of mortgages.
As with other interest only mortgages though, you’ll have lower monthly payments than with a repayment mortgage. However, the initial debt remains, so you’ll still owe the full amount at the end of the term.
As you can see, whether you’re planning ahead for retirement, or are already retired, there are plenty of options available. So, do some research and decide which one best suits your future needs. And as always, if in doubt, consult a mortgage adviser or broker for advice.
If you want to get started today, why not complete our decision in principle form? It only takes around 10 minutes and will give you an idea of how much you could borrow.
