Later Life Mortgages

Are You Considering Later Life Mortgages to Fund Your Retirement Years?
Contributors: Nicola Date, Katherine Read. Edited by Rachel Wait & Reviewed by Francis Hui
Are You Thinking About Later Life Mortgages? Discover How They Differ From Regular Mortgages & the Risks of Borrowing in Later Life. Let’s Unpack This.

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Are you one of the 17% of UK retirees who have no savings and are considering later life mortgages? If so, you’re probably looking for a solution to supplement your income.

Do you own your home? Perhaps, a later-life mortgage could be the answer you’ve been looking for.

However, with so many options on the market, it’s not easy to decide where to turn.

What You’ll Learn in This Article:

    Our expert team has analysed all the latest plans available on the regulated market to bring you the newest information available in Aug 2022.

    Are you wondering if a later life mortgage could be the financial decision you’ve been looking for?

    Let’s take a look!

    What’s a Later-Life Mortgage?

    A later-life mortgage is an umbrella term for forms of borrowing money into retirement in which you trade the equity in your home for cash.

    A lifetime mortgage and equity release are later-life mortgages, and there are some clear differences between them.

    Another new product is a retirement interest-only mortgage.

    There are a variety of retirement mortgages available, each with its own set of terms, but they all assist you in funding your retirement.

    You may either make monthly payments to pay off the debt or just cover the interest.1 

    Why Might I Need a Mortgage in Retirement?

    You might need a retirement mortgage if you discover that you won’t have enough money to live the life you desire in retirement.

    It’s not uncommon for individuals to own property, but not live comfortably every day due to a lack of pension income or insufficient savings.

    What Age Can I Apply for Later Life or Retirement Mortgages?

    You can apply for a later-life or retirement mortgage if you are approaching or have already reached retirement age.

    Typically, they’re available for homeowners from the age of 55. You’ll usually need to be receiving a pension, and your property must be your primary residence.

    In recent years, many banks and building societies have increased the upper age limit for a later life mortgage, or have not set one at all.

    What are the Later Life Lending Options?

    The later-life lending options are standard mortgages, retirement interest-only mortgages, lifetime mortgages, and home reversion schemes.

    Standard Mortgage Features:

    • Take comfort in the fact that your fixed-term mortgage will be paid off at the end of the term.
    • There are many alternatives to choose from; you may pay off part of the loan each month so that it is completely paid off by the end of the term, or you can just pay interest and then repay the amount you borrowed after the agreed term.
    • If you apply for a mortgage, the lender will want to know if you can afford to make the monthly instalments from your income or pension for the whole term.

    Retirement Interest-Only (RIO) Features:

    • You’re only required to pay back the interest and not the loan itself. By repaying the interest monthly, the amount you owe never increases.
    • Since you’re only paying back the interest, the amount you owe with a retirement interest-only mortgage will generally be lower than your typical mortgage.
    • There is no limit to how long you can leave your mortgage outstanding; however, if you pass away or enter long-term care, the loan must be repaid – typically by selling it.

    Equity Release – Lifetime Mortgage Features:

    • Despite releasing equity, you’ll still retain 100% ownership of your home with these lifetime mortgages for pensioners.
    • The cash is tax-free.2 You may use the money as you wish, whether it’s to assist friends and family, go on a dream holiday, or even make home improvements.
    • If you have mortgage payments outstanding, you’ll need to use some of the money you release to pay it off.
    • You won’t have to pay back the loan during your lifetime, and you may either pay the interest each month or let it roll up.
    • The loan (and interest) is then repaid, usually from the sale of your home, when you pass away or move into long-term care.

    Equity Release – Home Reversion Plan Features:

    • You will sell all, or a portion of your home and receive a lump sum or regular income as compensation.
    • You’ll receive the cash tax-free.
    • You may live in your house rent-free if you take advantage of this offer, but you will still have to pay to maintain it.
    • When your home is sold when you pass away or enter long-term care, the lender will take their cut, and the balance will go to your heirs.

    Which Is the Best Retirement Mortgage? 

    The best retirement mortgage options will depend on your personal circumstances.

    A lifetime mortgage is the most common and you can leave a greater inheritance with a retirement interest-only mortgage.

    Your best bet is to get in touch with a whole-of-market financial adviser who can help

    You should also base your decision on how much capital you require at first, your age, income, and property value.

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    Who Are Retirement Mortgages For?

    Retirement mortgages are designed for UK retirees who want or need to use the cash in their home, whether it’s to supplement retirement income, help children, or desperately pay off a mortgage or debt.

    If you find yourself in any of the following situations, you may require a retirement mortgage:

    • You desperately need to repay your mortgage.
    • You’re relocating to a bungalow, retirement community, or closer to your children for help.
    • You want to help your children purchase their first home or leave an early inheritance.
    • You want or need to renovate your home.
    • You have a bucket list that needs fulfilling, whether it’s buying a new car or taking that dream trip.
    • You don’t have sufficient income to get you through retirement.

    Will I Be Able to Get a Mortgage When I’m Over 50?

    It will be difficult to get a mortgage at over 50 because lenders consider that your income will soon be dropping as you approach retirement.

    However, you can qualify for later-life mortgages when you are aged 55 and older.

    How Does a Later Life Mortgage Differ From a Regular Mortgage?

    The difference between a retirement mortgage and a regular mortgage is that a later-life mortgage is used to unlock cash.

    Whereas homeowners typically take out a regular mortgage to purchase a home.

    The most important aspects are similar.

    The bank will want to ensure that the property has enough value to cover the amount its lending, and might require proof of income, if applicable.

    However, the goal of a standard mortgage is to repay more of it to own the property outright.

    With a later-life mortgage, you’ll usually use the equity from your property, and it’s paid off when you die.

    What Are the Risks of Borrowing in Later Life?

    There are risks when borrowing in later life.

    The main risks of borrowing in later life are that you’ll leave a smaller inheritance and that you could unlock too much cash in one go, draining all the equity in your home.


    • Below Market-Value Offer – Since you’ll continue to live there, you’re effectively tying up the bank’s new asset for a while.
    • Reduced Inheritance – You’ll be using the cash tied into your asset, therefore leave less to your loved ones.
    • Benefits Impacted – A lump sum might impact any means-tested benefits or local authority grants you receive.
    • Terms & Conditions – It’s vital to verify the fine print of the agreement.
    • Compound Interest – If you don’t pay off the interest on a lifelong mortgage, it will accrue over time.
    • Monthly Payments – If required, you must ensure you have the means to repay all monthly payments.

    You must listen to suggestions given by a professional financial adviser and select a product that is right for you.

    They will also help you determine if equity release is worth the risk. It would also be beneficial to talk with your friends and family first.

    How Do I Apply for a Mortgage in Later Life?

    You can apply for a later-life mortgage by getting in touch with a whole-of-market financial adviser or one of the best equity release lenders.

    Before meeting with the adviser, it will be beneficial to have personal information to hand.

    Such as your income figures from any pensions or other savings, outstanding debt, or insurance coverage.

    What Documentation Is Needed for a Retirement Mortgage?

    The documents you need for a retirement mortgage will depend on the plan you select and your employment status.

    These may include:

    • P60s
    • a state pension forecast
    • occupational scheme pension forecasts
    • business trading accounts
    • a pension letter
    • 3 months bank statements
    • SA302s

    Take note:

    If you’re opting for a mortgage for retired people that requires repayments, you will need to go through affordability checks.

    Following the mortgage market regulator’s (MMR) review of the sector in April 2014.

    It is now up to the lender to show affordability in such cases; therefore, careful inspections will be made.

    Providing such documentation before retirement is generally required by lenders in such instances:

    • Employer and Self-Employed: P60s will be required if you work, as well as a state pension forecast, and any occupational scheme pension forecast (to verify future income in retirement).
    • If you operate a business, most stockbroking firms will ask for 3 years’ worth of trading accounts before opening an account. You may also need to submit SA302s and a pension forecast.

    If you are already receiving a pension, lenders may request the following documents:

    • A copy of your last Department of Work and Pensions (DWP) State Pension letter.
    • Your last 3 months’ bank statements as proof of receipt of pension income.

    Some lenders may accept investment income and drawdown funds as an acceptable source of income for your mortgage application, although not all do.

    What Are the Alternatives to Borrowing in Later Life?

    The alternatives to borrowing in later life include digging into your savings, downsizing to a smaller or cheaper home.

    Seeking support from friends or family, looking into local grants or means-tested benefits that you’re eligible for.

    Your financial adviser should talk you through the most common equity release alternatives before you make your final decision.

    Mortgage Calculator

    Are you wondering how much cash you could be eligible to unlock through the various later life mortgages?

    We’ve got the most accurate mortgage calculators in the UK for you to try.

    Just fill in a few details, and our expert team will email you with an estimate of the maximum amount of equity that you could be eligible to borrow.

    Common Questions

    Will You Qualify for a Later Life Mortgage at Age 54?

    Who Offers the Best Later Life Mortgage?

    Is a Later-Life Mortgage a Good Idea?

    In Conclusion

    While we all imagine a financially stress-free retirement, it’s easier said than done.

    In today’s world, it’s becoming more and more expensive to equip oneself for the financial challenges that come with retirement.

    If you’re heading towards retirement and you don’t know how you’ll cope financially, later life mortgages may be an ideal way to enjoy your golden years.

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