What’s a Retirement Mortgage & How Does It Work?
Maximise your retirement finances.
From tax effective retirement and international investment options, to finding the right retirement mortgage for you.
Are You Considering a Retirement Mortgage to Unlock Funds?
Are You Looking to Fund Your Senior Years With a Retirement Mortgage? Discover the Different Types of Retirement Mortgages & the Top Providers in 2022. We Answer All Your Burning Questions in This Ultimate Guide. Read On...
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How Much Can You Release? 👇
A retirement mortgage is a loan secured against your property, with regular capital and/or interest repayments being made per the agreement with your lender.
This allows older borrowers to access the equity tied up in their home as tax-free cash.
Over 55? Well, we’ve got news for you! If you think that you can’t get a mortgage, you could be wrong.
Half of Brits who take out a mortgage don’t expect to have paid it off by their 65th birthday. Could there be a better solution?
Presenting – the world of retirement mortgages, the possible solution to your financial freedom.
In this article, we’ll help you discover:
- What are the different types of retirement mortgages?
- Which companies provide retirement mortgage services?
- Halifax retirement mortgages
- Nationwide retirement mortgage
- Santander retirement mortgages
- Are retirement mortgages a good idea?
- Retirement mortgage advisors
- How is interest calculated on a retirement mortgage?
- How do you repay a retirement mortgage?
- How to use a retirement mortgage calculator?
- How flexible are retirement mortgages?
- Are retirement mortgage products regulated?
Our expert journalists have spent hours researching retirement funding to bring you the latest advice and news.
Check this out!
Understanding Retirement Mortgages
Most people approaching retirement age plan to move out of their home for their retirement years.
They opt to take out a mortgage before retiring, believing that once they retire, they won’t be able to get a reliable mortgage plan1.
But, we’ve got news!
You don’t have to do that. There’s a variety of mortgage products that are designed for older borrowers.
The umbrella term is retirement mortgages, which refers to mortgages taken out against the value of your home before or during your retirement years.
There are a few types of retirement mortgages with different features.
Furthermore, you can find options that have more flexible terms than traditional mortgages.
- You must be 55 years or older: This allows you to borrow in your later years, and not rejected because of your age.
- You can live in your home for the rest of your life: This is possible while still unlocking equity.
- You’re never obligated to make loan repayments: The loan is covered, usually from the sale of your home, when you pass away or enter a long-term care facility.
- You can volunteer to opt for a later-life mortgage with interest repayments: However, there are fantastic options where interest isn’t a concern.
- You will unlock the cash on your existing property: You can use some of the money to pay off your existing mortgage, if you have one.
- You can only have a small or no mortgage left on your estate. This is one of the requirements to qualify for a retirement mortgage.
Types of Retirement Mortgages
- Lifetime mortgages: This is the most popular type of equity release loan. You’ll unlock the cash tied into your home, while still retaining 100% ownership of your estate. No capital or interest repayments are required, but you can find plans that give you the option of making payments if you wish. In itself, there are various types of lifetime mortgages.
- Home reversion schemes: As another type of equity release, you’ll sell all or a portion of your estate to a lender, below market value. In return, you can live in your home until you die or enter permanent care.
- Retirement interest-only mortgages: This newer addition to the world of retirement mortgages lets you only pay back the interest on your loan, with the balance being covered when you pass away or enter a long-term care facility.
What’s the Best Retirement Mortgage in 2022?
The best retirement mortgage depends on your lifestyle and financial state, but most homeowners opt for lifetime mortgages.
You’ll need to get in touch with a whole market financial adviser2 who’ll help you determine the best plan type for you and your family.
Lenders will consider:
- Your age (from 55, or in some cases, 60 or 65).
- Your income (if repayments are required).
- The amount of capital you need.
- The value of your property (usually, it should be worth £70,000 or more).
A joint application will also significantly influence the mortgage lender’s decision.
The mortgage firm will also have to stress test your future affordability.
The lender will carefully evaluate the implication of one spouse dying, and whether the survivor can continue to manage the mortgage loan on their own.
Therefore, it’s important to get independent financial advice before taking out the mortgage loan, since your local mortgage adviser will look at these scenarios.
What Documentation is Required for A Retirement Mortgage?
The documents you need for a retirement mortgage will differ depending on whether you’re employed, self-employed, or on pension.
These may include your P603, bank statements, and a state pension letter.
Based on the regulators’ review of the mortgage market (MMR4) in April 2014, it’s the plan provider’s responsibility to prove your affordability if repayments are required.
- If employed, the plan provider will need to see your P60. They’ll also need to check your state pension forecast, and any other occupational scheme pension forecast to prove future income in retirement.
- If self-employed, the lender will need to check 3 years’ worth of trading accounts. You might also have to offer them proof of your SA302s5 and pension forecast.
If you’re already getting a substantial pension(s), then your mortgage provider will request to assess the following documentation:
- Your last annual Department of Work and Pensions (DWP)6 State Pension letter.
- P60s from all private and occupational pension plans.
- Your last 3 months’ bank statements, as further evidence of receipt of pension income.
Moreover, some lenders will take your investment income and drawdown finances as an acceptable form of income, and use it to determine your mortgage amount.
Who Are Retirement Mortgages For?
Retirement mortgages are designed for older British homeowners who want to unlock the cash tied up in their property.
All of this while still living in their home until they pass away or enter long-term care.
Furthermore, you might want to consider a retirement mortgage if:
- You have an existing mortgage to settle: If your mortgage lender is pressing for an outstanding, final mortgage balance repayment.
- You want to retire in your home: Instead of downsizing or moving to a retirement village.
- You want to help your kids buy a home: If you want to offer a deposit to help your family climb up the property ladder.
- You want to renovate and increase your property price: If you want to make the necessary home improvements to upgrade your kitchen or an extension.
- You need income to supplement your retirement income: Whether it’s for living expenses or to fulfil a bucket list item.
What's a Retirement Mortgage?
A retirement mortgage is a lifetime mortgage scheme option. It means that you don’t have to repay your loan amount until you die or move into long-term care.
You’ll have to pay the interest charged every month until the youngest borrower reached 80 years. After that, you can opt to stop paying the interest meaning it’ll be added to your mortgage instead.
How Does One Qualify for the Retirement Mortgage?
To be eligible for the retirement mortgage plan, you need to be aged 55 or above. Mortgage companies also check your income, your credit rating and your affordability.
How Can You Get A Mortgage After You've Retired?
There are several ways you can get a mortgage after retirement. You can apply for an equity release scheme that allows you to unlock the value tied up in your property and you repay the mortgage when you die or move into residential care.
There are also retirement mortgages and retirement interest-only mortgages which are specifically designed for retirees, and are flexible and reliable, unlike standard mortgages.
Is it Bad to Have A Mortgage After Retirement?
Paying off your mortgage is a smart option for retirees or those about to retire who are in the lower-income bracket, have a high-interest mortgage loan and don’t benefit from tax-deductible interest.
However, there are mortgages like the equity release, lifetime mortgage or retirement mortgages that offer you tax-free cash to spend as you wish. For most, you don’t have to pay off the loan until you die or move into residential care.
If you’re looking for retirement mortgage advice, you’ve come to the right place.
With so many plans available on the market, you must ensure that you seek expert financial advice to find the right retirement mortgage to suit your needs.
Before You Go...
How Much Can You Release? 👇
Editorial Note: This content has been independently collected by the SovereignBoss team and is offered on a non-advised basis. SovereignBoss may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.
Most people are using equity release as a means of retaining the use of their house while also obtaining a lump sum or a steady stream of income. Get matched with an expert and check your eligibility for equity release options.
Use our free equity release calculator & see how much you can release today.