Retirement Mortgage

Are You Strapped For Cash as a Pensioner? Find Out How a Retirement Mortgage Can Help You
Contributors: Nicola Date, Katherine Read. Edited by Rachel Wait & Reviewed by Francis Hui
Need Some Cash But Can’t Find Any Reliable Sources As a Pensioner? Find Out How Retirement Mortgages Can Benefit You Financially …

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A retirement mortgage is an umbrella term for financial plans that allow older borrowers to access some of the equity tied into their homes, in exchange for tax-free cash.

Over 55? Well, we’ve got news! 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. But could there be a better solution?

Presenting: the world of retirement mortgages, the possible solution to your financial freedom.

We’ll help you discover:

  • An introduction to retirement mortgages.
  • The types of retirement mortgages.
  • The best retirment mortgages in May 2022.

Our expert journalists and researchers have spent hours delving into the retirement care industry, to bring you the latest advice and news.

Let’s see what we’ve found!

Understanding Retirement Mortgages

Most upcoming retirees plan to move home after retirement.

They opt to take out a mortgage before retiring, believing that once they retire, they won’t be able to get a reliable mortgage plan.

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, and it essentially refers to mortgages that you take out against the value of your residence.

They can start before your retirement or while you’re in retirement.

There are a few types of retirement mortgages with different features.

Furthermore, you can find options that have more flexible terms than traditional mortgages.

These include:

  • You must be aged 55 or older – giving you a chance to borrow in your later years, instead of being prejudiced towards your age.
  • You can live in your home for the rest of your life – 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 although there are fantastic options where interest isn’t a concern.
  • You will unlock the cash on your existing property – using 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 – to qualify for a retirement mortgage.

Types of Retirement Mortgages

Although retirement mortgage is the umbrella term, there are a few different types of plans to consider. These are as follows:

What’s the Best Retirement Mortgage in May 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 adviser 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 (it should usually be worth £70,000).

Borrowing in joint names will also significantly influence the mortgage lender’s decision.

The mortgage firm will also have to stress test your future affordability.

They 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 whether you’re employed, self-employed, or on pension.

These may include your P60, bank statements, and a state pension letter.

Based on the regulators’ review of the mortgage market (MMR)3 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 pension4 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 plan providers will take your investment income and drawdown finances as an acceptable form of income and use it in determining your mortgage amount.

Who Are Retirement Mortgages For?

Retirement mortgages are designed for older British homeowners who want to take advantage of the cash tied into their property.

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 onto 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 add an extension.
  • You need income to supplement your retirement income – whether it’s for living expenses or to fulfil a bucket-list dream.

In Conclusion

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.

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Editorial Note: This content has been independently collected by the SovereignBoss advisor 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.

rachel w

Rachel Wait
Personal Finance Journalist

Rachel is an experienced finance journalist and editor with a particular interest in personal finance and consumer affairs. She has vast experience writing about money issues, property, insurance, and consumer affairs, and you’ll find her articles regularly featured in top media and newspaper publications.
John Lawson

Written by
John Lawson
Founder SovereignBoss

John is passionate about education and has made it his life-long mission to assist UK citizens on their future financial options, with a specialist interest in equity release, and SovereignBoss is the natural extension of this passion.

Reviewed by
Francis Hui
Senior Risk Manager

Having held various high-level roles across the industry, Francis is truly an expert in aiding UK citizens in their financial decisions and risk analysis. His unique insight and statistical knowledge make him the perfect person to help you take your financial future to the next level.
kath icon

Katherine Read
Consumer Affairs Writer

Since joining the editorial team at SovereignBoss, Katherine has become focused on bringing transparency to finances and opportunities for those approaching retirement age. She writes on the topics of equity release, home reversion, and mortgages.

Nicola Date
Writer & Journalist

Nicola is a financial writer for SovereignBoss and is passionate about the opportunities that equity release can open up for homeowners. Her extensive business experience and deep understanding of the industry means that she’s always up-to-date with the latest developments.

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