Retirement interest-only mortgage guide
Retirement interest-only mortgages, explained in full.
A retirement interest-only mortgage lets you borrow in later life and pay just the interest each month, with the loan repaid when your home is sold. This guide answers the questions people ask most, from whether you can still get a mortgage in retirement to moving home and what happens later in life, and how we can help.
Written by Harry Mansell, CeMAP, from the questions our clients ask us.
In this guide
- What is a retirement interest-only mortgage?
- What we need to know
- If your interest-only mortgage has ended
- Applying on your own
- Releasing money to help family
- Moving home
- If you die or go into care
- What you leave behind
- Bad credit in later life
- Documents you’ll need
- How it works, step by step
- Frequently asked questions
What is a retirement interest-only mortgage?
These are later-life mortgages where you pay just the interest each month, with no fixed end date. The loan is repaid when your home is sold, whether that’s because you move, go into long-term care or pass away. It’s regulated by the Financial Conduct Authority, like a standard residential mortgage.
Our retirement interest-only mortgages page explains how it works, compares it with other later-life options and covers what lenders look at. Below, you’ll find answers to the more specific questions people ask about their own situation.
What do we need to know for a retirement interest-only mortgage?
We need to know a few things. To start, that’s the ages of everyone on the mortgage, your income in retirement, your home’s value and type, any existing mortgage and what the money is for. With the full picture, we can match you with lenders whose criteria suit your situation.
| Area | What we need to know |
|---|---|
| You | The ages of everyone on the mortgage and whether anyone else lives in the home |
| Retirement income | State, workplace and private pensions, any rental or investment income, and what would continue for a surviving partner |
| Your home | Its value, the type of property, whether it’s leasehold and that it’s your main home |
| Existing mortgage | Your lender, the balance, the end date and whether it’s interest-only or repayment |
| What it’s for | Repaying an interest-only mortgage, buying a home, releasing money or helping family |
| Your credit | Your credit history, including any missed payments or arrears |
Criteria vary from lender to lender, so these details decide which lenders could suit you.
Can you get a retirement interest-only mortgage if your interest-only mortgage has ended?
Yes, a retirement interest-only mortgage is one way homeowners repay an interest-only mortgage that has reached the end of its term. Affordability is checked against your retirement income, and your home’s value and your age are taken into account too, with criteria varying between lenders.
If your current lender has written to you about repaying your mortgage, getting in touch early gives more time to look at the options. Staying with your current lender, switching to a new lender or, for some people, equity release can all be compared.
Can you get a retirement interest-only mortgage on your own?
Yes, sole applicants can take out a retirement interest-only mortgage. Your own retirement income is used to work out affordability, such as your pensions and, if it applies, any widow’s or survivor’s pension, and the monthly interest needs to be affordable for you alone.
Joint applications work a little differently. At the start, lenders check that the payments would still be affordable for whichever of you remains if one of you passes away.
Can you release money with a retirement interest-only mortgage to help family?
Yes, many people use a retirement interest-only mortgage to release money for family, such as a gift towards a first home. How much you want to borrow, your retirement income and your home’s value are all assessed, and some lenders ask for details of the gift and who is receiving it.
Can you move home with a retirement interest-only mortgage?
Yes, moving home is possible, either by transferring your mortgage to the new property, known as porting, or by repaying it and taking out a new one. Whether a mortgage can be ported depends on the lender and the new property, and early repayment charges may apply during a fixed rate.
Downsizing, moving closer to family or finding a home better suited to later life are common reasons for a move. If the new home costs less, part of the mortgage can sometimes be repaid from the difference.
What happens to a retirement interest-only mortgage when you die or go into care?
Once the last remaining borrower passes away or moves into long-term care, the loan is repaid from the sale of your home. On a joint mortgage, it simply continues for the surviving borrower. Your estate is given a set period to sell the property, and the length of that period varies by lender.
Family can also repay the loan from other money instead of selling the home, if they would like to keep it.
Will a retirement interest-only mortgage affect what you leave behind?
Because you pay the interest each month, the amount you owe stays the same and the loan doesn’t grow over time. When the home is sold, the mortgage is repaid first and whatever is left goes to your estate, so any rise or fall in your home’s value affects how much that is.
Can you get a retirement interest-only mortgage with bad credit?
Yes, credit issues don't rule out later-life borrowing, but it all depends on your credit profile and the details of each issue. Your credit file is checked as with any mortgage, alongside your retirement income and the value of your home.
Our bad credit mortgage guide sets out the details we ask about for each credit issue.
What documents do you need for a retirement interest-only mortgage?
Most lenders ask for photo ID, proof of address, proof of your pension income such as annual pension statements, recent bank statements, and your latest mortgage statement if you’re remortgaging. Further documents may be needed for other income, such as rental or investment income, depending on the lender.
About you
- Passport or driving licence
- Proof of address, such as a recent utility bill
- Recent bank statements showing your pension payments
- Your latest mortgage statement, if you have a mortgage
Your income
- State Pension award letter
- Workplace or private pension statements
- Details of any rental or investment income
- Pension forecasts, if you’re not yet retired
How does getting a retirement interest-only mortgage work, step by step?
There are usually six steps: talk through your plans with an adviser, gather your pension and income details, compare the lenders whose criteria fit, get a mortgage in principle, make the full application with a valuation of your home, then receive your mortgage offer.
- Talk through your plansA free call with Harry or Lois, at your own pace. You’re welcome to have family with you.
- Gather your income detailsPension statements, award letters and any other income, so affordability can be worked out.
- Compare lendersWe look at which lenders’ criteria fit your age, income, home and plans.
- Mortgage in principleAn initial indication of what a lender could lend.
- Full application and valuationThe lender values your home and checks your documents.
- Mortgage offerYour offer is issued and, once the legal work is done, your new mortgage starts.
Interest-only mortgage ending, or planning ahead?Book a free call with Harry or Lois. You’re welcome to have family with you on the call.
Book a free callRetirement interest-only questions, answered
Is a retirement interest-only mortgage regulated?
Yes. Since 2018, retirement interest-only mortgages have been regulated by the Financial Conduct Authority, in the same way as standard residential mortgages. Lenders must check you can afford the monthly payments, and advice on them is covered by the same rules and protections as any other regulated mortgage.
Can I make overpayments on a retirement interest-only mortgage?
Yes, with many lenders, often up to a set amount each year without a charge. Larger overpayments during a fixed rate may mean an early repayment charge, and allowances vary from one lender to the next, so we check the terms before you choose a deal.
Is there a maximum age for a retirement interest-only mortgage?
No, not usually. Some lenders do have a maximum age, but there are lots of lenders out there who don’t, and it all depends on the lender’s criteria. Minimum ages differ too, starting at 55 with most lenders and from 50 with a few.
Can I get a retirement interest-only mortgage on a flat?
Yes, depending on the flat and the lender. The length of the lease, the building, the floor it’s on and any service charges are all taken into account, and restrictions on certain flats and non-standard properties apply with some lenders.
Can I have family with me when I speak to you?
Yes, of course. Family are always welcome to join the call, and if you’re local to Sudbury, you can arrange to meet us in person by appointment. We’ll explain everything clearly, answer every question and go at a pace that suits you.
Can I switch to equity release later on?
Yes, switching later is an option for some people, for example if they’d prefer not to make monthly payments in future. A lifetime mortgage works differently, as the amount owed usually grows over time, and early repayment charges may apply if you leave a fixed rate early.
What happens if my partner moves into care?
The mortgage carries on for the partner still living in the home, as long as they remain a borrower. When you first apply, lenders assess whether the payments would be affordable for either of you alone, which helps plan for this kind of change in later life.
Sources
Your home may be repossessed if you do not keep up repayments on your mortgage.
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