MORTGAGES IN RETIREMENT
Being retired does not automatically prevent you from getting a mortgage. A lender will usually consider whether the borrowing is affordable, the income available to support the mortgage, your age, the proposed term, the property and the type of mortgage required.
Different lenders use different criteria, so the options available depend on your individual circumstances.
No obligation to proceed.
Your property may be repossessed if you do not keep up repayments on your mortgage.
Potentially, yes.
Retirement itself is not necessarily a barrier to mortgage borrowing. The important question is whether the applicant satisfies the lender’s eligibility and affordability requirements.
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The lender may need evidence of sustainable income to support payments.
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Age criteria can affect when you can apply and the term available.
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A deposit or existing equity influences how much you need to borrow.
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Different structures have different payment and capital repayment obligations.
Lenders may consider different forms of sustainable retirement income. What they accept, how they assess it and the proportion of income taken into account can differ. A source being available to you does not mean every lender will accept it in the same way.
Examples may include the State Pension, a defined benefit or final salary pension, annuity income, and regular workplace or private pension income. A lender may ask for statements or other evidence showing what you receive.
Pension drawdown, employment or self-employed income continuing in retirement, rental income, investment income and other sustainable income may be considered where acceptable. Variable income may be assessed differently from regular payments.
Evidence requirements vary, and lenders may consider whether income is likely to continue rather than treating every payment received today as sustainable throughout the mortgage.
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Whether payments can remain manageable as circumstances change.
A lender may consider whether payments remain affordable throughout the relevant mortgage term, not simply look at today’s income. Income sustainability and foreseeable changes matter, alongside household expenditure and debts. For joint borrowers, the assessment may need to account for changes affecting either person.
Age can still affect the mortgage available, but there is no single universal maximum mortgage age. Lenders use different criteria, and age is separate from the need to demonstrate affordability.
This concerns your age when you take out the new mortgage. Some lenders may apply an application-age requirement.
This concerns your age when the agreed term finishes. Where a limit applies, it can restrict the term available.
Different mortgage structures have materially different repayment obligations. Being retired does not make one automatically appropriate, and availability depends on lender criteria and your circumstances.
Monthly payments normally include capital and interest, with the intention of repaying the mortgage by the end of the agreed term.
Monthly payments generally cover interest while the capital remains outstanding. An acceptable strategy for repaying the capital will normally be required.
A later-life mortgage where monthly interest is normally paid and capital is generally repaid following an event specified in the mortgage terms. Affordability requirements still apply.
A lifetime mortgage is structurally different from a conventional mortgage or RIO. Monthly repayments are not normally required, although some products allow voluntary payments, and unpaid interest may roll up, increasing the amount owed. It is not the default solution for retired borrowers.
Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits and your tax position.
You may be retired and looking to move home, downsize, relocate, move closer to family or buy a different type of property. Retirement does not remove the usual mortgage considerations: the deposit, property, affordability, credit circumstances and proposed term still matter.
Work out how much the move would require you to borrow after allowing for available savings or equity and the costs involved. The property also needs to be acceptable to the lender. A different home or a smaller mortgage does not automatically mean an application will be accepted.
A large deposit or substantial property equity may help reduce the amount that needs to be borrowed, but it does not replace the lender’s affordability and eligibility assessment.
Reasons to review borrowing may include an existing deal ending, reducing the balance, changing mortgage structure, an interest-only mortgage approaching maturity, moving home or raising additional funds where appropriate. Remortgaging is a new lending decision, not an automatic continuation of the existing agreement.
Check the outstanding balance, remaining term, current rate and repayment method. Establish when the deal ends and whether early repayment charges or other fees would apply. For interest-only borrowing, review how the capital will be repaid.
A new affordability assessment and the new lender’s criteria may apply. Consider sustainable income, the requested term, property value and loan-to-value, the proposed repayment method and all relevant fees. Compare the overall implications, not just the payment.
If an interest-only mortgage reaches maturity, the outstanding capital still needs to be repaid according to its terms. Making monthly interest payments does not normally reduce that capital balance.
Depending on your circumstances, possibilities to investigate may include using the agreed repayment strategy, remortgaging, reducing the borrowing, selling or downsizing, or considering an appropriate later-life mortgage structure. No particular option is automatically suitable or guaranteed to be available.
Review the position early enough to understand any shortfall and the costs and requirements of possible alternatives, rather than waiting until the mortgage is due to finish.
When two people borrow together, retirement dates and income sources may differ. Affordability can change when one person stops working, even if the other continues earning.
If one borrower dies, a survivor’s pension or other income may differ from the household income received previously. Lenders may consider the sustainability of payments as circumstances change. The assessment depends on the borrowers, lender criteria and mortgage structure.
Exact requirements vary by lender and circumstances. These are examples of information you may be asked to prepare, rather than a universal list.
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Identification and address evidence
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Pension statements or pension income evidence
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Bank statements
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Evidence of other income
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Details of existing borrowing
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Evidence of deposit or equity where relevant
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Property information
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Repayment strategy evidence for interest-only borrowing where required
A typical journey starts with your borrowing need and budget, before considering structures and lender criteria. The steps and evidence required will depend on the mortgage and your circumstances.
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Allow for your deposit or equity and the costs of the transaction.
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Gather evidence of income and consider how sustainable it is.
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Account for living costs, debts and other commitments.
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Check monthly payments and when and how capital must be repaid.
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Consider age, term, income, property and affordability requirements.
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Provide the required evidence. The lender will assess the application; approval is not guaranteed.
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How much do I need to borrow?
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What income will support the mortgage?
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How might my income change?
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What monthly payment can I sustainably afford?
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How long should the mortgage term be?
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When must the capital be repaid?
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What happens if one borrower dies?
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Is my mortgage repayment or interest-only?
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Do I have an appropriate repayment strategy?
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Can I make overpayments?
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What happens if I move home?
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What alternatives should I consider?
COMMON QUESTIONS
General answers to common questions about getting a mortgage after retirement.
Can I get a mortgage if I am already retired?
Is there an age limit for mortgages after retirement?
Can I use pension income for a mortgage?
Can I get a repayment mortgage after retirement?
Can I get an interest-only mortgage after retirement?
Can I get a 20-year mortgage after retirement?
Can I remortgage after retirement?
Can I buy a house after retirement?
Can I get a joint mortgage after retirement?
Is a retirement mortgage the same as equity release?
What is a RIO mortgage?
READY TO TALK TO AN ADVISER?
A mortgage adviser can discuss your retirement income, existing borrowing and circumstances and explore mortgage options that may be available.
No obligation to proceed.
Your property may be repossessed if you do not keep up repayments on your mortgage.
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