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Getting a mortgage when you're retired
How to qualify for a mortgage when you're retired
When applying for a mortgage as a retiree, there are a few extra things to look out for.
Repayment period
You might have less time to pay the mortgage back, depending on the age you retired.
This can make monthly repayments more expensive. Some lenders have set an age limit for new mortgage applications at 65 to 70 years old. With Lloyds Bank, there are age limits on when your mortgage must be paid off:
- Residential mortgages must be paid off by the time you are 80 years old.
- Buy to Let mortgages must be paid off by the time you are 70 years old.
Employment
If you’re already retired, or you will retire during your mortgage term, you’ll need to prove that you can continue to make the monthly repayments.
Income
Having more than one source of income – investments, for example, may make it more likely you’ll be accepted for a mortgage.
Retirement income and mortgages
Whether you’re buying a new house at 25 or 65, your lender will want to know that you can repay the mortgage in full.
Some lenders will let you to take out a mortgage that you’ll still be repaying after you have retired. You might also be able to arrange a new mortgage, even after retirement. This often depends on your retirement income.
Retirement income is the name given to money you have coming in after you have retired.
Working out your retirement income
To calculate your retirement income, work out your:
- Expected income from pensions
- Any weekly or monthly state pension payment
- Any other income from property or investments
Make your lender aware of all of these income types when you want to apply.
Proving your income to your lender
When considering your application, your mortgage provider will need to see evidence of your retirement income.
For workplace pensions, you’ll need to provide a pension forecast or annuity statement, as well as a statement for your State Pension.
If you are still working, but planning on retiring soon, you may need to show evidence of both your current income and what you’ll have when you’ve retired.
Retirement-interest only (RIO) mortgages
One option for retirees is an interest-only mortgage. With an interest-only mortgage, you pay only the monthly interest for a fixed period without paying anything off the total amount owed.
Retirement-interest only mortgages (RIO) work in a similar way, but are designed for people over the age of 55 and those who are retired, or planning to retire soon.
You’ll need to show the lender you can afford to make the monthly interest payments to apply for a RIO mortgage and pass affordability checks too.
Repaying a retirement-interest only mortgage
With a retirement-interest only mortgage, the monthly repayments you make cover only the interest.
The money from selling the house often goes towards paying off the mortgage.
With certain RIO deals, you may be able to also pay off a percentage of the actual mortgage as well as the interest. Check with your lender to understand your options.
The content on this page is for reference and does not constitute finance advice.
For impartial financial advice, we recommend government bodies like the MoneyHelper.
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