It’s often assumed that if you’re aged 50 or over your options for a mortgage are limited but this isn’t the case. You still have a range of mortgage products available to you even if you’ve retired.
Lenders do have their own eligibility criteria but there are plenty that offer the flexibility and financial security you need at this stage of your life, whether you want to release equity, move home, remortgage, or refinance an existing interest-only mortgage.
So which over-50 mortgage products might be suitable for you and your circumstances?
What types of mortgages are available to the over-50s?
Retirement Interest Only (RIO) mortgage
Retirement Interest Only mortgages are aimed at people aged 55 or over who want to only pay the interest on their mortgage. You can release up to 60% of your property’s value with this option and the minimum loan amount is £10,000.
If you’ve had a ‘standard’ interest-only mortgage that’s concluding, or simply want to limit your outgoings by only making interest payments on a home loan, this may be a good choice for you.
How does a Retirement Interest Only mortgage work?
An RIO mortgage is a loan secured on your property whereby the capital amount doesn’t increase over time, there’s no fixed end date for the mortgage, and you only make interest payments.
The capital is repaid on your death, when you move into permanent care, or sell the property. If you can prove to the lender that you can repay the interest each month, this could be a suitable mortgage for you.
The benefits of taking out a Retirement Interest Only mortgage include:
- Peace of mind – you still own the property
- Greater financial stability – you can make capital repayments that reduce the outstanding loan and the monthly interest amount
- It can be used for a range of purposes, including repaying an existing mortgage or funding home improvements
Traditional mortgage
As well as traditional capital repayment mortgages and interest-only mortgages, a third option exists that could offer valuable flexibility if you’re over 50. Sometimes known as a ‘part and part’ mortgage, this is a combination of capital repayments and interest-only.
How does a traditional repayment mortgage work when you’re over 50?
A traditional capital repayment or interest-only mortgage involves either paying off some of the capital and interest each month to reduce the balance, or just the interest. There’s generally an age limit of 85 to fully repay these types of home loans.
The ‘part and part’ hybrid repayment structure can reduce the pressure on your finances if you’ve retired and you’ll need to provide a plan for repaying the remaining interest when the mortgage ends.
The benefits of traditional mortgages when you’re over 50 include:
- Certainty of budgeting if you opt for a mortgage with a fixed interest rate
- Flexible repayment options you can tailor to suit your financial situation
- You can make long-term plans without worrying about funding them
Equity release mortgage
An equity release mortgage, also known as a lifetime mortgage, lets you unlock the value of your home without having to sell. It can help you reduce financial pressure in older age and live a comfortable life without worrying too much about money.
Lifetime mortgages are available to people aged 55 and over but are generally more suitable for those over 65 years of age.
How does an equity release lifetime mortgage work?
When you take out a lifetime mortgage you borrow money against the value of your home. You can choose to make interest payments or ‘roll up’ the interest so it’s added to the outstanding amount. The total loan is repaid on the death of the last borrower or on moving into permanent care.
The benefits of taking equity release include:
- Choice of receiving one large lump sum, or smaller amounts
- No requirement to make monthly payments but you can do so if you wish
- You retain ownership of your home
Releasing equity to raise capital
It’s worth noting that you can release equity in your home to finance a large purchase in retirement, such as a car or a dream holiday, or consolidate existing debt into a single loan. Funds from equity release are also commonly used to help a family member onto the property ladder.
If you’ve already retired, it’s reassuring to know that you don’t need to prove your income to an equity release provider as they make their decisions based on age and the amount of equity that’s available.
Furthermore, regulation of the majority of the equity release market means there’s no risk of owing more than the value of the house when the time comes to repay, as regulated lenders must provide a No Negative Equity Guarantee.