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Retirement interest-only mortgages explained

Find out how to get a mortgage when you're retired, and how retirement interest-only mortgages (RIOs) work.

In this article
What is a retirement interest-only mortgage (RIO)? How much can I borrow with a retirement interest-only mortgage? Who offers retirement mortgages for older borrowers? Why might you need a mortgage when you're older?
Can I get a 'retirement mortgage'? How can older mortgage borrowers prove their income? Retirement interest-only mortgage vs equity release

hy might older borrowers need a mortgage?

What is a retirement interest-only mortgage (RIO)?

Retirement-interest only mortgages (RIOs) are a relatively new set of products designed to help older borrowers who may struggle to get a standard residential mortgage. They allow you to borrow against your property and only pay back the interest (and not the loan itself) each month.

RIOs are very similar to standard interest-only mortgages but there are some key differences. 

With most RIO mortgages, you only repay the loan when you sell your property, move into residential care or die. But some retirement-interest only mortgages carry terms like a regular mortgage, meaning you either pay them back after a set number of years or when you reach a certain age - 90, for example.

Rather than the onerous steps you have to take to prove your income with a standard residential mortgage, you only have to prove that you can afford the interest.

Some retirement interest-only mortgages allow you to repay some capital as well as interest. This will cut down the size of your loan over time, meaning that more of your property can be passed onto your loved ones.

How much can I borrow with a retirement interest-only mortgage?

Each lender has different limits on how much you can borrow against your property.

If you're borrowing on an interest-only basis, you're likely to be able to borrow less than if you get a deal where you also pay down the loan. 

For example, you might be able to borrow 50% of the value of your property on an interest-only basis, or 65% on a capital repayment basis.

There will be other requirements, too, such as a minimum property value, minimum income and minimum loan size. 

The amount you can borrow will be based upon an affordability assessment, looking at your income and outgoings to make sure you can keep up repayments once your only sources of income are from pensions, savings or investments, and not employment. 

We've explained this in detail further down the page. 

Who offers retirement mortgages for older borrowers?

Increasing numbers of mortgage lenders have launched deals specifically aimed at older borrowers, as they begin to recognise that traditional mortgage products may not meet the needs of this demographic.

Below, we've listed every deal on the market and explained how it works - just click on the lender's name to find out about each deal.

 

Aldermore Bank

 

Deal name: 'Later Life Lending' range

Capital repayment or interest-only? Both available. Two, three, five and 10-year fixed rates are available, as well as discount-rate deals.

Min property value: £60,000.

Min/max loan sum: £25,000/£400,000.

Max LTV: 60% if interest-only; 75% if capital repayment.

Min/max age at application: 55/85.

Min income: £10,000 a year.

Mortgage term: Minimum 10 years, but you can extend repayments until you are 99 years old. 

Overpayments: up to 10% per year without early repayment charges (ERCs). 

How is the loan repaid? If you plan to sell your property to repay the loan, you need a minimum amount of equity - £300,000 in London and the South East and £175,000 elsewhere. You can clear your mortgage early through overpayments, but you will face ERCs. 

How to apply: only available through a mortgage broker.

 

Bath Building Society

 

Deal name: Retirement Mortgages

Capital repayment or interest-only? Interest-only.

Min property value: £100,000.

Min/max loan sum: £50,000/£500,000. Max loan size of 4.25x your annual income if you earn between £20,000 and £50,000, or 4.5x if over £50,000.

Max LTV: 50%.

Min/max age at application: 65 min, no max.

Min income: £20,000 a year after deductions. 

Overpayments: unlimited, fee-free.

How is the loan repaid? When you die or move into care and the property is sold. 

How to apply: directly or through a mortgage broker

 

Beverley Building Society

 

Deal name: Retirement Mortgages

Capital repayment or interest-only? Interest-only.

Min property value: £125,000.

Min/max loan sum: £25,000/£350,000 if buying; £40,000/£350,000 if remortgaging. Max loan size of 3.5x a single or joint annual income.

Max LTV: 55%.

Min/max age at application: 55 min, no max.

Min income: you must be receiving pension income to apply; other kinds of non-salaried income also accepted.

Overpayments: up to 10% per year fee-free; a 2% early repayment charge (ERC) applies beyond that. 

How is the loan repaid? When you die or move into care and the property is sold, unless you take out the mortgage with a joint borrower who continues to live in the house and can afford the interest payments on their own.

How to apply: directly or through a mortgage broker.

 

Family Building Society

 

Deal name: Retirement Interest-Only (RIO) and Retirement Lifestyle Booster

Capital repayment or interest-only? Interest-only. For the Lifestyle Booster, you're also given an advance in monthly instalments or as an upfront lump sum. 

Min property value: £240,000 if you're mortgage-free; £180,000 if remortgaging.

Min/max loan sum: RIO - £45,000/£3m. Lifestyle Booster - £60,000 min if you're currently mortgage-free; £45,000 if remortgaging, with at least £30,000 paid in advances; no max.

Max LTV: RIO - 50%. Lifestyle Booster - 25%.

Min/max age at application: RIO - 65/none. Lifestyle Booster - 60/79.

Min income: none.

Mortgage term: RIO - unlimited. Lifestyle Booster - 10 years.

Overpayments: up to 10% per year without early repayment charges (ERCs) during initial period. Unlimited overpayments thereafter. ERCs differ depending on deal.

How is the loan repaid? The RIO is repayable when you die or move into care. You can repay the Lifestyle Booster by selling your property or other means if you have the funds. 

How to apply: directly or through a mortgage broker

 

Hanley Economic Building Society

Deal name: Retirement Interest-Only Mortgages

Capital repayment or interest-only? Interest-only.

Min property value: £50,000.

Min/max loan sum: £10,000/£750,000.

Max LTV: 65%.

Min/max age at application: 55 min, no max.

Min income: none, though you'll need to be able to prove you can afford the interest payments.

Mortgage term: 55 years max. 

Overpayments: unlimited, fee-free.

How is the loan repaid? When you die or move into care and the property is sold (although other arrangements will be considered), or when you sell the property and move elsewhere. 

How to apply: directly or through selected mortgage brokers

 

Hodge Lifetime

Deal name: 55+ Mortgage and the 55+ Retirement Interest-Only Mortgage (which we'll refer to as 'the RIO' here).

Capital repayment or interest-only? Interest-only.

Min/max property value: £120,000 min for the 55+ Mortgage; £100,000 for the RIO; £1m max for both.

Min/max loan sum: £20,000/£1m.

Max LTV: 60% for both, but you must also hold at least £100,000 equity for the 55+ Mortgage.

Min/max age at application: 55/85. For the 55+ mortgage, the oldest you can be when your term ends is 95. 

Min income: none, though you'll need to be able to prove you can afford the interest payments.

Mortgage term: the 55+ Mortgage has a term of between 10 and 40 years depending on your age; the RIO lasts for your lifetime.

Overpayments: up to 10% per year without early repayment charges (ERCs).

How can I repay the loan: with the 55+ Mortgage you can repay by downsizing or selling other property or investments. With the RIO, repayment is made on death or when you go into long-term care. 

How to apply: through a mortgage broker.

 

Ipswich Building Society

Deal name: Retirement Interest-Only Mortgage. Fixed-rate and discount deals are available.

Capital repayment or interest only? Interest-only.

Min property value: None, but you must hold at least £150,000 equity. 

Min/max loan sum: £25,000/£500,000.

Max LTV: 50%.

Min/max age: 55 min; no max.

Min income: £20,000, which can include 100% of your pension income and 75% of your investment income. 

Overpayments: with a fixed-rate deal you can overpay by up to 50% of the loan amount. After that, you'll have to pay a 3% penalty. The discounted-rate deal allows unlimited fee-free overpayments.

How can I repay the loan: when you die or move into care and the property is sold. If you're on a discount deal, you can also pay off the entire loan early without facing ERCs.

How to apply: through selected mortgage brokers

 

Leeds Building Society

Deal name: Retirement Interest-Only

Capital repayment or interest-only? Interest-only. Two, three and five-year fixed-rates available.

Min property value: £50,000.

Min/max loan sum: £27,500/£1.25m.

Max LTV: 55%.

Min/max age at application: 55/80.

Min income: none, though you'll need to be able to prove you can afford the interest payments.

Overpayments: up to 10% per year without early repayment charges (ERCs).

How is the loan repaid? When you die or move into care and the property is sold. 

How to apply: directly or through a mortgage broker.

 

Loughborough Building Society

Deal name: Borrowing Into Retirement

Capital repayment or interest-only? Both available.

Min/max property value: none.

Min/max loan sum: £25,000/£350,000. Max loan size of 4.5x annual income if aged under 70 at time of application; 3.5x if aged 70 or above.

Max LTV: 60%.

Min/max age: you must be aged 80 or above by the end of the mortgage term; no max age.

Min income: none, though you'll need to be able to prove you can afford the payments.

Mortgage term: 2-25 years.

Overpayments: up to 10% per year without early repayment charges (ERCs) on the fixed term products, although a deal with no ERCs is also on offer.

How is the loan repaid? For the interest-only option, you can sell the property to pay off the loan, though other methods will be considered. Capital repayment mortgages will have been repaid by the end of the term. In all cases, you can pay off the loan early through overpayments.

How to apply: directly or through a mortgage broker.

 

Marsden Building Society

Deal name: Older Borrower Mortgages

Capital repayment or interest-only? Both available.

Min property value: £150,000.

Min/max loan sum: £30,000/£750,000.

Max LTV: 60%.

Min/max age at application: 55 min; no max.

Min income: £17,500; pension and earned income are considered. 

Mortgage term: Min five years; max 30 years.

Overpayments: 5% of the loan annually during the introductory term, fee-free. ERCs applicable above that but vary based on deal. No overpayment limit or ERCs once the introductory term is over.

How is the loan repaid? Through the sale of the property, though other methods will be considered.

How to apply: directly or through selected mortgage brokers.

 

Melton Building Society

Deal name: Retirement Interest-Only

Capital repayment or interest-only? Interest-only.

Min property value: £90,000.

Max loan sum: £750,000.

Max LTV: 50%.

Min/max age at application: 65 min, no max.

Min income: none, though you'll need to be able to prove you can afford the interest payments. Pension and earned income considered.

Overpayments: in the first five years you can overpay by up to 10% per year fee-free; from year six onwards there are no fees on overpayments.

How is the loan repaid? When you die or move into care and the property is sold. 

How to apply: through a mortgage broker.

 

 

Nationwide Building Society

Deal name: Borrowing in Later Life

Capital repayment or interest-only? Both available.

Min/max property value: none.

Min/max loan sum: £1,000/£500,000.

Max LTV: 50%.

Min/max age at application: 55/85. 

Min income: none, though you'll need to be able to prove you can afford the interest payments.

Overpayments: allowed, subject to early repayment charges, which reduce over time. Exact charges are aligned to Nationwide's prime mortgage range, which varies from 0-7%.

How is the loan repaid? Interest-only option repaid when you die or move into care and the property is sold. Capital repayment mortgages will have been repaid by the end of the term. Either can be paid off early through overpayments. 

How to apply: originally, these deals were only available to Nationwide customers. As of August 2019, both customers and non-customers can apply directly or through a mortgage broker

 

Newbury Building Society

Deal name: Retirement Interest-Only 5-Year Discount

Capital repayment or interest-only? Interest-only.

Min property value: £125,000.

Min/max loan sum: £50,000 (or £40,000 for those with existing Newbury loans)/£500,000.

Max LTV: 50%.

Min/max age at application: 60/90.

Min income: £30,000. 

Overpayments: fee-free overpayments of up to 20% per year allowed in the first three years. For payments above that, 3% ERCs apply during the first year, dropping to 2% in year two and 1% in year three. Unlimited fee-free overpayments allowed after three years.

How is the loan repaid? When you die or move into care and the property is sold.

How to apply: directly or through selected mortgage brokers

 

Nottingham Building Society

Deal name: Retirement Interest-Only Mortgage

Capital repayment or interest-only? Interest-only.

Min/max property value: none.

Max loan sum: £500,000.

Max LTV: 40%.

Min/max age at application: 55 min, no max.

Min income: none, though you'll need to be able to prove you can afford the interest payments.

Overpayments: up to 10% allowed each year, as long as they reach a minimum of £500.

How is the loan repaid? Generally through the sale of the property, but any repayment strategy will be accepted. This means your family won't have to sell your home when you die if they can afford to pay off the mortgage through other means.

How to apply: through a mortgage broker

 

Post Office Money

Deal name: Retirement Link

Capital repayment or interest-only? Both available.

Min property value: for the interest-only option, your property must be worth at least £250,000 plus the value of your loan - e.g. if you borrowed £50,000, you'd need a property worth £300,000. You have to own your property outright to qualify for the interest-only mortgage.

For the capital repayment option, the minimum property value is £100,000.

Min/max loan sum: £25,000/£500,000.

Max LTV: 30% for interest-only; 50% for capital repayment. 

Min/max age at application: 50/75 for interest-only; 55/85 for capital repayment.

Min income: £15,000 in pension; only guaranteed income will be considered.

Mortgage term: With the interest-only option, the loan must be repaid before you reach 80, with a term of five to 25 years. With the capital repayment option, the loan must be repaid before you reach 90, with a term of five to 35 years.

Overpayments: during the fixed-term period, you can overpay up to 10% of the mortgage balance with no ERCs. When the initial term is over, you can make unlimited fee-free overpayments.

How is the loan repaid? The interest-only mortgage can only be repaid by selling the property the mortgage is taken out against - not from any other investments or sources. 

How to apply: directly or through a mortgage broker.

 

Saffron Building Society

Deal name: Lending into Retirement Downsizing (LIRD) and Retirement Interest Only (RIO)

Capital repayment or interest-only? Interest-only. 

Min property value: min £100,000. Must have at least £250,000 equity for LIRD.

Min/max loan sum: £30,000/£1m.

Max LTV: 50% for RIO. 60% for LIRD.

Min/max age at application: LIRD has no min age but must be within five years of retirement. RIO has 55 min age but you must be retired. Neither has max age.

Min income: none, though you'll need to be able to prove you can afford the interest payments.

Mortgage term: min five years. No max for RIO, 40-year max for LIRD.

Overpayments: up to 10% fee-free per year on the LIRD deal, with a 2% early repayment charge (ERC) on anything above that in the first three years. Up to 20% fee-free per year with the RIO deal; 3% ERCs apply above that in the first three years. Unlimited fee-free overpayments after three years for both products.

How is the loan repaid? LIRD is designed to be repaid by selling your home and downsizing. RIO will run until you die or move into long-term care. Either deal type can also be repaid through overpayments.

How to apply: through selected mortgage brokers.

 

Scottish Building Society

Deal name: Retirement Interest-Only Mortgage

Capital repayment or interest-only? Interest-only.

Min property value: none.

Min/max loan sum: £30,000/£300,000. Max loan size of 4.5x annual income if applying alone or 3.5x joint income if applying as a couple. 

Max LTV: 50%.

Min/max age at application: 60 min, no max.

Min income: none, though you'll need to be able to prove you can afford the interest payments.

Overpayments: up to 10% per year without early repayment charges (ERCs).

How is the loan repaid? When you die or move into care and the property is sold, or if you sell for a different reason.

How to apply: directly or through a mortgage broker.

 

Shawbrook Bank

Deal name: 55 Plus Interest-Only Mortgage

Capital repayment or interest-only? Interest-only.

Min property value: £185,000.

Max loan sum: £1m (but £30,000 max if you're using the money to pay off debts).

Max LTV: 60%, and you must hold at least £125,000 equity (£250,000 in London and the South East). 

Min/max age at application: 55/75.

Minimum income: £16,500. Shawbrook accepts employment income up to the age of 70; after that it will only consider pension income.

Mortgage term: the mortgage must end by the age of 85. This means the term can be between 10 and 35 years. 

Overpayments: unlimited, fee-free.

How is the loan repaid? Through the sale of property or other means. You can repay the entire sum early without penalties.

How to apply: directly or through a mortgage broker.

 

Tipton & Coseley Building Society

Deal name: Retirement Interest-Only Mortgage

Capital repayment or interest-only? Interest-only; fixed and variable-rate deals available.

Min property value: £75,000 (£250,000 if you live around the M25). 

Min/max loan sum: £50,000/£1m.

Max LTV: 60%.

Min/max age at application: 55 min, no max.

Min income: none, though you'll need to be able to prove you can afford the interest payments.

Overpayments: up to 10% per year without early repayment charges.

How is the loan repaid? When you die or move into care and the property is sold, or if you sell for a different reason.

How to apply: directly or via a mortgage broker.

 

Vernon Building Society

 

Deal name: Retirement Mortgage

Capital repayment or interest-only? Both available. Vernon also offers an offset retirement mortgage, which allows you to release additional equity and potentially only pay interest on part of it. 

For example, say you wanted to take £50,000 equity out of your home but only wanted to access £20,000 right away. The remaining £30,000 would be placed into an offset savings account until you needed it, and you'd only pay interest on the £20,000 (plus your remaining mortgage balance).

The offset account is instant access, meaning you can withdraw the money at any time. Any amount you subsequently withdraw will be added to the sum that you pay interest on. Find out more about offset mortgages.

Min property value: £80,000.

Min/max loan sum: £25,000/£250,000.

Max LTV: 50%.

Min/max age at application: 55 min, no max.

Min income: none, though you'll need to be able to prove you can afford the interest payments.

Mortgage term: Vernon says that these products are most suitable for those who will be aged 85 and over when the mortgage term ends. The minimum term is usually five years and the term can run until you die.

Overpayments: all deals allow unlimited overpayments, though some will have ERCs if you pay off more than 10% extra per year.

How is the loan repaid? Some of Vernon's mortgages have no early repayment charges, meaning you can pay off the loan in full whenever you want. If necessary, the loan can be repaid through the sale of your property when you die or move into long-term care. 

How to apply: directly or through a mortgage broker.

Why might you need a mortgage when you're older?

We are all living and working for longer, but getting hold of a mortgage in your 60s and above can be extremely tough. However, as the list above demonstrates, lenders are increasingly taking a more considered approach when lending to older people.

There are many reasons why older borrowers might want to take out a mortgage:

  • To purchase a retirement property which better suits your needs as you get older. 
  • To release cash from your property to top up your pension income.
  • To gift money to a loved one to help them purchase a property. 

Another big motivation for some older borrowers is to remortgage away from their existing interest-only mortgage

These deals were very popular before the credit crunch, and allow borrowers to only pay off the interest on their loan every month, ahead of repaying the capital borrowed in full at the end of the mortgage term. 

However, thousands of these borrowers have no plan in place for repaying that capital, leaving them with the prospect of having to sell up and downsize unless they can remortgage.

You can find out more about this in our guide to interest-only mortgages.

Can I get a 'retirement mortgage'?

Lenders consider two different ages when you apply for a mortgage. The first is your age at the time of application. The other is the age you will be at the end of the mortgage, when the debt will be fully repaid.

In the past, lenders have been uncomfortable about lending to borrowers into their retirement years. This was in part due to the tougher affordability tests lenders have to carry out on borrowers following the credit crunch, which force them to look closely at income and expenditure.

While this situation is improving, as lenders begin to adapt to the fact we are all living and working longer, it’s true to say that many lenders have an upper age cap which they will not consider lending beyond.

How can older mortgage borrowers prove their income?

In order to check that you can afford a mortgage in retirement, lenders will carry out a variety of different checks. These vary between lenders.

If you plan to work beyond state pension age, Halifax, for example, will consider your earned income up to the age of 70.

But you'll also need to provide a company pension forecast or annuity statement dated within the last 18 months as well as a state pension statement. If you are already receiving some form of pension income, you’ll need to provide you latest bank statement too.

With Nationwide, it comes down to how close you are to retirement. If retirement is less than 10 years away, it requires details of both your current and anticipated retirement income, and will then use the lower of those two figures for its affordability calculations. 

If retirement is more than 10 years away, your current income is used to calculate affordability, but it requires evidence of your pension planning beyond the state pension, such as a pension statement.

Retirement interest-only mortgage vs equity release

Retirement interest-only mortgages share some similarities to equity release, in that they both allow you to tap into your property's value you to access cash. 

With equity release, you borrow a portion of the property’s value, but are not required to make monthly repayments (although some deals now allow you to do this).

Instead, the debt is repaid once you die or move into long-term care and the property is sold. These products are typically called 'lifetime mortgages'.

Because you don’t make repayments, the debt grows over time and can erode the value of your property. This is not the case with a retirement interest-only mortgage.

Let's look at an example. You own a property worth £200,000. You want to borrow 50% of this, meaning a loan of £100,000.

In 15 years' time, your property is worth £300,000, and you go into care, so the loan needs to be repaid. The interest rate is 5%. 

Equity release

  • Your monthly repayments: £0
  • Total value of the loan after 15 years: £211,370
  • How much is left after repaying the loan: £88,630

Retirement-interest only

  • Your monthly repayments: £417
  • Total value of the loan after 15 years: £100,000
  • How much is left after repaying the loan: £200,000
  • Total amount of interest paid: £75,055

With equity release, there will be less equity in your property to pass onto your family after you've died than with a RIO mortgage. 

If you are considering equity release, it’s really important that you get advice from a qualified financial adviser. Find out more in our guide to equity release.

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