A retirement mortgage, simply put, is a mortgage that you are eligible take out both as you head into retirement and past the age of retirement. They can come in a variety of forms, from standard mortgages, to equity release, interest only mortgages and more.
In recent years, there has been a notable shift in the trend of individuals opting for mortgages later in life. This shift is attributed to rising property prices and the need for extended financial support.
This article delves into the concept of retirement mortgages, exploring the options available for those entering their 60s and beyond.
With property values on the rise and income growth not keeping pace, mortgages are now extending over more extended periods. This trend accommodates individuals well into their retirement years, allowing for financial flexibility and home ownership continuation.
Contrary to common belief, obtaining a mortgage in your 60s is not an implausible feat. Even as individuals approach retirement, lenders are still willing to provide mortgage options, with the expectation that the loan will be repaid by the borrower’s nominated retirement age.
Most lenders prefer the mortgage to be settled by the borrower’s retirement age. This age may align with the state retirement age, typically around 67 or 68.
However, for those intending to work beyond this age, perhaps until 70 or even 75, standard mortgages are still a viable option, provided the occupation is non-manual and the ability to work until the intended retirement age is reasonable.
For individuals whose circumstances do not fit the criteria of standard mortgages, there are alternative options available. Lifetime mortgages and Retirement Interest Only (RIO) mortgages step in to fill the gap.
These options will consider factors such as pension income in their affordability assessments, providing tailored solutions for those with unique financial situations.
You can learn more about lifetime mortgages in our article “What is a lifetime mortgage?“
A Retirement Interest Only (RIO) mortgage is a specific type of mortgage designed for people in or nearing retirement. Unlike regular mortgages, with RIO mortgages, you only pay the interest regularly without the need to repay the borrowed money during your lifetime.
This option gives retirees more flexibility with monthly payments. To qualify for an RIO mortgage, factors like age, health, and financial situation are considered, offering a customised solution for financial needs later in life.
The benefits include flexible finances, keeping ownership of your home, and a personalised approach, making it a practical choice for retirees managing their money in retirement.
Deciding if a Retirement Interest Only (RIO) mortgage is right for you depends on your unique situation.
These mortgages can provide short-term relief by allowing you to pay only the interest during retirement, offering flexibility. That being said, it’s important to think long-term, as the borrowed amount remains to be repaid later on.
Before making a decision, it’s wise to talk to a mortgage advisor who can help you understand the implications and explore other options. Taking the time to evaluate all choices ensures you make the best decision for your financial well-being in retirement.