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Retirement interest-only mortgages

As you approach retirement, you might find it hard to renew your interest-only mortgage, even if you’re comfortably meeting your monthly repayments. At the same time, you might want to unlock some of the equity in your home. 

What is a retirement interest-only mortgage?

A retirement interest-only mortgage is only available on your main residence and is very similar to a standard interest-only mortgage, with two key differences.

  1. The loan is usually only paid off when you die, move into long term care or sell the house.
  2. You only have to prove you can afford the monthly interest repayments.

While there’s no minimum age requirement, retirement interest-only mortgages are generally aimed at older borrowers, such as the over 55s, over 60s and pensioners who might find them easier to qualify for than a typical interest-only mortgage.

In this way, they’re similar to types of equity release schemes like a lifetime mortgage, where you pay off your debt when you die or move into long-term care.

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How will I repay a retirement interest-only mortgage?

There are two parts to paying off a retirement interest-only mortgage. The interest and the outstanding capital.

During the term of the mortgage, you’ll make monthly payments to cover the cost of the interest on your loan.

The outstanding capital you still owe will be paid off when the house is sold, you die, or when you move into long-term care.

Advantages and disadvantages of a retirement interest-only mortgage

There are a few reasons why a retirement interest-only mortgage could be a good option for you:

  • more likely to have something to pass on as inheritance
  • no problem of interest roll-up – which is when interest builds and builds - like with lifetime mortgages
  • providing you can continue to pay the interest you'll avoid having to sell your home 
  • generally cheaper when compared to an interest roll-up Lifetime Mortgage

But there are some things that could mean you need to look at alternatives:

  • you’ll need to pass the mortgage affordability checks to prove you can afford the interest only repayments
  • your home will be sold off to repay the loan when you die, enter long-term care or sell your home
  • your home is at risk if you do not keep up the repayments
  • the amount you can borrow is based on your retirement income.

Should I choose a retirement interest-only mortgage?

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If you’re coming towards the end of your current interest-only mortgage and want to stay in your home, talk to your lender to see if they’ll extend your mortgage term into retirement.

You can also talk to an independent mortgage broker about the next steps you could take. The broker does not need to have an equity release qualification to help you find a retirement interest-only mortgage.

Where can I get a retirement interest-only mortgage?

Retirement interest-only mortgages can be offered by traditional mortgage lenders, including high street banks and building societies.

Can I remortgage?

Yes, it’s possible to remortgage a retirement interest-only mortgage. But, you may have to do another affordability assessment if you switch lenders or want to increase the size of your mortgage, which could be difficult for some people.

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Looking for us? Now, we’re MoneyHelper

MoneyHelper is the new, easy way to get clear, free,
impartial help for all your money and pension choices.
Whatever your circumstances or plans, move forward with MoneyHelper.

Continue to website
Looking for us? Now, we’re MoneyHelper

MoneyHelper is the new, easy way to get clear, free,
impartial help for all your money and pension choices.
Whatever your circumstances or plans, move forward with MoneyHelper.

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