Retirement interest-only mortgages

A retirement interest-only mortgage can do a lot to help you manage your finances into retirement.

It has been historically difficult for older homeowners to secure a mortgage that lets them borrow into retirement.

However, with the introduction of retirement interest-only mortgages, this is changing.

These loans work similarly to regular interest-only mortgages. As the name implies, you’ll only need to pay the interest on the mortgage each month (although some lenders will let you pay off some of the capital too).

However, there are a couple of key differences with retirement interest-only mortgages that will appeal to older borrowers.

  • Firstly, many retirement interest-only mortgages won’t need to be paid off until the borrower dies, sells the house or moves into care. Learn more about what happens to a mortgage when the borrower dies.
  • Secondly, the affordability checks are far more lenient. You only need to prove you can afford the interest payments.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

Why might you want a retirement interest-only mortgage?

The rates on these mortgages aren’t particularly competitive compared to the rest of the market, although they do let you borrow past the age of 65, which few other mortgages will allow.

Here are the most common reasons why you might want to borrow into later life.

  • You may want a mortgage to purchase a retirement property which suits your needs as you get older.
  • You may want to draw equity from your property, perhaps to gift money to family members or add to your pension income.
  • The end of your existing interest-only mortgage term may be approaching. If you can’t afford to repay the capital, you could remortgage to save yourself from having to sell your property.

Who is eligible for a retirement interest-only mortgage?

Most lenders require you to be at least 55 years old when applying for one of these mortgages.

Some of these mortgages have no maximum age, either when you apply or when the term ends, although others do.

Although the affordability checks aren’t as onerous as with traditional mortgages, you’ll still need to be able to prove you can afford the interest payments, both before and after retirement.

In order to do this, you may need to provide a company pension forecast, annuity statement and/or state pension statement, as well as recent bank statements.

With most of these mortgages, the lending criteria will include a minimum property value, minimum equity, minimum loan size and minimum income.

How much can you borrow?

Lenders will typically set two maximum borrowing amounts, based on both equity and cash value. There are plenty of lenders that will let you borrow up to 50% of your property, while others will allow more. If you’re planning to repay capital as well as interest, you may be eligible to borrow a higher amount.

Nevertheless, as with all other mortgages, the amount you can borrow will ultimately depend on your financial situation.

Retirement interest-only mortgage vs equity release

Retirement interest-only mortgages and equity release products both let you withdraw cash from the value of your property. You don’t necessarily have to pay back either until death, selling the home or moving into care.

The main difference is that retirement interest-only mortgages require you to make (and therefore be able to afford) monthly interest payments.

With equity release products, the interest is added onto your debt and doesn’t need to be repaid until the loan ends. It is easier to be approved for an equity release product, because there are no monthly payments for you to have to prove that you can afford. However, the debt compounds, usually meaning there’s little to pass on to your heirs.

What are the pros and cons of a retirement interest-only mortgage?


  • You can borrow into retirement.
  • Lenient affordability checks.
  • You may not have to pay the loan back until you die, sell the house or go into care.
  • It can be a cheaper alternative to equity release.


  • You’ll have to prove you can afford the repayments.
  • This mortgage could prove unaffordable if your retirement income is low.
  • Interest payments could substantially eat into your retirement income, decreasing your quality of life.
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