A Guide to Mortgages For Pensioners

Today, an increasing number of people are purchasing their first home later in life. In 2023, approximately one-third of first-time buyers were over the age of 35, and two-thirds of landlords were aged over 55.

In response to this trend, many lenders have extended their maximum age limits, providing a range of mortgage options for pensioners that go beyond traditional equity release products. Below, we explore some of these alternatives.

What type of mortgages are available for pensioners?

Mortgages available to pensioners typically fall into three main categories:

Mortgages with Flexible Age Limits

• A growing number of lenders offer mortgages for borrowers aged 65 and above, though the range of options narrows with age.
• Some lenders, particularly building societies, impose no upper age limit for repaying the mortgage.
• Provided you meet affordability criteria, it is possible to secure a traditional mortgage into your 60s and 70s. However, repayment terms are likely to be shorter than for younger borrowers, resulting in higher monthly payments.

Equity Release Mortgages

There are two types of equity release products available to pensioners:

• Lifetime Mortgages:
  Designed for those aged 55 and older, a lifetime mortgage allows you to borrow against the equity in your home as a tax-free loan. Repayment is deferred until your property is sold, either after you pass away or move into long-term care.

• Home Reversion Plans:
  Typically available to homeowners aged 65 and above, this option involves selling all or part of your home at below market value to a home reversion provider. While you remain in your home rent-free for life, there are no repayments to make. Home reversion plans are less common today.

RIO (Retirement Interest-Only) Mortgages

• These specialist products are available to those over 50, though some lenders require a minimum age of 55.
• RIO mortgages function like traditional interest-only mortgages, where you only pay the interest each month.
• The loan is repaid when your home is sold, typically upon entering long-term care or after your death.
• Despite their name, you don’t need to be retired to apply for a RIO mortgage.

Each option comes with its own benefits and considerations, making it important to evaluate your financial needs and seek expert advice before choosing the right product.

Age limits for traditional mortgages

An increasing number of lenders are expanding their age limits for standard mortgage products, providing a wide range of options for individuals over 65 beyond equity release solutions.

This table shows the number of UK lenders currently offering mortgage terms that end above 75 years of age. As you can see, some have no upper age limit at all:

Best mortgage lenders for pensioners

This table shows examples of mortgage lenders who specialise in pensioners and cater for their needs well, with flexible age limits and a range of retirement mortgage deals.

Remortgaging in later life

Although mortgage products are available, remortgaging as a pensioner can be more challenging. This is often due to lower post-retirement income, which makes meeting affordability criteria more difficult. Additionally, lenders may offer only a short repayment term based on their age limits, which can increase monthly costs.

That said, if you have substantial equity in your property and can demonstrate affordability, remortgaging as a pensioner is achievable. Downsizing to a less expensive property can make the process easier, as the reduced loan amount typically leads to lower repayments.

Buy-to-let mortgages for pensioners

With over 60% of landlords in the UK aged over 55, buy-to-let mortgages are generally more accessible to older borrowers. This is because such lending is often viewed as lower risk for several reasons.

Landlords typically use rental income to cover mortgage repayments, so affordability does not rely on their pension income. Additionally, investment properties can be sold to repay the mortgage if necessary, which is often more straightforward than selling a primary residence, especially for those with larger property portfolios.

Frequently Asked Questions