Remortgaging in Later Life
Remortgaging after 55
Remortgaging involves replacing your existing mortgage with a new one, either with your current lender or by switching to a different provider.
This process can be used to change the interest rate, extend or reduce the mortgage term, or borrow additional funds against your home.
It does not require moving house, and many homeowners remortgage while continuing to live in the same property.
Reasons for remortgaging in later life
Reducing interest costs
Many people over 55 remortgage to obtain a lower interest rate. If you are currently on a standard variable rate or your initial fixed-rate period has ended, switching to a more competitive deal may reduce your monthly repayments.
For example, if you are paying 6.5% interest and find a new deal at 4.2%, the savings over time can be substantial, especially on larger loan amounts.
However, potential savings must be weighed against any early repayment charges or fees involved in switching.
Accessing equity in your home
If your property has appreciated in value since the original mortgage was taken out, remortgaging may allow you to release some of that equity. This involves borrowing more than your existing balance and taking the difference as a lump sum.
Homeowners sometimes use this to fund retirement income shortfalls, pay for home adaptations, or support children with property deposits.
For instance, someone with a home valued at £350,000 and an existing mortgage of £75,000 might be able to borrow £25,000 extra, depending on income and lender criteria.
Replacing an interest-only mortgage
Many older borrowers have interest-only mortgages that are nearing the end of their term. If there is no repayment vehicle in place, the outstanding capital will need to be settled. In this situation, remortgaging to a different product is often a practical solution.
This could involve switching to a capital repayment mortgage, taking out a retirement interest-only (RIO) mortgage, or considering equity release.
Each option has different repayment structures and implications for ownership and inheritance.
Switching to a retirement-focused mortgage
Some mortgage products are tailored to the needs of borrowers in later life. These may offer longer terms, flexible repayment options, or allow for interest-only payments without a set end date.
For example, a retirement interest-only mortgage allows you to make monthly interest payments, with the loan repaid when you die or move into long-term care.
This structure can be helpful if you have a stable pension income but want to avoid the higher monthly costs of capital repayment.
How lenders assess borrowers over 55
Retirement income and financial stability
Lenders assess your ability to afford the mortgage both immediately and in the future. This involves reviewing your current and expected income, including State Pension, workplace pensions, private pensions, rental income, investment returns, and any ongoing employment income.
Documentation such as pension statements, payslips, and tax returns may be required.
The focus is on consistent, reliable income rather than short-term gains.
Age-related lending limits
Most lenders apply maximum age limits, either at the time of application or by the end of the mortgage term. For example, some may only lend if the mortgage is due to be repaid by age 75, while others may extend this to age 85 or beyond.
A few specialist lenders offer mortgages with no strict upper age limit, particularly for retirement-specific products.
These rules can affect both eligibility and the maximum term offered.
Mortgage term restrictions
Older borrowers are typically offered shorter mortgage terms than younger applicants. A 35-year mortgage may be available to a 30-year-old but could be reduced to 10 or 15 years for someone in their 60s.
Shorter terms result in higher monthly repayments, which must still meet affordability requirements.
For example, a £100,000 loan over 10 years at 5% interest will have significantly higher monthly payments than the same loan over 25 years.
Health and lifestyle not considered
Standard mortgage providers do not assess your health or lifestyle when determining eligibility.
Unlike equity release providers, who may offer enhanced terms based on medical conditions, conventional lenders focus solely on financial factors.
This means that even if you have serious health issues, your application will be assessed in the same way as any other applicant of similar age and income.
Mortgage options available in later life
Standard repayment mortgage
This option involves paying back both the interest and a portion of the capital each month. Over time, the debt reduces until it is fully repaid. For those with strong, stable income and a clear plan to repay the mortgage within the available term, this can offer peace of mind and full ownership.
However, shorter terms can make this unaffordable for some older borrowers.
Interest-only mortgage
With interest-only arrangements, monthly payments cover only the interest, and the original loan amount remains outstanding. Lenders require a clear repayment strategy for the capital, such as selling the home, using investments, or other savings.
These are becoming less common and can be harder to secure without a well-documented exit plan.
Retirement mortgages
These products are specifically designed for older applicants. They often extend traditional lending limits and take pension income into account. Terms can vary by lender but may include capital repayment or interest-only structures.
These mortgages still involve affordability checks but may allow borrowing beyond age 80, depending on the provider.
Retirement interest-only (RIO) mortgages
RIO mortgages offer interest-only payments with no set end date. The borrower pays the interest monthly for the rest of their life or until they move into permanent care. The loan is repaid from the sale of the property at that point.
These mortgages are regulated like standard mortgages and require evidence of income to meet the ongoing interest payments.
Equity release through lifetime mortgages
Lifetime mortgages allow you to borrow against your home without making regular repayments. The interest is added to the loan and compounds over time. The debt is repaid when the property is sold, usually after death or entry into care.
These products do not require affordability checks but can significantly reduce the value of your estate over time.
They are typically used by homeowners who are asset-rich but cash-poor.
Key risks and considerations
Early repayment charges
Many fixed-rate mortgages include penalties for repaying the loan early or switching deals before the term ends. These charges can be a percentage of the remaining balance or a set fee.
For example, a 3% early repayment charge on a £100,000 mortgage could cost £3,000. Always check your current mortgage agreement before committing to remortgage.
Shorter terms and affordability pressure
Being limited to a shorter mortgage term can increase monthly payments to levels that are difficult to sustain on a fixed income. If your retirement income is modest, this may restrict your options.
Lenders will only approve the mortgage if they are confident that you can meet the repayments throughout the term.
Changing income in retirement
Income in retirement may vary over time. For example, someone still working at 58 might have a higher income than they will at 65 when relying solely on pensions. When remortgaging, lenders assess whether your future income will still support the repayments.
This means some applicants are approved for smaller loans than they might expect.
Inheritance and estate planning impact
Releasing equity or extending borrowing in later life can reduce the amount of wealth passed on to heirs. For instance, a lifetime mortgage with rolled-up interest can eat into the property value significantly over ten or twenty years.
It is important to weigh the benefit of cash now against the long-term reduction in inheritance.
Risk of repossession
As with all secured borrowing, failing to keep up with repayments can result in your home being repossessed. Even in retirement, mortgage contracts are legally enforceable, and lenders can take action if payments are missed.
This is particularly important for borrowers on tight budgets or variable incomes.
Alternatives to remortgaging
Downsizing
Selling your home and moving to a smaller, less expensive property can free up capital and eliminate mortgage costs entirely. For example, selling a house worth £400,000 and purchasing a bungalow for £250,000 may leave £150,000 to fund retirement. However, this approach may involve emotional trade-offs, practical disruption, and moving away from familiar surroundings.
Lifetime mortgage
If you want to release equity but avoid regular repayments, a lifetime mortgage may offer more flexibility. This can be particularly useful for homeowners with low income but significant property wealth. The trade-off is that the loan and compounding interest reduce the equity left in your home over time, which affects long-term financial planning and inheritance.
Keeping your existing mortgage
If your current deal is affordable and competitive, it may be better to stay with it. This is often the case if you are still within a fixed-rate period or would incur significant early repayment charges by switching. Reviewing your mortgage terms periodically is still advisable, especially as your financial situation evolves.
Frequently asked questions
Can I remortgage using pension income?
Yes. Pension income is an accepted source for affordability assessments. This includes the State Pension, workplace pensions, annuity income, and income drawdown from pension pots. Lenders typically require documentation such as annual pension statements or regular income schedules to verify these sources.
Is there a maximum age for remortgaging?
There is no universal age limit, but each lender sets its own policy. Standard mortgages often have a maximum age at term end, typically 75 or 85. Specialist lenders offering retirement-focused products may allow applications well into your 80s or beyond, depending on income and property value.
Will I need to pass affordability checks?
Yes, unless you are applying for an equity release product. Standard and retirement mortgages require lenders to assess whether your income is sufficient to meet the repayments. This involves providing evidence of pensions, employment, or other ongoing income sources. Equity release products generally do not require this type of assessment.
What if I still have an interest-only mortgage?
If your mortgage term is nearing its end and you do not have a plan in place to repay the capital, you must act. Options include remortgaging to a retirement interest-only product, switching to a repayment mortgage, or using equity release to settle the outstanding balance. Each route has different costs and long-term implications, so it is important to evaluate them carefully.
Can I borrow more money through remortgaging?
Yes, if you meet the lender’s criteria. Borrowing more when you remortgage is known as capital raising. The funds can be used for a range of purposes, such as home improvements, paying off debts, or supporting family members. The key condition is that your income must support the larger loan, and the total borrowing must remain within the acceptable loan-to-value ratio for your property.
