22 July 2025
general
Current financial models often assume that those entering retirement will be free from housing costs. However, this may not be the case.
Indeed, a surprisingly high number of individuals are carrying mortgage debt into later life. The Equity Release Council says that half a million homeowners are still paying a mortgage beyond the age of 55.
Understanding how this could affect you could be crucial for your long-term financial stability.
Here’s what you need to know about your mortgage options in retirement.
A number of converging factors could mean retirees still have a mortgage to pay
A common goal for homeowners is to be mortgage-free by retirement age. Succeed in this goal and, once you stop working, you will no longer need to make repayments and can spend a greater portion of your retirement fund on your lifestyle.
However, since the pandemic, the UK’s financial landscape has changed. Longer mortgage terms (often due to higher interest charges), increasing house prices, and the rising cost of living mean that a significant number of people are now entering retirement with outstanding mortgage debt.
Indeed, Legal & General notes that it has seen a 156% increase in searches for 10 – 15 year remortgage options for those over the age of 50.
And, even if you own your home outright by the time you retire, you may want or need to access some of the wealth tied up in your property.
This could be for:
As more people are either paying a mortgage in retirement or needing to release equity later in life, specialist later-life lending has become increasingly popular. Let’s take a look at some common scenarios.
2 common scenarios for those entering retirement with a mortgage
Here are two of the main scenarios you might encounter when entering retirement with a mortgage.
1. Needing to make monthly repayments once you start drawing from your retirement pot
You may find yourself still making repayments on your mortgage when you enter retirement. This may be a traditional capital repayment mortgage or an interest-only mortgage. Regardless, it is an additional monthly expense to consider.
If you can afford to continue paying off your mortgage once you reach retirement, then you may not be concerned about this. You may also have plans to use some of your pension funds to pay off the remaining debt.
But if your mortgage term comes to an end and you still have debt left to repay, you may need to take out a new mortgage – which can be a lot harder once you’re retired – and continue making repayments on a monthly basis.
Lenders typically assess your affordability based on your income compared to your expenses. Your income may consist of various pensions, investments, and cash savings.
Lenders will check that this is sustainable and that your mortgage will come to an end during what they consider an appropriate time frame. Most standard lenders have an upper age limit of 75 to 80, but there are specialist lenders available who can offer extended age limits.
As long as your family has the capital available to repay the mortgage upon your death, you may be eligible for a standard mortgage, even if you are already retired. This capital may come from selling the home, life insurance, or other investments.
2. Your interest-only mortgage leaving you with a chunk of debt to repay
A common challenge for older homeowners is their interest-only mortgage coming to an end. Remember, with an interest-only mortgage, you don’t pay off any of the capital, so you must have a plan to repay this when your mortgage term ends.
For many, this means selling the home and potentially downsizing. However, plenty of homeowners want to stay in their family home.
Maturing interest-only mortgages often lead people to consider specialist later-life products, which are designed to address this exact issue.
For example, a retirement interest-only (RIO) mortgage is an option for those aged 55 and over. It allows you to borrow a lump sum for a mortgage, but, unlike a standard interest-only mortgage, there’s no set end date.
In most cases, you simply make monthly interest payments for however long you need to. The capital is typically repaid when the property is sold, for instance after you and any joint borrower have died, or if you move into long-term care.
You will still need to pass affordability checks, but this allows you to stay in your home, as you can use a RIO to pay interest and keep your housing costs low.
Releasing equity from your home could be a viable option if you need funds and own your home outright
Equity release allows you to unlock some of the cash tied up in your home without having to sell it. This money is tax-free and can be used in any way you choose.
There are two main equity release options:
Remember that for some, downsizing can be a viable way to release equity and reduce ongoing housing costs. This can free up substantial capital but may also involve other costs, such as Stamp Duty, agent and solicitor fees, and removal costs.
Be sure to weigh of the pros and cons of taking a mortgage into retirement
Regardless of the option you choose, there are important financial factors to consider, including:
Later-life lending can be complicated, so seeking independent financial advice from a specialist qualified in later life mortgages or equity release is essential.
They will help you fully understand the implications on your finances before committing to any one plan.
Learn more about your mortgage options in later life
Understanding the various mortgage options available to you is key, particularly if you’re considering equity release as an option for later life.
Our trusted mortgage broker, Advantage FS, can help with this.
Email info@advantagefs.co.uk or call 0117 442 0604 to find out more about how they can help.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
Think carefully before securing other debts against your home.
Equity release will reduce the value of your estate and can affect your eligibility for means-tested benefits.
A lifetime mortgage is a loan secured against your home. To understand the features and risks, ask for a personalised illustration.
