Remortgaging When Retired and for Over 60s
Learn all about remortgaging when retired here. From how borrowing in retirement works, to your options, the benefits, considerations and more.
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Retired and wondering whether you can remortgage your home? The good news is lenders do offer remortgages to retirees. Whether you yourself can remortgage when retired will ultimately depend on your unique situation and specifically your income in retirement.
So, how do you know which remortgage products and services are available to you? Don’t worry, we’ve got you covered. Here, we look at the steps you’ll need to take to remortgage your property along with why retirement may affect a lender’s decision for remortgaging. While a high-street lender may offer you more complex eligibility requirements when it comes to remortgaging, it’s important to note there are still options.
Want to know more about other types of lending? See our Borrowing into Retirement Guide.
Contents
What Is Remortgaging?
Remortgaging your property means switching your mortgage deal on a property you already own to a new one with a different lender, usually with a better rate and sometimes to release equity. It’s worth noting you can also remortgage a property you already own that doesn’t currently have a mortgage on it to release equity.
There are also product transfers which allow you to change to a new deal but stay with your existing lender.
The process of remortgaging allows a property owner to pay off any existing mortgage with a new one. A remortgage does not refer to taking out a second charge mortgage (also called a second mortgage) on your property, which exists alongside your current mortgage/first charge.
What Are the Benefits of Remortgaging?
There are many reasons why you might want to remortgage your property. These can include the below.
Better interest rates
You may find that you can secure a better interest rate by remortgaging your property. A rise in your property’s value or a change in your LTV (loan-to-value) ratio, could give you access to cheaper rates.
If your current mortgage deal is about to expire but your property hasn’t been fully paid off, it’s important to review your remortgage options. Otherwise, you’ll be moved onto your lender’s SVR (standard variable rate), which is set by the lender rather than being linked to the Bank of England’s Base Rate. Moving onto your lender’s SVR is likely to be more expensive, so it’s worth looking into remortgaging if you want to save money in the long run.
More flexibility
You might require greater flexibility with your mortgage payments. For example, you may have received additional income and want to pay your mortgage off sooner, but your current deal does not allow you to do so. You might also want to pause your mortgage repayments; something you can’t do under the terms of your current mortgage.
Release equity and access cash
You may want to remortgage your property to release some of the equity you’ve built up over time – whether you’re remortgaging for more than the amount remaining on your current mortgage balance or remortgaging a property you don’t have an existing mortgage on anymore.
Releasing equity can free up cash you can use for so many different things – e.g. providing children with deposit money, funding a big expense like a wedding or school fees, home improvements, buying a second home or rental property and more.
Consolidate debts
When you remortgage, you can potentially add other unsecured debts to your mortgage, such as credit card bills or car finance. This can provide significant financial and practical help for those wanting to clear their debts, reduce stress and better organise their finances.
It’s important to note that you could end up paying more overall when you consolidate debt via a remortgage than if you had continued managing your unsecured debts separately. This is because the mortgage will be spread over a longer term, meaning you’ll be paying interest for a longer period.
Can a Retired Person Refinance a Mortgage?
Refinancing or remortgaging when retired is possible. The lender will assess your affordability based solely on your expected monthly income in retirement.
Remortgaging when nearly retired
It’s also possible to remortgage if you’re expecting to retire during the term of your mortgage.
In this situation, how the lender assesses your income and affordability will depend on how close you are to retirement. For example, if you’re due to retire in the next 10 years, the lender will use your expected income in retirement to assess your affordability.
On the other hand, if you’re not due to retire for over 10 years, the lender will likely assess your affordability using your working income.
In some situations, the lender may even consider both your current income and your projected income once you retire.
Getting a mortgage after retirement with low income
If your income in retirement won’t be enough to cover the repayments, the lender may consider shortening your mortgage term or discuss alternative options, such as:
- A part repayment, part interest only mortgage
- Remortgaging onto a different product once you retire
If you’re considering borrowing into retirement, most remortgage lenders will ask the following:
- Pension plans and income
- Investments or post-retirement income
- The age you expect to retire
- The value of your pension
Can I Get a Remortgage for Over 50s?
If you’re over the age of 55 and considering a remortgage, but not yet in retirement or due to retire for over 10 years, you should be able to get a normal remortgage based on your working income. It’s common for lenders to offer remortgages to applicants in their 50s with a standard 25 year term.
Note that if you’re expected to retire within 10 years from the point of application, the lender will likely base affordability on your retirement income.
Can I Get a Remortgage for Over 60s and 65s?
There are many high street lenders that will still lend to those over 60, but typically only for a shorter period (up to the standard retirement age of 75).
There are also specialist lenders and building societies that offer remortgages for over 60s and don’t necessarily have a maximum age limit. These lenders can offer longer terms than high street lenders.
Other options include:
- Later life products such as RIOs (retirement interest only)
- Adding a younger family member on to the mortgage (joint mortgage or joint borrower sole proprietor)
To find the best remortgage deals for over 60s, speak to a mortgage adviser.
Is It Possible to Get an Interest Only Remortgage Later in Life?
It is possible to get an interest only remortgage later in life. These are known as RIO (retirement interest only) mortgages.
With a RIO mortgage, you make interest payments each month, not capital payments. You repay the outstanding mortgage amount when the property is sold, either after you pass away or enter long term care with no prospects of returning to the residence. If it’s a joint mortgage, the surviving party will become the sole borrower and can remain in the residence until they die, enter long term care, or sell the property.
The lender will need to assess your affordability with a RIO mortgage to ensure you can meet the monthly interest payments. One key benefit of a RIO mortgage is that you don’t need a repayment strategy as you would with a normal interest only mortgage, as the debt is repaid when the property is sold after you die or enter long term care.
How Do Those Borrowing in Retirement Remortgage Their Homes?
The easiest way to arrange a remortgage in retirement is to use a mortgage broker like John Charcol. We know the criteria requirements of lenders from across the market and can find you a deal that works for your situation, no matter how complex. Talk to one of our experts today on 0808 256 4469 or request a call back to discuss your options.
What Are the Remortgaging Requirements for Older Borrowers?
Many factors, including your age, will be considered by lenders when approving a later-life remortgage application.
Age
Most lenders have a maximum borrowing age limit of 75 years old, but some have age limits of 80, 85, 90 and higher.
Retirement age
If you’ll retire during the term of the mortgage, the lender will assess your affordability based on your working income and your retirement income – e.g. your pension.
Earnings
You must demonstrate that you can afford the mortgage payments, which could include proof of pensions or forecast of pensions, non-standard income, savings, or investment income.
The type of property
If the type of property you have is non-standard, such as a listed building or one with modifications, this could affect the mortgage rates available to you. It’s best to speak to a broker if you have a non-standard property.
Expenses
Lenders will consider other debt, loans, or outgoings in their affordability calculations.
Other Considerations When Remortgaging in Retirement
Some property owners may find that remortgaging is helpful for releasing equity held in property and finding a better interest rate.
However, as with all other financial products, there are a few things you need to consider before you apply for a remortgage:
Change isn’t always necessary when it comes to your mortgage – it’s possible that you won’t get a better deal, especially if you factor in any potential extra fees. For this reason, it’s always a good idea to speak to a remortgage broker about what’s most suitable for you
Mortgage lenders may charge you ERCs for remortgaging if you try to do so before your current deal ends – this could potentially be offset by any savings you might make from switching providers and rates. You can start arranging your remortgage up to 6 months before your current deal ends to avoid ERCs and moving onto your lender’s SVR
Getting a remortgage in retirement with bad credit or the inability to make future repayments is unlikely. Lenders will assess your creditworthiness, which could lead to issues with your application
Next Steps
If you require help with finding the best retirement remortgage deal, John Charcol can help. Contact us today on 0808 256 4469 to discuss your remortgage requirements.
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