What mortgages are available for over 60s?

Over 55s make up the largest proportion of homeowners in the UK, but securing a mortgage in later life can be a different ballgame. While lenders cannot legally discriminate based on age, they do scrutinize a borrower's income and ability to repay, which changes after retirement. Understanding what mortgages are available for over 60s is the critical first step toward securing your home's financial future.

Quick Summary

Several mortgage options exist for those over 60, including traditional loans (subject to affordability checks), retirement interest-only mortgages, and reverse mortgages like the HECM, which access home equity without monthly payments. Specialized later-life mortgages are increasingly common.

Key Points

• Age is not a barrier: The Equal Credit Opportunity Act prevents age-based discrimination, meaning eligibility depends on financial criteria, not your date of birth.

• Consider income sources: Lenders evaluate all sources of retirement income, such as pensions, Social Security, and investment earnings, to determine affordability for traditional loans.

• Explore later-life products: Options like Retirement Interest-Only (RIO) and Reverse Mortgages (HECM) are specifically designed for older borrowers and focus on home equity rather than earned income.

• Understand repayment differences: RIO mortgages require regular interest payments, while reverse mortgages accrue debt that is settled upon the sale of the home or death of the borrower.

• Seek professional guidance: Consult a financial advisor to understand the long-term impact of each mortgage type on your finances and estate, as products like reverse mortgages can significantly reduce home equity.

Navigating Mortgage Options for Older Adults

For many people over the age of 60, the desire for a new mortgage arises from various life events, such as moving to a more accessible home, consolidating debt, or helping family members. While the rules are similar to those for younger borrowers, the assessment criteria are tailored to fixed or changing income streams, such as pensions and investment income. Understanding the landscape of later-life mortgages is key to finding a product that fits your needs.

Traditional Mortgages with Adjusted Terms

Many conventional mortgage products are still accessible to older borrowers, but often with specific stipulations. The Equal Credit Opportunity Act prohibits discrimination based on age, so your application is legally considered on its financial merits. However, lenders will require proof of sustainable income for the entire loan term, which can be challenging if you have a short time until or are already in retirement.

• Shorter Loan Terms: Lenders may cap the loan term so it concludes by a certain age, such as 75 or 85. This means a 65-year-old may only be offered a 10- or 15-year mortgage, resulting in higher monthly payments.
• Income Verification: Retirement income sources, including pensions, social security, and investment dividends, are thoroughly vetted to ensure they can cover the repayments for the life of the loan. This can involve providing detailed pension statements and future earnings projections.

Specialized Later-Life Mortgages

Beyond the traditional routes, several mortgage products have been developed specifically to address the financial situations of older adults. These offer flexible alternatives that leverage home equity rather than traditional earned income.

Retirement Interest-Only (RIO) Mortgages

RIO mortgages are a hybrid product designed for people over 50. With a RIO, you make monthly interest payments on the loan, but the capital is only paid back when a specified life event occurs, typically when you sell the property, move into long-term care, or pass away. This makes monthly payments more manageable, as you are not repaying the loan principal.

Benefits of a RIO Mortgage:

• Lower monthly payments compared to a traditional repayment mortgage.
• Allows you to stay in your home for the rest of your life, provided interest is paid.
• Less risk of eroding home equity over time compared to some reverse mortgages.

Reverse Mortgages and Equity Release

For those who want to unlock the value of their home without making monthly repayments, reverse mortgages (known as equity release in the UK) are a popular option. The most common type in the U.S. is the Home Equity Conversion Mortgage (HECM), insured by the FHA. This is available to homeowners aged 62 or older who have significant equity.

How HECMs and Equity Release Work:

• The loan is paid out as a lump sum, a line of credit, or monthly payments.
• The loan and accumulated interest do not need to be repaid until the borrower dies, sells the home, or moves away permanently.
• The loan balance can grow significantly over time due to compounding interest, which reduces the home's remaining equity.

Asset Depletion Loans

For high-net-worth individuals, an asset depletion loan can be a powerful tool. Instead of relying on a monthly income, this non-qualified mortgage (non-QM) allows lenders to use a borrower's liquid assets, such as savings, investment accounts, and retirement funds, to calculate an imputed income. A portion of the asset value is "depleted" or factored in each month to demonstrate the ability to repay.

Requirements for Asset Depletion:

• Significant liquid assets, often well over $1 million.
• Must have sufficient assets to last the duration of the loan term.

Comparison of Mortgage Options for Over 60s

Feature	Traditional Mortgage	Retirement Interest-Only (RIO)	Reverse Mortgage / Equity Release
Age Requirement	No legal maximum, but affordability is key.	Typically 50-55+, varies by lender.	62+ (U.S. HECM) / 55+ (UK Lifetime Mortgage)
Monthly Payments	Principal + Interest	Interest Only	No Required Payments
Repayment Event	End of term	Sale of home, entry to care, or death	Sale of home, entry to care, or death
Debt Accumulation	Decreases	Stable	Increases	n	Eligibility	Income and credit-based	Sufficient retirement income to cover interest	Significant home equity
Downsides	Can be hard to prove long-term affordability.	Requires ongoing interest payments.	Reduces home equity significantly over time.

Considerations and Recommendations

Choosing the right mortgage in your 60s requires careful thought and professional advice. Your decision should align with your long-term financial goals and lifestyle preferences. While some may prefer a fixed-term, traditional mortgage, others may benefit from a more flexible equity-based solution.

Before proceeding, it is highly recommended to seek independent financial advice from a qualified advisor who can review your entire financial situation. This expert guidance can help you navigate the complexities and understand the full implications of each product. Consider options from building societies and specialist lenders, as they often have more flexible criteria than larger high-street banks.

An excellent resource for understanding all aspects of reverse mortgages is the Consumer Financial Protection Bureau, a government agency dedicated to helping consumers navigating complex financial products. Their insights can provide a solid foundation for your research.

Conclusion

There is no one-size-fits-all answer to what mortgages are available for over 60s. The market offers a variety of products, from conventional mortgages with adjusted terms to specialized later-life products like Retirement Interest-Only and Reverse Mortgages. Your best course of action depends on your financial stability, assets, and plans for the future. By combining thorough research with professional advice, you can make an informed decision that helps you enjoy your retirement years in your home with confidence.

Frequently Asked Questions

Can you be too old to get a mortgage?

No, you are never legally too old. Lenders are legally prohibited from denying an applicant based on age. The decision is based on your ability to repay the loan from a stable income, whether from a salary, pension, or other assets.

What is a Retirement Interest-Only (RIO) mortgage?

A Retirement Interest-Only mortgage allows borrowers, typically aged 50 or over, to pay only the interest on their loan each month. The capital is paid back upon a significant life event, such as the sale of the property, the last borrower's death, or moving into long-term care.

How does a reverse mortgage differ from a traditional mortgage for over 60s?

A reverse mortgage, like an HECM, allows you to convert home equity into cash without making monthly payments. With a traditional mortgage, you make regular payments to the lender. The loan amount on a reverse mortgage grows over time, while a traditional mortgage shrinks.

What is an asset depletion loan?

An asset depletion loan is a type of mortgage for high-net-worth borrowers who have significant liquid assets but may not have a traditional income. The lender uses a portion of the assets to calculate a projected monthly income to prove the borrower's ability to repay.

Can I use my pension to qualify for a mortgage?

Yes, lenders will consider your pension as a source of income when assessing your affordability for a mortgage. You will need to provide proof of your pension income and likely show that it is sustainable for the entire loan term.

What are the risks of a reverse mortgage?

The primary risks include a significant reduction in your home's equity over time due to compounding interest. This can leave less of an inheritance for your heirs. Additionally, if you fail to pay property taxes or insurance, the home could still face foreclosure.

Do I need to get financial advice before taking out a mortgage over 60?

Yes, it is highly recommended to seek independent financial advice, especially for later-life products like reverse mortgages. A qualified advisor can help you understand all the costs, benefits, and long-term implications for your unique financial situation.