If you’re retired—or thinking about it—and wondering how you’re going to be able to keep yourself in your home or downsize without draining your savings, you’re not alone. More and more retirees are wondering, what are retirement interest-only mortgages? And for good reason.
These mortgages can make your life much more comfortable in retirement as you will be able to keep your monthly payments low. If you want to release equity to travel, assist your family, or simply make life easier, understanding how these mortgages work could be the key to being able to do more with less.
So, What Are Retirement Interest-Only Mortgages?
A retirement interest-only mortgage enables you to borrow against your home, but instead of repaying the capital and interest monthly, as you would with a normal loan, you just repay the interest. The loan is typically repaid when you sell your home, move into long-term care, or pass away.
This implies:
- Monthly payments are kept lower
- You get to keep more of your pension or savings
However—you will need to have a clear plan to repay the capital at some point in the future
According to MoneyHelper, these loans aim to provide financial freedom during retirement without forcing homeowners to sell prematurely.
Why Consider One?
These mortgages suit older borrowers who would be unable to take standard repayment loans due to income or age restrictions.
Suppose you’re 67, just retired, and have cleared 50% of your London apartment. You’d like to free up some equity to live life, but without selling the house or taking on high monthly payments. A retirement interest-only mortgage lets you do exactly that—with confidence and no stress about paying off the entire loan during your lifetime.
Who Are They For?
- Typically available to borrowers 55 or more
- You’ll need to show you can afford the interest-only payments
- Lenders may cap the loan-to-value (LTV) to 60%, so you’ll need at least 40% equity
Example: On a £400,000 house, you may be able to borrow £240,000—so there’s a decent equity cushion left.
How Do They Work?
- You only pay interest monthly—no capital repayment
- The loan is repaid when you pass away, sell your home, or enter care
- Some lenders now offer options for buy-to-let properties, but this is still rare
- You’ll be required to go through affordability checks, even in retirement
To explore regulated options, consider the Equity Release Council or discuss with a specialist broker like Age Partnership.
See also:
What’s the Catch?
It’s worth remembering:
- The loan will need to be paid back at some point, reducing your estate
- You’ll need a solid plan for repayment if you don’t wish to sell your house
- There are still lenders with age restrictions, although this is getting better
Always consult with a mortgage broker who is familiar with later-life lending. Many are able to source options that meet your individual objectives and budget.
Why This Matters in London
Retirees living in or moving to London face high property prices, tight housing stock, and growing costs. Whether you’re staying in your long-time family home or downsizing to a stylish flat in Kensington, managing affordability is crucial.
See also:
Am I too old to get a mortgage?
Conclusion
So, what do retirement interest-only mortgages really have to do with? With freedom. With keeping your home, managing the costs, and living life on your own terms—even in retirement.
If you’re aged 55 or more and want lower monthly repayments without losing access to the equity in your home, this mortgage could well be the solution. Just be sure you understand the long-term implications and speak to a trusted broker before making any important decisions.
And if you’re looking for a fresh place to live in London while navigating later-life lending? London Stays is here to help—with flexible, comfortable properties across the capital.
