Remortgaging to pay off debt when you are over 60 or retired

How lenders typically treat it

A general guide to how the market behaves, not a promise about any lender. Criteria change and every case is assessed individually. See the lender criteria database for named lenders.

Can you remortgage to pay off debt when you are over 60?

Yes. Age on its own does not stop you remortgaging; what lenders look at is whether the mortgage can be repaid by the end of its term from income they can evidence. Most lenders set a maximum age of 70 to 75 at the end of the term, a large group of building societies and specialist later-life lenders go to 80 or 85, and a few have no maximum age provided affordability is proven.

What changes as you get older is the term, and the term drives the monthly payment. A lender with a maximum age of 75 will give a 62-year-old at most 13 years. The same £20,000 of consolidated debt costs more per month over 13 years than over 20, which is worked through in numbers below.

The other change is how income is assessed. If you are already retired, the lender works from your pension and other retirement income. If you are still working but the term would run past your intended retirement date, the lender assesses the later years of the mortgage on your projected pension income, not your salary.

Everything else is the same as any consolidation remortgage: a lower maximum loan to value, commonly 80% to 85%, the debts being repaid on completion, and an affordability check that usually removes those debts from your outgoings. Our guide to remortgaging to pay off debt covers the general rules. And because the borrowing is secured on your home, your home may be repossessed if you do not keep up repayments on the mortgage.

What income do lenders count when you are retired?

More than people expect. The state pension is counted by almost every lender, usually evidenced with the annual letter from the Department for Work and Pensions or bank statements showing it arriving. Private and workplace pensions in payment are counted in full, evidenced with pension statements, payslips from the scheme or a P60. Drawdown income is counted by many lenders, though some assess a sustainable withdrawal level rather than this year's amount.

Beyond pensions, lenders commonly count rental income from other property, investment income, and part-time or self-employed earnings if you are still working, though some cap earned income at a certain age or ignore it beyond the planned retirement date.

If you have not yet retired and the term runs past your retirement date, you will be asked for evidence of what your pension will pay. A recent pension statement or projection is usually enough. Where the projected pension is much lower than your salary, the lender may shorten the term so that it ends at retirement, which pushes the payment up, or cap the loan at what the pension supports.

Be realistic about a partner's income. On a joint application many lenders check that the survivor could keep paying if one of you died or went into care, so income that dies with one partner, such as a single-life annuity, is weighed carefully. A qualified adviser who works with later-life lenders will know which ones take the most generous view of each income type.

What does a shorter term do to the monthly payment?

It raises it. The lower payment that makes consolidation attractive comes from spreading the debt over a long term. With a maximum age of 75, a 62-year-old gets 13 years rather than the 20 or 25 a younger borrower might take, so the same amount costs more each month.

Compare that with a 20-year term at the same 5.4%: £136 a month and £32,748 in total. The shorter term costs £43 a month more but saves nearly £5,000 in interest. Applied to the whole mortgage, the difference is larger: £100,000 (an £80,000 balance plus the £20,000 of debts) costs about £894 a month over 13 years against £682 over 20, a gap of more than £200 a month.

That gap is the reason some over-60s find a repayment remortgage does not fit. If the shorter term pushes the payment beyond what the pension comfortably covers, the options are a lender with a higher maximum age, a retirement interest-only mortgage, or a secured loan over a longer term. The debt consolidation calculator lets you test different terms with your own figures.

What is a retirement interest-only mortgage?

A retirement interest-only mortgage (RIO) is a mortgage for older borrowers where you pay only the interest each month, and the capital is repaid when the home is sold, typically when the last borrower dies or moves into long-term care. There is no maximum age and no fixed end date, but you must show that you can afford the monthly interest for life, and on a joint application that the survivor could afford it alone.

For debt consolidation the appeal is the payment. Using the illustrative figures above, £100,000 on a retirement interest-only basis at 5.4% costs £450 a month in interest, against £894 on a 13-year repayment term. That can be the difference between a consolidation that works on a pension and one that does not.

The cost is that the capital does not fall unless you overpay. The £100,000 is still owed at the end, and it comes out of the sale proceeds, which reduces what passes to your family or what you have to fund care. Loan to value limits are usually tighter than a standard remortgage, often around 50% to 60%, so you need a good amount of equity.

A RIO is a regulated mortgage secured on your home, and the same warning applies: your home may be repossessed if you do not keep up the interest payments. It suits people with reliable pension income who want a low fixed outgoing and are comfortable that the capital is repaid from the house. It suits less well anyone who wants to be clear of the debt in their lifetime.

Should you consider equity release or a secured loan instead?

Equity release, usually a lifetime mortgage, lends against your home with no monthly payments at all. The interest is added to the loan and compounds, so the debt grows over time and is repaid from the sale of the home when you die or move into care. Plans that meet Equity Release Council standards ensure you can never owe more than the home is worth. For someone whose pension cannot support any monthly payment, that can be the only way to clear expensive debt; for someone who could afford a payment, it is usually the most expensive route over time because nothing is being repaid. Our equity release versus secured loan comparison sets the two side by side.

A secured loan is a second charge behind your existing mortgage, and it can help over-60s in two ways. It leaves a good existing mortgage rate untouched, and secured loan lenders often allow longer terms and higher maximum ages than remortgage lenders, with several lending to 85 and beyond at the end of the term. So the £20,000 could run over 15 or 20 years, keeping the payment down. Our secured loans for pensioners and over-60s page covers the criteria in detail.

A rough rule of thumb: a remortgage fits when your deal is ending and the shorter term is affordable; a secured loan fits when you want to keep your mortgage or need a longer term; a retirement interest-only mortgage fits when the payment must be as low as possible for life; equity release fits when no monthly payment is possible at all. In every case, free advice from MoneyHelper, StepChange or Citizens Advice should come first if the debts are unmanageable rather than just expensive.

What improves your chances

• Gather evidence of every pension and retirement income source before applying, including state pension letters and scheme statements.
• If you are still working, get a current pension projection so the lender can assess the years after you retire.
• Ask the adviser to include later-life lenders and building societies with maximum ages of 80 or above, not just mainstream banks.
• Check that the payment over the shorter term fits your pension with room to spare, since lenders stress test it.
• On a joint application, be ready to show the survivor could manage the payment alone, or that life cover would clear the balance.
• Keep every existing payment on time in the months before applying; conduct matters as much at 65 as at 35.

Alternatives worth considering

If the shortened term makes a repayment remortgage too expensive, a secured loan for over-60s over a longer term or a retirement interest-only mortgage may bring the payment within reach. If no monthly payment is affordable at all, equity release with regulated advice is the route designed for that, though it is the most expensive over time. For smaller debts, an unsecured personal loan or a 0% balance transfer card avoids securing anything on your home. And if the debts are unmanageable rather than just expensive, a debt management plan through a free debt charity should be considered before any borrowing; our consolidation versus DMP comparison explains the difference.