Can I use my pension to get a mortgage

Can You Get a Mortgage on a Pension? A Complete Guide

Disclaimer: This guide is for informational purposes only and does not constitute personal financial advice. Mortgage criteria vary by lender, and approval depends on individual circumstances. Always consult an FCA-authorised mortgage adviser for regulated advice.

Introduction

Many people ask: can I get a mortgage using my pension income? The answer is yes. However, lenders need proof that you can comfortably repay what you borrow. This guide covers the types of mortgages available for pensioners, how lenders assess applications, and tips for getting approved.

Types of Mortgages for Pensioners

Retirement Interest-Only Mortgages

These mortgages require monthly interest payments only. The outstanding balance is repaid when you die. Available for those over 55, they allow you to stay in your home while paying lower monthly costs.

Older People’s Shared Ownership (OPSO)

A government-backed scheme letting pensioners buy up to 75% of their home and rent the remaining 25%. Offers flexibility and can be suitable for downsizing later in life.

Equity Release

Borrow money against your home’s value. Two main options:

• Lifetime Mortgage: Retain ownership and repay loan plus interest during life or at the end.
• Home Reversion Plan: Sell all or part of your home to a provider in exchange for a lump sum or regular payments while retaining the right to live rent-free.

Factors Lenders Consider

Type of Pension Income

Lenders assess whether your income is steady or variable and how long you will receive it to determine affordability.

Current Earnings

Monthly income before tax is important. Guaranteed pensions are preferable to variable amounts.

Age

Lenders assess whether your remaining pension period aligns with the mortgage term.

Duration of Pension Payments

Usually, lenders require at least 12 months of consistent pension payments as proof of stability.

Credit Score

A good credit history helps. Missed payments or defaults can affect approval.

How to Get a Mortgage as a Pensioner

Find Lenders Who Accept Pension Income

Some lenders prefer borrowers under 65 and in full-time employment. Specialist lenders for pensioners are available.

Organise Financial Documents

Gather bank statements, proof of income (pension), and tax documents before applying.

Set Aside a Down Payment

Saving for a down payment and closing costs (up to 20%) improves chances of approval.

FAQs

Can I get a mortgage using my pension income?

Yes – lenders accept pension income if it is steady and sufficient to cover mortgage payments.

Are there age limits for getting a mortgage on a pension?

Some lenders set upper age limits, often requiring the mortgage to be repaid before life expectancy or age 85-90. Specialist lenders may have more flexible terms.

Do I need a large pension to qualify?

Lenders assess affordability, so a larger pension may help, but other income or assets can also strengthen your application.

Can I remortgage using my pension?

Yes – if your existing mortgage allows it and your pension income meets lender criteria.

Is equity release a better option than a mortgage?

It depends on your situation. Equity release provides cash without monthly payments but reduces estate value. Consider both options carefully.

Conclusion

Using your pension to secure a mortgage is possible but requires careful planning. Lenders evaluate income, age, and credit history. By preparing documentation and understanding your options, you can find a mortgage solution suitable for retirement.

As a mortgage is secured against your home/property it may be r