Mortgage Options for Seniors

More than 15 million Americans aged 65 and older are insecure about their financial stability. To simplify their lives in retirement, many seniors downsize or use the equity in their homes to do so.

If your financial situation and credit score meet the lender’s standards, you might be able to take out a mortgage even in your retirement. You can tap into your home’s equity to settle financial obligations, whether you opt for a reverse mortgage or a home equity line of credit (HELOC).

But how can you determine whether a mortgage is really your best option? When it comes to mortgages, what are the best choices for retirees? Here, we’ll address all of your concerns and explain how a mortgage works, so you can make an informed decision for your family.

Different Senior Mortgage Options

For seniors, the right mortgage option might help them achieve their own objectives. Mortgage eligibility is contingent upon a number of factors, including credit history, income, and housing status. Let’s take a look at the best mortgage options for retirees.


The only type of reverse mortgage insured by the government is a home equity conversion mortgage (HECM). You must be 62 or older to be able to qualify, making it ideal for retirees. The Federal Housing Administration (FHA) runs a scheme that lets homeowners take out a loan against their home’s equity.

Moreover, if you opt for a HECM for Purchase you can use it toward the down payment on a new house. For seniors, a HECM for Purchase is a great option since the costs are often cheaper than those of a conventional reverse mortgage.

With this arrangement, you can combine the earnings from a reverse mortgage with the money you’ve saved or received from the sale of your current house to buy a brand-new one outright. When you purchase a property this way, you won’t have to worry about mortgage payments ever again.

Home Equity Loan

Borrowing against the value of your property is possible with a home equity loan, sometimes known as a second mortgage. In exchange for a decrease in your home’s value, you’ll get a lump sum now and make payments on it over time. A home equity loan functions similarly to a first mortgage in that it helps you build equity in your property. This is a viable alternative for retirees with a lot of home equity who are short on cash and need a quick infusion of funds.


One way to borrow money against the value of your property is via a line of credit known as a “home equity line of credit.” You can opt to receive payments on an as-needed basis rather than in one large amount. After a certain number of years (usually 10), the equity loan is refinanced as a more traditional mortgage.

During the first withdrawal period, borrowers have the option of paying just the loan’s interest rather than the principal. After the draw period expires, the HELOC becomes a standard loan with fixed repayment terms, including principal and interest. Those who know they’ll need money soon and want to take out exactly what they need will benefit the most from this kind of mortgage.

Cash-Out Refinance

Refinancing your mortgage to get cash out means getting a new mortgage, usually with more favorable conditions. Any amount of equity you have left over is yours to withdraw as cash. Refinancing is a good option for retirees who wish to reduce their interest rate and monthly payment, consolidate their debt, and free up some cash each month. Taking out cash via refinancing can result in the elimination of part of your current equity, which might affect your ability to get future loans.

Can You Get a Mortgage After Retirement?

In a nutshell, yes, you can still get a mortgage after retirement. There are some standards that hold true for both working individuals and retirees, such as having a good credit score. One of the few exclusions is proof of income. To qualify for a mortgage in retirement, you must prove that your retirement assets can generate income for at least three years.

To qualify for a mortgage after retiring, you’ll need a credit score of 640 or higher, a debt-to-income ratio of no more than 43%, and enough finances to cover monthly mortgage payments. Many retirees opt for no-payment refinancing or reverse mortgages since conventional loans might be difficult to qualify for on a fixed retirement income.

Final Thoughts

There are several programs and loan options available to seniors who are interested in getting a mortgage. You can leverage your home’s equity to improve your financial situation and make it simpler to live comfortably with options including reverse mortgages insured by the Federal Housing Administration (FHA) and cash-out refinances. Just make sure you do your homework on any mortgage offer before committing to anything.