If you're approaching or enjoying retirement but need or want to get a mortgage you may find that your options are somewhat limited. Here's how to find a mortgage if you're an older borrower.
Whether you're looking to buy a new home, free up some cash or lower your monthly outgoings, if you're an older borrower you may find that getting a mortgage isn't as simple as you might have hoped.
We look at how to find a lender if you want to take out a mortgage in your late 50s, 60s, 70s or beyond.
Traditionally banks and building societies have been reluctant to extend loans and mortgages to older borrowers.
Lending to anyone over 65 was viewed as risky and unprofitable, not to mention a potential PR disaster (the media would have a field-day if they they reposessed the home of a pensioner).
For a long time this meant that mortgages for older borrowers were rarer than glass hammers.
However, over the last 5 - 10 years banks have started to recognise that with people living and working for longer, lending to individuals later in life can be worthwhile. Consequently they're starting to loosen their lending criteria to satisfy the increasing demand.
This means that if you're an older borrower looking to take out a mortgage you do have options. Here's how to get approved:
If you're approaching the UK retirement age (currently 65) or have already retired and are looking to take out a mortgage, you will need to prove that you have sufficient income to repay your borrowing - this is in the same way any working applicant has to show they can afford their mortgage.
Mortgage providers are most likely to want to see evidence of regular income from pensions, investments and insurance policies when you apply.
If you're concerned that your income might not be sufficient you may be able to seal the deal by finding a guarantor. However, they will need to agree to cover your repayments if you become unable to do so and show that they could afford to do this on top of their exisitng financial commitments.
Before you begin the hunt you should set out exactly what you need from your mortgage not least because applying for deals that meet your needs and requirements will increase your chances of getting approved.
To start with you need to establish how much you need to borrow and what loan-to-value (% LTV) you'll require. Unless you have other funds that you plan to use as a deposit this is likely to be based upon the amount of equity you have in your home.
You'll also need to give some thought to the type of mortgage deal you are looking for. For instance, if you want the security of a fixed monthly repayment over a set period then a fixed rate mortgage is likely to best suit. Alternatively, if you want more flexibility then a flexible tracker mortgage or an offset mortgage may be a better fit.
At this stage you should also consider how many years you will need to extend your mortgage over. The easiest way to work this out is to think about how much you can afford to repay each month and therefore how long it will take you to clear the loan in full.
Once you know what you want from your mortgage you can already exclude a large number of the deals on the market because they simply don't meet your needs.
Despite taking a more open stance towards older borrowers, most banks still place a maximum age limit on their mortgage deals; many also specify another age limit by which the mortgage must be repaid.
The upper age limit for new applicants is usually set somewhere between 65 and 70, although some mortgage deals may be available to people over 75.
Similarly many lenders will limit mortgage terms to ensure the money will be repaid in full by the time the borrower reaches somewhere between 70 and 85.
While it sounds relatively easy to exclude lenders that won't offer you a mortgage because of your age, or the age you will be when you finish repaying, things aren't quite that straight forward.
The difficulty is that many mortgage lenders don't openly state a maximum age as it's often dependent on your income too.
This means that while it's worth checking for a maximum age upfront, you'll most likely need to speak to lenders before you apply too.
You may think that the older lending market has been left un-tapped by the high-street lending market and you're not wholly wrong.
There are some mortgages available, mainly through mortgage brokers which are specifically designed for the older borrower.
These are well worth investigating although you are still likely to be subject to stringent affordability checks, need a large deposit and have to repay in full before you reach a set age.
If you need to borrow, own your current home and are struggling to find a mortgage, equity release may be a viable option but you should proceed with caution and make sure you do your research before committing.
Equity release mortgages differ from standard repayment mortgages in many ways and aren't suitable for everyone, however if you need to free up some cash from your home they could be an option worth investigating.
Here are the main types of equity release policies on offer to older homeowners:
One of the most common types of equity release mortgage is called a Roll Up Lifetime Mortgage. These release a cash lump sum from your property, and are repayable when you sell your home or pass away.
However, with a lifetime mortgage, the interest charged on your cash lump sum is added to your outstanding debt, slowly eating into how much of your home you actually own. This means the longer you live in your property the more you will have to pay back when you sell your home, and the less you'll have to leave for your family when you pass away.
A Home Reversion Plan is where you sell a percentage of your property in exchange for a single lump sum payment and the right to live in your property rent free.
Then, when you sell your home, you need to pay the lender the agreed percentage of the sale value of your property.
The downside of this type of arrangement is that you won't benefit fully if your property increases in value between the time you take out the mortgage and the time you sell your home.
This is because you've agreed to pay the lender a percentage of your property's sale value as opposed to a fixed amount.
A Home Income Plan is where you sell a share a your home and exchange the lump sum for an annuity, which will pay you an income for the rest of your life.
However, if you are looking for a mortgage because you need a lump sum a Home Income Plan is unlikely to meet your needs.
You can find more information about the pros and cons of equity release and whether they're a suitable option for your finances by reading our guide: What is Equity Release.
Before you make a final decision on a mortgage or equity release scheme you should consider speaking to a qualified independent financial advisor.
He or she will be able to review your current financial circumstances and, if applicable, your likely situation post retirement and suggest the best options to achieve your goals.
Plus, many mortgages for older people are only available through a qualified FCA mortgage broker, so you may find that there are other borrowing options that you'd otherwise have missed.
For help finding a mortgage broker read our guide: How to Interview Your Mortgage Broker Before They Start your Search, or if you're currently 65 or under and would like to speak to a FCA authorised broker in your area you can complete our mortgage enquiry form and one will be contact you.
I am 68 years old, we are looking for a remortgage. thank you
No problem Chris, glad it was useful :-)
Can I ask how this would impact on a young professional getting a joint mortgage with a 64 year old relative who is now retired but recieves a pension of 20-30 grand a year? If the 64 year old already has a property that is now paid off that they can put up as equity if anything goes wrong?
We are looking for a mortgage my husband is 66 has a regular income and I am 54 and working full time please can you help us
i own a flat with equity of £100,000 +. I would like to buy a smaller flat and rent out my my present flat. i am 75years old. can you help me?
i am 69 years old and my wife is 63. we are looking to move to a smaller bungalow and require a mortgage. we will have approx £66k after selling our current property. can you help
I am 60, and earn £30000 and have £20000 savings. I don't want to carry on renting what' s the chance of getting a mortgage over about 5 years?
This will depend on how much you want to borrow, when you plan to retire and your other financial commitments.
If you fill out our mortgage enquiry form an FSA qualified mortgage broker will get in touch to talk through your options: http://www.money.co.uk/mortgages/mortgage-enquiry.htm
I am 69 Working full time with à. Young family,my wife is35 Also working full time We have à Young family aged 11 and 5 ,i want to See of We could get à mortgage ,
It's difficult to say whether this will be possible without more details about your circumstances, if you pop your details into our mortgage enquiry form an FSA regulated advisor will get in touch to discuss your options.
Here's the link:
hubby and i have a mortgage of12,500 and a mortgage currant account of 36,500 we only have 14 months left befor i mortgage is finished but wont have cleared the currant account our present lenders wont extend owing to it taking us passed hubbys 70th birthday.we are currently 69and 64 both retired with an annual income of 29,000 our property is valued at 280,000 could we get a re-mortgage till hubby was75
This will depend on your other financial commitments and the nature of your income etc.
It's probably best to speak with and independent financial advisor who can look at your different options.
If you fill in your details online on the link below an FSA qualified advisor will get in touch with you. :-) Good luck!
currently renting a property at £850pcm, husband taking semi-retirement with a lump sum pension pay off of £75,000 will still be earning approx 25,000 a year what are our chances of getting a mortgage? hubby is 54 i am 53
I'm 59, earning £40,000 pa and seeking a small property, maybe £60-70,000. Would I be able to find a mortgage do you think?
am 60 years old and looking for a small mortgage
Iam 60 years old and in full time work my husband is on a pension and we now have an 11 year old dependant child living with us . I am looking to remortgage
I am 76 years old and wish to remortgage my 45K mortgage which will mature at the end of next year. I have an index linked University(USS) pension of 19k pa, plus index linked state pension of over 6.5 k per month, investments of some #35 k which I would prefer to keep for a rainy day. I Live comfortably,not extravagantly, within my means.I also have 2.5 years left of of a life insurance policy for which I pay some #125 per month. I would like to retain the mortgage in trust after my death for my three grandchildren aged10, 10, and 12 to help them with mortgage deposits in due course.
l am 73 and looking for a mortgage of £144 00 l am currently working can you give me any advise?
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