Securing a mortgage can be more challenging if you are close to retirement or have already started drawing your pension. Here’s how to find a retirement mortgage whether you want to move house or remortgage your current home.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
It's commonly believed that mortgages for older borrowers are harder to get. While that can be true, it doesn’t mean you won’t be able to find a loan. Here’s everything you need to consider, including specialist providers, mortgages for people over 70 and how to get the best deal.
There’s no legal limit on the maximum age you can be when applying for a mortgage. However, many lenders impose their own rules.
Typical mortgage age limits are:
under 65 to 80 – to take out a mortgage
under 70 to 95 – when the mortgage term ends.
So even if you are below the maximum age when you get a mortgage, you might have to opt for a shorter term. For instance, if you get a mortgage at 65, lenders might say it can only last 15 or 20 years, meaning monthly repayments would be higher, though, on the upside, you would pay less interest.
When lenders decide whether to give you a mortgage, they must consider affordability, and they need to follow the Mortgage Market Review (MMR) rules, which means they must make sure you can keep up with repayments over the full term of the mortgage.
The older you are, the more likely you are to retire during your mortgage’s term – that is, before you’ve paid everything you owe. Once you retire, you will no longer have a regular salary, and your income is likely to decrease even if you have a pension. Lenders may be unsure about whether you will still be able to afford the mortgage repayments at that point. They also have to consider the possibility that you could become unwell or die before the mortgage is repaid.
Offering you a mortgage is riskier as you get older, so to compensate, lenders may impose maximum age limits or say you need to take a mortgage over a shorter term. They may also ask about your retirement plans and your likely pension income through retirement.
Yes, some lenders will let you take out a mortgage
after you have retired
that you will not pay off until after you have retired
You will need to prove that the income from your pension would be more than enough to cover the repayments. It is sometimes easier to do this if you are already retired because you can show how much you are getting each month.
If you have not retired yet, you will need to ask your pension provider to confirm your:
planned retirement age
current pension pot value
predicted pension pot value
expected retirement income
You can also provide proof of any expected income from other sources such as ISAs, investments or property.
Getting a mortgage once you’re aged over 50 should be relatively straightforward. Most lenders offer standard terms for people in this bracket. That means you should be able to get a mortgage for 25 years at a competitive interest rate. You might be asked to show your predicted pension income, especially if you’ll still be paying the loan off once you retire. Think about what is realistic, and whether you still want to be making payments in your 70s. Borrowing over a shorter term could mean you’re mortgage-free more quickly.
Plenty of lenders offer mortgages for people over 60, but your options are likely to be more limited. For instance, many lenders offer shorter terms, so you need to repay the loan over 10 or 20 years.
You have a better chance of being accepted if you have a strong credit history and if your income is high enough to cover the mortgage repayments easily. You’ll almost certainly be asked for proof that your pension payments will be enough to meet your mortgage repayments.
Once you hit 70, your options for getting a mortgage become substantially more limited. Fewer lenders are prepared to offer you a loan, and they are likely to offer shorter terms and higher interest rates.
Specialist lenders could be an option for mortgages for people over 70, and it’s also worth investigating what building societies can offer. You could also consider other options, such as a guarantor mortgage.
As long as you meet the lender’s eligibility requirements, you should be able to get a traditional repayment mortgage. This could be a fixed-rate mortgage or a variable-rate mortgage such as a tracker. You borrow a set amount of money and have to pay it back over a pre-agreed term with interest. This could be a new mortgage because you’ve moved house or bought your first home, or it could be a remortgage to get a better deal. As described above, if you’re under 60, you should be able to access the same rates and deals that a younger borrower can.
However, there are also special kinds of mortgages that are designed specifically for older borrowers.
A retirement interest-only mortgage is the same as a standard interest-only mortgage, except that the loan is paid off when you die, move into long term care or sell your home.
Lenders will check that you can afford the monthly interest repayments, and you’ll need to make sure there is a plan to pay off the rest later. For instance, your loved ones may need to sell the house once you’ve passed away.
You could use an equity release mortgage to withdraw equity in a home you own as a lump sum or monthly income. You could then use this to:
pay off your existing mortgage
pay for a major purchase or unexpected cost
fund your retirement
The amount borrowed will be repaid when the house is sold, usually when you move into a care home or pass away. However, it can be an expensive way to borrow.
Check that this type of mortgage will meet your needs if you want to move or sell your home or you want your family to inherit it. If you are in any doubt, seek independent advice. Your home may be repossessed if you do not keep up repayments on your mortgage.
A lifetime mortgage is the most common form of equity release. It allows you to free up money tied up in your home so you can spend it now. You still own your home, can continue to live in it, and you may be able to keep some of the equity to leave as an inheritance.
Interest on your mortgage can be paid monthly or deferred to be paid off when you die, go into care, or sell the house. At this point, the mortgage will be paid off in full – along with any interest that has built up. If there is any money left, it will go to any beneficiaries named in your will (it’s important to make a will if you take out a mortgage).
Most lifetime mortgages include a no-negative-equity guarantee, meaning that no debt will be passed on even if the amount realised from the sale of your house isn’t enough to cover the amount outstanding on the mortgage, including any owed interest. This type of guarantee can be helpful if property prices fall or interest payments have built to a high level.
A home reversion plan is another form of equity release. Here, you sell all or part of your home in return for a cash lump sum, a regular income or both. You can then stay in your home as a tenant, rent-free, and when your home is eventually sold, the home reversion company gets their share of the proceeds of the sale.
It’s important to note that you will usually only get between 20% and 60% of the market value of your home, depending on your age or state of health, so it's worth seeking independent financial advice first.
Depending on your age, you should be able to get a mortgage with a wide range of providers. For instance, most lenders will consider applicants under 60 for the same deals they offer younger borrowers. If you are older than that, you may find that you have a more limited range of offers and only have access to shorter-term mortgages or higher interest rates.
You can use our comparisons to find mortgages that may accept you if you are over 50 or over 60. You might also want to consider specialist lenders with products aimed specifically at older borrowers. A broker can help you find the right lender for your circumstances and may get you a better deal.
Lenders are looking for evidence that you will be able to make the repayments for the entire term of your mortgage. Because you are a riskier bet, it’s important to demonstrate that you are a responsible borrower with a stable income.
Start by making sure your credit rating is as high as possible. Make sure you are on the electoral roll and that all your information is correct. The better your score, the better deals you can get.
If you’re likely to retire during your retirement, gather evidence to show you will have enough income to pay what you owe. This could be proof of the state pension you’ll receive and any defined benefit or defined contribution pensions.
Having a bigger deposit helps, too, as you’ll owe less overall. Save up as much as you can to be an attractive proposition to lenders. Paying off any other debts before you apply can also help.
Speaking with a broker and doing your research can also increase your likelihood of getting a mortgage. Consider all the providers out there, and make sure they are appropriate before applying. If you get rejected, it can cause your credit score to drop, so you want to give yourself the best chance of getting accepted the first time.
Salman is our personal finance editor with over 10 years’ experience as a journalist. He has previously written for Finder and regularly provides his expert view on financial and consumer spending issues for local and national press.