Mortgage providers are becoming increasingly flexible about lending to older borrowers, which means that if you’re aged 65 or over, you should still be able to apply for a standard mortgage. There are also specialist mortgages aimed at older borrowers that could provide a different solution, enabling you to buy a new home or borrow against your existing property and free up some cash for your retirement.
As life expectancy continues to rise and more people work later in life, many lenders have increased their maximum age limit for getting a mortgage. Some lenders have no maximum age limit at all, while others require borrowers to have repaid the mortgage by the time they are between 70 and 95. Depending on your lender, this might mean a shorter loan term, say 10 or 15 years, rather than the standard 25 years, and your monthly repayments will be higher as a result. For this reason, the key to getting accepted for a repayment mortgage will be convincing your lender you can afford the repayments on a reduced pension income.
Other mortgages for pensioners include retirement interest-only mortgages, where you only pay off the interest each month, and the loan is repaid when you die or move into long-term care. There are also equity release schemes, such as lifetime mortgages, which don’t require any monthly repayments – instead, the loan plus interest is repaid when you die or move into care. Another option is a home reversion plan, which lets you sell all or part of your home in return for a lump sum or regular payments. We explain more about all of these below.
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There are several different mortgage options available for people over 65. The most appropriate one for you will depend on your attitude to risk and the reasons you want a mortgage. These could include moving home, paying for home improvements, or releasing some of the equity (value) in your home for additional income.
Below are four different mortgage options to consider.
Many banks and building societies offer standard residential mortgages to those aged 65 and over, which may be suitable if you want to move home or remortgage to a better deal. However, depending on the lender, you may need to settle for a shorter term of 10 to 15 years, compared to the standard 25 years. If that’s the case, your monthly repayments will be higher and you’ll need to show the lender that you can comfortably afford to pay off your mortgage within this shorter timeframe.
In the majority of cases, your mortgage will be offered on a repayment basis, which means you repay a portion of the capital (the amount borrowed), plus interest each month. As long as you meet all your monthly repayments, your entire loan will have been repaid by the end of the mortgage term.
A few lenders might also offer you a standard interest-only mortgage, whereby you only repay the interest each month. But this means you’ll need to pay off the capital in one go at the end of the mortgage term and your lender will ask to see evidence of how you plan to do this.
There are also specific interest-only mortgages for over 65-year-olds, known as retirement interest-only mortgages. These are designed to help older borrowers who don’t qualify for a standard residential mortgage. The loan is secured against your home.
Retirement interest-only mortgages work in a similar way to standard interest-only mortgages, as you only pay back the interest each month, not the loan. However, there are some key differences. The first is that the loan is usually only paid off when you die, move into long-term care or sell your home. The second is that you only have to prove you can afford the monthly interest repayments, not the amount borrowed.
You can use a retirement interest-only mortgage to pay off an existing mortgage or you can use it to provide extra funds in retirement. It’s also possible to move home with a retirement interest-only mortgage.
Some retirement interest-only mortgages are more flexible than others and allow you to pay off some of the capital each month, as well as the interest. This will help reduce the total amount owed, which means more of your property can be passed on to your loved ones.
Equity release schemes can be used to access some of the cash tied up in your home. You can then use this cash to help fund your retirement, pay for home improvements or even subsidise a trip around the world. There are two types of equity release. The first is a lifetime mortgage, which is available to those aged 55 and over and is a loan secured against the value of your property. The amount borrowed is then repaid, plus interest, when you move into long-term care or pass away. No repayments are required until then, but you can choose to pay off some of the interest each month, which will reduce the overall cost.
The second type of equity release is a home reversion plan. This allows you to sell all or part of your home below the market value rate in return for a lump sum or regular payments. You can remain living in your home until you die or move into care, as long as you maintain it.
Equity release can have major implications for tax, benefits and inheritance, so it’s essential to seek financial advice first.
If you’re looking to downsize or your home is no longer suitable for your needs, the Older People’s Shared Ownership scheme in England, which is available for those aged 55 and over, might be worth considering.
Through the scheme, you can buy any home that’s for a sale on a shared-ownership basis (part-rent/part-buy). You can buy a share of between 10% and 75% of the home’s value and pay rent on the remaining share. You can choose to buy more shares in your home as and when you can afford to, but unlike the standard shared ownership scheme, you can only buy up to 75% of the home. Once you own 75%, you won’t have to pay rent on the remaining share.
To qualify, your household must earn no more than £80,000 a year if you live outside London and no more than £90,000 if you live in London. You must also be unable to purchase a home suitable for your needs without assistance, and you should not already own a home - or you will need to sell any existing property owned before buying through the scheme.
The closer you get to retirement, the more nervous lenders become about your ability to keep up with your mortgage repayments. If you’ve already retired, or are retiring in the next couple of years, you’ll no longer have a regular salary which could increase the risk of missed mortgage payments. Even if you have a pension to fall back on, it can be difficult for lenders to assess how much income you’ll receive and as a result, they may be more hesitant about offering you a mortgage. There’s also an increased risk of ill health as you get older which means you may not live until the end of your mortgage term.
Those lenders that will offer you a mortgage may therefore reduce the mortgage term and interest rates could start to creep up to reflect the increased risk.
One of the best ways to increase your chances of acceptance is to ensure you have sufficient evidence to show your lender that you will be able to afford your monthly repayments for the term of your mortgage deal. This could be through payslips if you’re planning to work for a while longer, and/or pension forecasts or other income, such as investments or buy-to-let property.
Paying off any debts such as credit cards or loans will also help, as well as reducing your monthly outgoings where possible. Be sure to check your credit report too – you can do this for free via a credit reference agency such as Equifax, Experian or TransUnion. If you spot any mistakes, get them corrected as soon as possible.
Shopping around and comparing deals carefully will also work in your favour as some lenders are more flexible than others.
There are a number of mainstream banks and building societies that offer mortgages for those over the age of 65, but maximum age limits can vary. HSBC and Santander, for example, both offer mortgages that must be repaid by the time the borrower is 75, while Halifax extends this to 80. Leeds Building Society accepts mortgage applications from borrowers who could be as old as 85 at the end of the mortgage term, and Loughborough, Suffolk and Cambridge building societies, have no maximum age limit at all.
Most lenders will have a maximum age limit for mortgages, but this can vary between 70 and 95. A few lenders, such as Loughborough, Suffolk and Cambridge building societies, have no upper age limit at all.
Yes, you can. The key to getting accepted is to provide sufficient evidence that you can comfortably afford your mortgage repayments, whether this is through pension income or investments.
There are also specialist mortgages to consider, such as a retirement interest-only mortgage. These are designed for those aged 55 and over and work in a similar way to a standard interest-only mortgage, meaning you only pay back the interest each month, not the loan. The loan is repaid when you move into long term care, sell the home or pass away.
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