You may be concerned that you’re ‘too old’ to secure a mortgage when you’re at retirement age, although it may not be as easy to find a mortgage as an older borrower it is definitely possible. With life expectancy and the retirement age increasing many lenders are more willing to lend to older borrowers and some lenders even have specific retirement schemes for those wishing to obtain a mortgage or to remortgage in their later years.
Age and affordability
Since a mortgage is a long-term loan, most older borrowers think age limits are a hurdle to get past when looking for a mortgage. You might ask the question what is the age limit for a mortgage? The truth is this varies from lender to lender, and many lenders no longer impose an age limit of any kind whilst others do. Nowadays, lenders aren’t so much denying you a mortgage because of your age but they want to ensure you can afford to keep up the payments for the next 15+ years. You will need to prove the income from your pension, investments, or insurance policies is more than enough to cover the mortgage repayments each month.
Looking to the future
If you’re not retired yet but you’re looking at your options or whether it’s viable to obtain a mortgage as an older borrower you will need to ask your pension provider to give confirmation of your expected retirement date and retirement income, and your current pension pot value. This is because any older borrower is more of a risk to a lender – they need to know that your income will be sufficient once you’ve retired.
What can I get and where do I look?
Although you’re more of a risk to a lender, you shouldn’t be declined as soon as you tell them your age. However, your age will have an impact on the term of the loan offered to you and the type of loan you’re offered. Many will have higher monthly repayments over a shorter period due to longevity issues, if you’re looking at a 20-year mortgage for example at the age of 65. Most mortgages that accept older borrowers come with fixed interest rates, are subjected to stricter affordability checks and require a bigger deposit. You will also find many high street lenders can be difficult to access, whilst some like Nationwide have a ‘Borrowing in retirement scheme’, many high street lenders do impose an age limit of around 75-80. However, high street lenders tend to be the ones who can offer the best available rates.
If you’ve approached a high street lender and been declined as an older borrower then do not be disheartened, like anything you need to shop around! You will find it’s worth looking at smaller building societies as they are generally more flexible and willing to lend to older borrowers, however their interest rates are often much higher. Whilst you’re shopping around speak to a mortgage broker. Some mortgages for older borrowers are only available through a mortgage broker so look for an adviser who can work the whole of the market and knows of specialized mortgages aimed at older borrowers.
Other options you may have
If you’re already a homeowner, then look at equity release or a lifetime mortgage. With equity release you can extract money from a share of your home as a lump sum or monthly income. Most people do this to pay off their mortgage, fund retirement or to help out kids and grandchildren. In this instance you can also look at a secured loan where your home will be used as collateral, and the duration and interest rate will all depend on both your personal circumstances and the free equity in your property.
With a lifetime mortgage the loan is secured against your home and the term is the borrowers remaining lifespan, or until they go into long-term care, or until the house is sold – so you can continue to live there whilst releasing funds from the value of your home. Equity release plans have much higher interest rates, but affordability requirements are less strict.
If you’re looking for a mortgage in retirement, it is important to remember that all lenders have varying policies and therefore don’t be disheartened if one lender declines you. It is possible to get a mortgage as a retiree and lots of people have secured one – you just need to be persistent. Of course, a loan of any kind is a big commitment so speak to family first and see what other options are available by seeking professional advice.
The above post is intended to be informative but does not constitute advice – financial, legal or otherwise. Any opinions given are the author’s own and do not necessarily reflect the views of SO Media.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.