Latest mortgage statistics show that many people are choosing to buy their first home later in life. This is largely thanks to higher property prices and a higher general cost of living, which now consumes more of the average income than it did for previous generations.
The good news is, the UK mortgage market is gradually adapting to this, and the UK’s ageing population, with some lenders extending the maximum age limit by which a mortgage must be repaid.
These days there are plenty of mortgages for older borrowers available, and we explore the options for those aged over 55.
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The typical maximum age limit on mortgage products is between 70 and 95, depending on the lender. Although not all lenders have a maximum age on their mortgages, with a few, such as Loughborough, Suffolk and Cambridge building societies, having no upper age limit.
Rather than having a maximum age at application, most lenders maximum age limit refers to the age by which the borrower must have repaid their mortgage. NatWest, for example, sets a maximum age of 70, HSBC 75, and Halifax are happy for mortgages to be repaid by the time the borrower is 80 years old.
In some cases, lenders have both a maximum age limit at the time of application and a maximum age by which the loan must be repaid. Leeds Building Society, for example, accepts mortgage applications from borrowers who could be as old as 85 at the end of their mortgage term, but they must be 80 years or younger at the time of application.
Yes, you can get a mortgage after retirement. In fact, retirement interest-only (RIO) mortgages are intended specifically for retirees. Standard mortgages can be a little more difficult to secure, as lenders want to be sure that you continue to be able to afford your monthly repayments in retirement.
If you have a reliable income, being retired certainly won’t mean you are immediately refused a mortgage, however. You'll just need to show evidence of sufficient income from your pension or other sources, such as investments, shares or buy-to-let property.
As you get closer to retirement age, mortgage lenders grow concerned that your income post-retirement will be lower than it was when you worked. For example, if you're looking to get a 30-year mortgage at age 55, you'll need to prove that your income will remain stable until you're 85.
Even if your income isn’t impacted by retirement, your affordability could be, depending on your age and the maximum age limit of the lender. For example, if a lender will only give you a maximum term of 15 years to repay your mortgage, the repayments will be much more costly than if you were able to spread them over 25 years.
One way to avoid affordability issues is to use the equity in your existing home as a deposit when you buy a new home, and to downsize to a more affordable property, so that you won’t need to borrow as much.
There are a number of ways that you can make getting a standard residential mortgage more achievable as an older borrower.
Have evidence of state pension payments and/or any other retirement income
Have evidence of other sources of income
Seek advice from a mortgage broker
Reduce your debt-to-income ratio by paying off loans, credit cards and your existing mortgage, if you have one
Ask a younger relative to act as a guarantor, some lenders will consider this
Downsize to a smaller and/or more affordable property
However, if these tips don't suit your current circumstances, there are plenty of mortgage options available to the over 55s.
Retirement interest-only mortgages are aimed at those aged 55 and over, although some lenders accept applicants at 50.
They work in a similar way to a standard interest-only mortgage – you only pay back the interest, not the loan, each month. The loan is usually repaid when you pass away, move into long term care or sell your home.
Older People’s Shared Ownership schemes are available exclusively to those aged 55 and over. You can buy a share of a property, between 10% and 75%, and pay rent to the housing association that owns the remaining portion.
Once you own 75%, you'll no longer be liable to pay any further rent - but you won't fully own the property, as the housing association retain the remaining 25% share.
Equity release products are another mortgage option available to older borrowers.
While they may be a viable alternative for some people, it's essential to take advice from an Equity Release Council (ERC) certified broker, as this form of borrowing is not right for everyone:
A lifetime mortgage is available to those aged 55 and above. This involves borrowing a sum of money against the value of your home, which is then repaid either once you've passed away, or moved into long term care.
There is no obligation to make any repayments over the duration of the loan, however, the interest is added to the loan if you chose not to. This leads to compounded interest, which can reduce the overall value of your estate for inheritance purposes.
A home reversion plan is a less common type of equity release product, and only a few lenders now offer them.
They enable you to sell all or part of your home to a home reversion provider, who buys it below market value in return for providing you with a lump sum or regular payments. They sell your home to repay this loan when you pass away or move into care, however, you can live in your home rent-free for the rest of your life.
Lifetime mortgages are available to those over 55 and home reversion plans to those over 60, however, in both cases, it's generally easier to qualify the older you are.
If you have a small amount outstanding on your existing mortgage, you may still be eligible for equity release, but you'll need to pay off the outstanding mortgage with some of the equity that's released.
Many lenders will be happy to offer you a mortgage if you’re over 50, with a standard 25-year term and competitive interest rates often available. In some cases, you may be asked to show evidence of your predicted retirement income.
Make sure you can comfortably afford the mortgage repayments and don’t overstretch yourself – do you want to be (and will you be able to) still be repaying your mortgage in your 70s?
At the age of 60 your options are slightly more limited. Mortgages for over 60s tend to offer slightly shorter mortgage terms of 10-20 years.
It’s also more likely that you’ll need to provide evidence that your pension, annuities or other investments can meet your mortgage repayments once you retire.
At 60 you could also consider either of the equity release options, or a retirement interest-only mortgage, however, so there are plenty of options available to you.
Getting a mortgage in your 70s is certainly possible, but you'll find your options are more limited with high street lenders - and at 75 the pool will reduce even further. It’s also worth considering that affordability will be more difficult at this age, as your term length is likely to be a maximum of 15 years, unless your lender has no upper age limit.
Building societies and niche lenders sometimes allow borrowers to repay their mortgage up to the age of 95 and above. It may also be possible to apply for a guarantor mortgage if you can a younger guarantor is willing to meet the repayments should you become unable to - perhaps a child or grandchild.
If you’re unable to get a mortgage, you could look at secure loans, or possibly equity release, depending on your circumstances. Remember to always take expert financial advice, no matter which route you choose.
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