Latest mortgage statistics show that many people are buying their first home much later in life, largely thanks to higher property prices and a higher general cost of living compared to the average income.
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.
This guide explains how to increase your chances of getting a mortgage as an older borrower, and explores the options available to the over 55s.
The maximum age limit for getting a mortgage varies depending on the lender, but typically ranges between 70 and 95. Although a few lenders, such as Loughborough, Suffolk and Cambridge building societies, have no upper age limit.
Most lenders have a maximum age limit by which borrowers must repay 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.
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 mortgages are intended specifically for retirees. Standard mortgages can be a little more difficult to secure if you are retired, however, so long as you have a reliable income, being retired certainly won’t mean you are immediately refused a mortgage.
Lenders want to be sure you can continue to afford your monthly repayments, so will ask to see evidence of sufficient pension income or income from other income sources, such as investments, shares or buy-to-let property.
As you get older and closer to retirement, mortgage lenders are concerned that your income will be lower than it is for the average applicant in full time employment. So, for example, if you plan to retire in 18 years, you might find it harder to get accepted for a 25-year deal.
Even if your income isn’t impacted by retirement, your affordability still may be, however, this will depend on your age, and the maximum age limit of the lender. For example, if you can only get a maximum term length of 15 years, 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. However, if it’s not right for your current circumstances, there are plenty of other options available to the over 55s.
Here are some things to consider before applying:
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
If your unable to meet the criteria of a standard residential mortgage, there are several other options for you to consider:
Retirement interest-only mortgages are aimed at those aged 55 and over and 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 the home.
Older People’s Shared Ownership schemes are available for those aged 55 and over. You can buy a share of your home, between 10% and 75%, and pay rent to the housing association that owns the remaining portion. Once you own 75%, you will no longer be liable to pay any rent for the remaining 25% share.
There are two equity release products available to older borrowers, and these may be a viable alternative to a mortgage for some people, however, it is essential to take advice from a qualified broker who is a member of the Equity Release Council (ERC), 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 have 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, 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. It enables you to sell all or part of your home to a home reversion provider below market value, in return for a lump sum or regular payments. They will sell your home on 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 is generally easier to qualify, the older you are.
If you have a small amount outstanding on your existing mortgage remaining on your property, you may still be eligible for equity release, but you will need to pay off the outstanding mortgage with some of the equity 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 be) still repaying your mortgage in your 70s?
At the age of 60 your options will be 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 the income from your pension, annuities or other investments can meet your mortgage repayments.
At 60 you could 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 will find your options are more limited on the high street. There are fewer mainstream lenders willing to offer mortgages over 70 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 with most lenders.
However, some lenders are more flexible than others, building societies and niche lenders sometimes allow borrowers to repay their mortgage up to the age of 95 and some have no upper age limit at all. It may also be possible to apply for a guarantor mortgage if you can provide a guarantor who would be willing to meet the repayments should you be unable to.
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.