As you get older, it becomes increasingly more challenging to get a mortgage.
From the mortgage lender’s point of view, the reasoning may be understandable. Mortgages are designed to be repayable over many years’ – 20, 25 or even 30 years, let’s say. For anyone taking on a mortgage when they are aged 60 or over, therefore, they are likely to be well over 80 years old before the mortgage reaches full term.
Along with all the usual calculations based on your current income, expenditure, credit record, and loan to value (LTV) ratios, therefore, any lender may also need to start looking at your income during retirement when determining the affordability of any loan – in other words, what your pension is likely to be worth and the affordability of the mortgage repayments.
Against those difficulties and the natural wariness of mortgage lenders, however, it must also be recognised that the population is ageing and that we are all living longer lives. The Guardian newspaper on the 25th of September 2019, for instance, pointed out that the 13,170 centenarians alive today is a figure 73% bigger than in 2002 – the number of people in the UK older than 105 has doubled since 2002.
Looking to the future, in a posting on the 16th of April 2019 the Money Saving Expert reported that the number of over-65 year-olds today is around 12 million but is forecast to top 17 million by the year 2034.
So, can I get an over 60s mortgage?
So, what are the prospects of mortgages for older borrowers? Can you get an over 60 mortgage?
In a detailed response to that question, the Building Societies Association (BSA) has published a guide entitled “Can I get a mortgage at my age?” For the reasons we have already outlined, the BSA guide recognises that mortgages for older borrowers are likely to be more difficult to get.
Nevertheless, the mortgage industry also lives in the real world in which people are living longer, remaining economically active for longer, and eager to continue to manage their financial affairs for longer, too.
As a result there are a growing number of mortgage options among mortgage lenders who have removed the maximum age limit and/or have increased their upper lending limits to people over the age of 80, or even 85.
What do I need to consider when applying for a mortgage when over 60?
Whatever your age when you apply for a mortgage, the lender has one thing in mind, and that is the recovery, with interest, of the advanced loan. The principal measure of that goal is the affordability of the loan to the borrower.
When you are over 60, any mortgage lender is going to be just as interested in your income. The added dimension, of course, is your income during retirement.
Suppose you have delayed your retirement date because you need to keep working to maintain your income. In that case, the lender will be concerned about your physical ability to continue working and earning. If retirement is still some time away, it may also be difficult to estimate your income upon your retirement.
If you have already retired, of course, the retirement income from your pension and other savings or investments is likely to be well established.
The Nationwide Building Society reminds the over 65s that their credit history is also going to be a factor in determining whether a mortgage application is successful – just as it would for any other applicant.
The stress tests applied to applications from retired people may also differ slightly from those for other applicants. The older you are, for example, the more likely the lender will want to know whether your spouse or other beneficiaries of your estate will be capable of maintaining the mortgage repayments if you die before the end of the mortgage term.
It is also important you are confident you will be able to afford the monthly mortgage payments as well as are paying what you consider to be an attractive mortgage interest rate over the repayment term. Your mortgage broker will be able to assist you with this.
What are other borrowing options for over 60s?
In addition to checking out the feasibility of a regular or lifetime mortgage, you might also want to consider other means access to finance once you reach 60 years of age:
Retirement interest-only (ROI) mortgages
- this is another type of financing option, reserved for over-55 homeowners who want to release some equity from their house or find the funds to repay the capital on a previous interest-only mortgage without having to downsize or make an equity release arrangement;
Equity release mortgage
- equity release also allows you to unlock the capital tied up in your home and you don’t even have to immediately repay the interest on what is a lifetime mortgage – interest accumulates until your home is sold upon your death or when you move into long-term care when the capital advance is also repaid;
- if you are looking to reduce the cost of monthly mortgage repayments, you might also want to consider an offset mortgage, where the balance in an associated savings account offsets your outstanding mortgage balance, thereby reducing the interest payable.
For further advice on applying for a mortgage once you reach or are near retirement – or indeed for guidance on alternative sources of borrowing and selecting the most appropriate mortgage product for you – you might want to consult your independent mortgage adviser.