Our Guide to Mortgages for Older Borrowers Above the Normal Retirement Age
- mortgages for over 60s reflect the ageing nature of our population in general – there are currently 11.6 million people over the age of 65 and by the year 2034, it is estimated that this figure will rise to over 17 million;
- as a result, three years ago the average maximum age of any successful mortgage applicant was 67, whereas today that maximum is now 78;
- more people are working well beyond the State Pension age;
- lifestyle changes have resulted in more people divorcing in later life – and, therefore, looking to buy their own home;
- older people looking to downsize may also be looking for a new mortgage on a smaller property; or
- as a fixed rate or tracker mortgage comes to an end, homeowners might be looking to remortgage in search of a better deal.
Are mortgages for older borrowers readily available?
Mortgages for pensioners – or those approaching retirement – are not readily available. They are a specialist product, the demand for which is nevertheless being recognised by an increasing number of lenders.
Wariness on the part of lenders is hardly surprising in view of the increased risk in granting a mortgage for older borrowers – specifically the risks associated with ensuing that the borrower is able to keep up with repayments over the full term of the mortgage.
In their assessment of these affordability risks, lenders are bound by detailed Mortgage Market Review (MMR) rules published by the industry’s regulator, the Financial Conduct Authority (FCA).
I am an employed retiree. Can I get a mortgage?
Lenders may take greater comfort in granting mortgages for retired people who continue to work – provided that the nature of that work is relatively sedentary and not overly physical.
Any supplement in earnings in addition to your retirement income clearly provides a lender with a greater degree of confidence in the affordability of the mortgage for which you are applying.
Once again, this reflects mortgage lenders’ ability to adjust to times in which more and more pensioners continue in work – according to a report by the BBC on the 9th of May 2018, there are currently nearly 1.2 million over 65s in work (around 10% of that age group).
I am retired with a pension income. Can I get a mortgage?
Depending on the amount of your pension income, even if you choose not to continue to work, there are lenders prepared to advance a mortgage:
- if you have already retired; or
- if you are approaching retirement and will not have repaid the mortgage until after you have retired.
In such cases, some lenders may be prepared to grant mortgages that come to term as late as the borrower’s 75th birthday.
What older borrower mortgages can I get?
Provided you meet a lender’s affordability criteria mortgages for retired people are as varied and diverse as those for many other applicants.
Typically, the mortgage is likely to be offered on a fixed rate of interest, although many others offer interest rates that track changes in the Bank of England base rate – so-called tracker mortgages.
Offset, cashback, discount and stepped mortgages may also be suitable mortgages for pensioners.
Mortgages for older borrowers are available both on interest-only and standard repayment terms.
What does a mortgage lender consider for older borrowers?
Just as with any other applicant, any mortgage lender needs to consider your income (if you are retired, that is your pension income, plus any earnings from work), any other property you own and your savings and investments.
The minimum level of income for older mortgage borrowers is typically £20,000.
What proof of income will I need?
Any lender will ask for evidence of your income in retirement – to establish
that there is more than enough to cover your monthly mortgage repayments. Clearly, this is likely to be easier to provide if you have already retired and have your pension receipts to submit.
If you have yet to retire, you may need to ask your pension provider to confirm the essential information, such as:
- your anticipated retirement date;
- the current value of your pension pot; and
- your expected retirement income from that pension pot.
Any evidence of income from other investments – such as buy to let property, shares or savings – may be offered in further support of your application.
Is there an upper age limit for mortgages for older borrowers?
The upper age limit for older borrowers is typically 80 – but if you are older than this, here at Needing Advice we may still be able to offer our help and advice in making an application.
How much deposit is typically required for pensioner mortgages?
Typically, lenders are likely to require a minimum 40% deposit for mortgages for retired people – and, as with any mortgage application, of course, the bigger the deposit you have to offer the less you need to borrow and the greater the chances of your application being successful.
But there are circumstances in which some lenders may be prepared to consider a deposit of less than 40%.
Do you lend to retired expats?
No, applicants must be UK residents with the proposed security being their main residence. Mortgages are available on a residential basis only.
What is the difference between equity release loans and mortgages?
If your reason for applying for a retired mortgage or remortgage is to release equity in your current home, you might already have considered the option of equity release and the so-called lifetime mortgage which this typically involves.
Although a lifetime mortgage frees you from monthly mortgage repayments, however, the interest and repayment of capital continues to roll over until you die or until your home is sold when you move into long-term residential care – substantially reducing the value of any inheritance you might have planned to leave to your children or grandchildren.
With regular mortgages for retired people, however, you keep complete control over the borrowing, making repayments in accordance with the terms of your mortgage – retaining full equity in your home.
Whilst they may still be a specialist product, these days mortgages for retired people are by no means uncommon and, provided you meet some basic qualifications in terms of income (from your pension and any earnings) your choice of products is as wide as for many other applicants
Here at Needing Advice you may draw on our expertise and wide experience across the whole of the mortgage market – whatever your age.