It can feel like a challenge to get a mortgage at any age, but what about when you are older?
What are your chances of getting a mortgage when you are over fifty or retired?
Lenders have recognised that people are living longer and are active for longer, too. With the retirement age in the UK creeping up, many of us are also working longer – or else retiring with private pensions in place. Council of Mortgage Lenders figures suggest that by 2030 there will be around 10 million more people in the UK aged over 65. Clearly it would be a mistake for lenders to ignore such a large potential market.
Age limits on mortgages
Age limits on mortgages are set by individual lenders and they usually work on two figures: the upper age limit for granting a mortgage (typically 65–80) and the age by which it must be repaid (typically 70–85). As you can see, there’s a lot of scope within those age ranges – if you’re 65, you could potentially have up to 20 years to pay off a loan.
Age does affect lending criteria. Expect to be offered a shorter-term mortgage than the usual 25 years, even if 25 years falls within the age ranges quoted. There might also be fewer deals available to choose from.
If you’re working and have ten years or less to go to retirement, as well as proof of earnings you’re likely to be asked to show that you have a pension plan.
If you have retired, lenders will still look for the kind of things they look for with any applicant, such as a good credit score, evidence you have managed your money well, and proof of income, such as a pension or income from investments. It will also help if you have a good amount of savings, and equity in your current home.
When it comes to mortgage decisions, they are based on perceived risk, so the more reassured a lender is that their money is in safe hands, the greater the chance they will grant a mortgage.
Retirement interest-only mortgage (RIO)
This is a product specifically aimed at older borrowers; it’s potentially more achievable as you only need to prove you can afford to repay the interest. The capital is paid off on sale of the property. It might be your choice to sell up and move, or it may happen on death or when moving into a care home. An alternative version requires you to pay the capital back after so many years or when you reach a particular age. Some options allow you to repay some of the capital too.
When it comes to how much you can borrow, with a straightforward interest-only deal, you might be able to borrow half the value of the property, whereas if you’re also paying back some of the capital, that might go up to 65%.
Should I pay off my mortgage or save for retirement?
If you are wondering where best to put your money, then you really need to take expert financial advice to work out which is the best option for you. There are many issues to take into account and it’s possible you will be better served by a specialist lender rather than a high street one.
Get in touch with Mortgagemove to find out which avenues are open to you. Our network of regular and specialist lenders means we’ll be able to find a deal that suits your circumstances.