Getting a mortgage can be harder when you get closer to retirement. Here is a guide on how to look for one whether you want to move to another house or remortgage your current home.
What is the age limit for obtaining a mortgage?
There is no maximum age for applying for a mortgage. However, some lenders have their own age limits:
- Typically, a maximum age of 65 to 80, when you take out the mortgage.
- A maximum age of 70 to 85, when the mortgage term ends.
This suggests that even if you are below the maximum age for a mortgage, its term could be restricted by how old you are.
If you are 60, for example, and you want a mortgage that must be fully paid before the time that you reach 70, its term could be no longer than ten years.
You will receive a greater chance of being accepted if you possess a strong credit history and if your income is large enough to easily satisfy the mortgage repayments.
Why would you want a new mortgage?
- You avail a remortgage to get a better deal on your present home, especially if a fixed or tracker rate has expired
- To move to a house, for example, downsizing to a smaller property
Why it can be more difficult to obtain a mortgage when you are older
If you retire before you are done paying for the mortgage, you will not have a regular salary anymore. Your income will normally decrease, which means that lenders will be uncertain if you will still be able to afford the mortgage repayments.
This suggests that granting you a mortgage gets riskier as you get older. The Mortgage Market Review (MMR) rules must be followed by lenders, which means that they have to make sure that you can keep up with repayments over the full term of the mortgage.
After you retire, can you still get a mortgage?
Yes, some lenders will allow you to:
- Take out a mortgage that will be unpaid until after you have retired
- Take out a mortgage after you have retired
You will be required to prove that the income from your pension would be enough to satisfy the repayments on the mortgage. It is normally easier to do this if you are already retired because you can reveal how much you receive each month.
If you are not retired yet, you are required to request your pension provider to provide confirmation of your:
- Current pension pot value
- Expected retirement date
- Expected retirement income
You could also prove that you will receive an income from other investments like property or shares.
What mortgages can you avail?
Mortgages that take in older borrowers come with fixed interest rates and several offer rates that follow the Bank of England base rate.
There are also some cashback, offset, discount and stepped mortgages that are available too.
How to get a mortgage
- Talk to a mortgage broker because some mortgages for older borrowers are only available through them and they will examine your finances to find you a suitable deal
- Use comparisons to look for mortgages that may accept you if you are over 50 or over 60
- Look for specialist mortgages that are offered by lenders aimed at older borrowers, which you can usually find through mortgage brokers
- Check the maximum age that you can be when you apply
- Choose a mortgage that is best for your circumstances
Should you make use of equity release?
To withdraw a portion of the share of your home that you possess as a monthly income or as a lump sum, you could use an equity release mortgage. You could then make use of this to:
- Pay for a big purchase or an unexpected cost
- Pay off your mortgage
- Fund your retirement
The amount that is borrowed will be repaid when the house is sold, ordinarily, after the borrower has transferred into a care home or has passed away.