As the population ages, more people are looking to take out a mortgage in later life or retirement and more lenders are catering for this. Perhaps you want to live nearer your friends or family, or maybe you have your eye on a dream home to live out your golden years. Whatever your reason for taking out a mortgage in later life, you should have plenty of products available to you. However, the older you are the fewer options you’ll have and the more restricted your mortgage offers may be. In this guide, we’ll explain everything you need to know about getting a mortgage in later life and provide you with some alternative options to a traditional mortgage specifically designed for older homeowners.
Can I Get a Mortgage if I’m Over 50?
If you’re in your 50s or 60s and still in full-time work there should be plenty of traditional mortgages available to you. As you get older and approach retirement, the number of options may become more limited and the mortgage term will typically become shorter – meaning potentially less interest paid overall but higher monthly repayments. You’ll have to prove that you can cover the monthly repayments throughout the term of your mortgage.
Each lender sets their own criteria when it comes to age limits. Some base it on how old you are when you take out the mortgage, and this typically ranges from a maximum of 70 – 85 years of age. Others base it on how old you’ll be when the mortgage term ends, and this typically ranges from 75 – 95 years old.
If you’re already retired or semi-retired and your income won’t cover a traditional mortgage, then you may need to look into a Retirement Interest-only (RIO) Mortgage or a Lifetime Mortgage, which we’ll discuss below.
Can I Get a Mortgage Once I’m Retired?
If you’re retired, the same age limits apply as above for a traditional mortgage, but you may have fewer products available to you. There are lenders willing to accept retirees as long as you can prove that your retirement income will comfortably cover the monthly repayments. You could get a better choice of deals if you raise a large deposit, either with savings or with the equity in your current home. Lenders will also look at your credit history, so having a good credit score will help.
If your retirement income won’t cover a traditional mortgage, then you may need to look into a RIO Mortgage or a Lifetime Mortgage, which we’ll explain below.
How Can I Improve My Chances of Getting a Mortgage in Later Life?
Aside from meeting your lender’s age limit, you’ll also need to pass their affordability and credit checks. The exact criteria for all three of these factors varies between lenders, but here are a few general tips that could help to support your application.
Deposit
Try to raise as large a deposit as possible, either with savings, inheritance, or equity from your current home.
Affordability
Cut down on unnecessary outgoings, avoid taking out other loans if possible, and show proof of all your income streams (including your retirement income).
Credit Score
Try to improve your credit score by paying bills on time and using credit responsibly. Also, check for any mistakes in your credit report and have them corrected.
Joint Mortgage
Taking out a mortgage with your partner can be beneficial if they can add another income and they have good credit. However, you should consider how your partner would pay back the mortgage if you were to die, and vice versa.
What Other Options Do I Have Besides a Traditional Mortgage?
If you don’t qualify for a traditional mortgage, or if you’d rather not take on the financial burden of full monthly repayments, then you may want to take out a Retirement Interest-only Mortgage or a Lifetime Mortgage instead.
Retirement Interest-only (RIO) Mortgage
You have to be over 55 to be eligible for a RIO mortgage. These products allow you to take out a loan against your home and only pay the interest each month. They’re similar to a regular interest-only mortgage, but the loan is only paid back to the lender once you die or move into permanent care and the house is sold. This makes the affordability checks much more lenient, as you’ll only have to cover the interest each month and you won’t have to show the lender how you plan to repay the loan itself.
Lifetime Mortgage
You have to be over 55 to be eligible for a Lifetime Mortgage. This is a form of Equity Release that allows you to access up to 60% of the equity in a property as tax-free cash. Most people use Lifetime Mortgages to release equity from their current home, but you can also use it to buy a new property instead of a traditional mortgage. You don’t have to pay any monthly repayments, as the interest can roll up into the loan and will only be paid back to the lender once you die or move into permanent care and the house is sold. This means you won’t have to pass any affordability checks as the product is not dependant on your income.
The Bottom Line
If you’re over 50 or retired, you should still be able to get a traditional mortgage as long as you can afford the monthly repayments and you have a good credit history. The older you are the fewer options you’ll have available to you, and the age criteria varies widely from lender to lender. If you don’t qualify for a traditional mortgage, or if you’d rather not take on the financial commitment, you may be better off taking out a Retirement Interest-only Mortgage or a Lifetime Mortgage.
We’re whole of market mortgage advisors with over 30 years experience dealing with mortgages for the over 50s and retired. As the criteria for each lender varies so widely, it’s important you seek the right advice before applying to make sure you find a deal that suits your needs. We also have specialist advisors who deal with RIO Mortgages and Lifetime Mortgages, so no matter what your situation, we should be able to help you buy your dream home.
Book in for your FREE consultation to get going quickly – this can be done remotely via phone or video call if you’d prefer. We look forward to helping you!
