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By Pete Mugleston | Mortgage Advisor

Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 2nd March 2021*

Buy-to-let (BTL) mortgages aren’t only for people who want to invest in property as part of a long-term plan or to generate funds for their retirement. They’re also for those who are already retired as a way to increase the income they have to live on. 

We’ve written this brief guide to buy-to-let mortgages for people who have already retired or planning to invest once they’ve retired. Here, you can find out more about the age restrictions and other factors which may influence your ability to get a buy-to-let mortgage when you’re no longer working.

Read the whole article for a complete overview or use the links to jump to the information you want:

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Why invest in a buy-to-let mortgage after retirement?

Put simply, property can be a sound investment, depending on the mortgage you’re able to secure, your interest rate, the potential rental income and other fees that come with owning a buy-to-let property. If the market is strong and you get the right professional advice, there’s a good chance you could see a return on your investment.

Since the new pension rules were put into place by the UK Government, over 65s have had more flexibility over what they can do with their retirement savings. Considering the rise in property prices over recent years, it’s no surprise that older people are keen to use some of their pension funds to invest in the property market.

Buy-to-let properties are a popular choice for pensioners, but if you don’t have enough in your pension pot to purchase another property outright, you may need to look at getting a mortgage to cover the remaining sum.

How is affordability calculated for older borrowers?

This won’t be any different for an older borrower compared to someone younger. When it comes to but-to-let mortgages, repayments aren’t usually covered by pension savings or work salary as with residentials. Instead, affordability will usually be determined by the expected rental income from tenants (alongside the usual factors such as loan to value (LTV) and other individual circumstances). That said, some lenders might be willing to take personal income into account if necessary, and others will insist that you need to be earning a certain amount to qualify for a BTL mortgage (around £25,000 is standard).

Do buy-to-let mortgages have age limits?

Theoretically, age shouldn’t be as big a concern for buy-to-let properties as it may be for borrowers buying a residential property. Most mortgage lenders will consider applications from anyone over 21, but many borrowers face upper age limits. Generally speaking, the younger you are the less risk you pose to mortgage lenders and the wider choice of lenders you will have to choose from. Although whether you’re eligible with all of them will depend greatly on other individual circumstances.

  • 65 years old: The majority of mortgage providers won’t see your age as an issue. Assuming you meet their other eligibility requirements and your projected rental income is high enough, most lenders will consider your application for a buy-to-let mortgage.
  • 70 years old: There are mortgage lenders willing to arrange mortgages for 70-year-old borrowers, but keep in mind that some providers set an age limit of 75. The older you are, the higher lenders will deem the risk that your income may not be able to meet the repayments during the full mortgage term. 
  • 80 years old: You’re more likely to encounter lender age restrictions in your 80s. Many lenders will not even consider offering a buy-to-let mortgage to anyone who is 85 or over. That isn’t to say a favourable deal is impossible to come by. It just means you will need to use a whole-of-market deal to find the right mortgage for you.

There are a handful of lenders out there who won’t insist you meet their upper BTL age limits, as long as they are confident you’ll be able to repay the mortgage during your retirement.

Whatever your age, or circumstances, there are specialist buy-to-let lenders who have no age limits at all, and the expert advisors we work with know exactly who they are. Speak to one of the whole-of-market brokers we work with and let them help you find the best deal for you.

Why does age impact eligibility?

Because some lenders will be concerned that you might not be able to make your mortgage payments during your retirement years, especially if you won’t be working and your projected pension income is below a certain amount. Historically, lenders have been more sceptical about offering older people any type of mortgage, especially if they are entering retirement with outstanding debt, such as repayments on their primary home.

Factors such as health and life expectancy also play a role, and many lenders have caps on the maximum age of borrowers they are willing to lend to. Some lenders will limit the term length if a borrower is over a certain age too, so that also needs to be taken into account.

Other factors impacting buy-to-let mortgage eligibility for older people

As well as age and income, there are a few other factors lenders will consider when they assess buy-to-let mortgage applications for pensioners:

Bad credit

Every lender has different criteria and requirements when it comes to bad credit. However, when it comes to buy-to-let mortgage, having adverse credit on your file may be less of an issue (depending on the severity), because repayments are usually on an interest-only basis and will be covered by the rental income.

Flexible adverse credit mortgage providers often base their lending decision on the severity of the credit issue and how long it has been on your file. 

For more information, check out our dedicated page on bad credit buy-to-let mortgages.

Large loans

While some providers cap the amount they’re willing to lend you, particular lenders may be happy to authorise a large mortgage. Lenders will take your age, health and the overall investment strategy into consideration and will look for an investment that will yield a good return over a short period.

Property type

As with all non-standard property types (e.g. thatched roof, timber frame etc), lenders can be more cautious because they deem such constructions as higher risk and, potentially, less sellable when the mortgage term is over. 

Again, every lender has their own criteria and some may still consider lending to you depending on the perceived risk of the property in question.

You can find more information about what is considered non-standard construction and how lenders typically treat these properties on our non-standard construction mortgages page.

Speak to a buy-to-let retirement expert

If you’re looking for a buy-to-let mortgage in your later years, it’s a good idea to seek professional advice first. While it’s possible to get a favourable deal in your retirement, the risk of being turned away or hit with high interest rates is far greater if you go it alone and approach a buy-to-let mortgage lender directly.

Speaking to a buy-to-let mortgage broker who specialises in older customers and fully understands their needs could be the difference between getting the finance you need and potential disappointment. The right broker can significantly improve your chances of a successful outcome, and we’ve made it our mission to make sure people find their ideal mortgage advisor.

We offer a free broker-matching service that will assess your needs and circumstances and pair you with an expert who has the right knowledge and experience to help you achieve your goals. Call 0808 189 2301 or make an enquiry and we’ll set up a free, no-obligation chat between you and a retirement buy-to-let mortgage broker today.

 

Updated: 2nd March 2021
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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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