Mortgages for Pensioners
If you’re a pensioner looking for a mortgage, you can get the right advice here.
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We get lots of enquiries from people who want to know “Can you get a mortgage when you’re retired?”
The short answer is yes, it is quite possible, and the advisors we work with are experts on finding mortgages for pensioners, even if they’ve been previously declined by a lender or have bad credit.
We have gathered all the key information you’ll need to know about mortgages for retired people in this guide, and you’ll find the following topics covered below…
- How can I get a mortgage if I’m a pensioner?
- Is there a maximum mortgage retirement age?
- Are there alternative mortgages for pensioners?
- What is the difference between releasing equity and equity release?
- How does a retirement mortgage differ?
- Other forms of later life lending
- Eligibility for the types of mortgages for older adults
- What is the limit for mortgage retirement age?
- How much can an older person borrow on a mortgage?
- Mortgage terms and age
- How do retirement mortgage lenders assess income?
- Mortgages for pensioners with bad credit
- Can you get a retirement mortgage on a unique property?
- Can you get a mortgage on a retirement apartment?
- What to do if you are declined for a retirement mortgage?
- Retirement mortgage FAQs
- Retirement only mortgage calculator
- Why you should speak to an expert in mortgages for older people
- Speak to an expert about retirement mortgages
How can I get a mortgage if I’m a pensioner?
Getting a mortgage as a pensioner isn’t all that different from getting a mortgage at any other time of life, with a few exceptions.
It all comes down to a few factors, including…
- Affordability – Can you afford the repayments?
- Deposit – How much deposit do you have?
- LTV – Is the loan to value acceptable to the lender?
- Credit rating – Are you considered low risk?
Before you approach a high street lender, you should get the right advice from one of the advisors we work with. They’re experts when it comes to finding mortgages for people who are retired – it won’t cost a penny and, unlike a lender’s broker, they won’t leave footprints on your credit rating.
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Is there a maximum mortgage retirement age?
There isn’t necessarily a maximum age for applying for a mortgage for an older person. However, most lenders have their own age limits that they use to cap eligibility on a mortgage and to decide the terms of the agreement.
For most lenders, this age is 75, however, there are some who specialise in mortgages for older people with a higher age limit of 85 and a few who will provide with no maximum age limit under the right circumstances ,and the expert advisors we work with know who they are.
Are there alternative mortgages for pensioners?
If you already own a property, then there are a number of options open to you which could include:
- Releasing equity
- Equity release
Getting a mortgage can be more difficult when you get closer to retirement, so speak to one of the advisors we work with. They can give you the right advice and, being whole of market, they can find a lender who is more likely to approve you and offer you a more favourable interest rate.
What is the difference between releasing equity and equity release?
It’s very easy to confuse the two terms, and a whole host of information online uses these same words to mean two very different things:
“Releasing equity“ purely describes the action of raising money against equity in a property, and can be done via a number of different ways that we’ll discuss in this guide (with equity release being one of them).
“Equity release” is the term for a “lifetime mortgage” – a special type of borrowing for someone over the age of 55, who essentially takes money from the property and has interest roll up over time without the need to make any monthly repayments.
For the purposes of this article, we will refer to equity release as lifetime mortgages, and use the term “releasing equity” to describe the process of raising capital in other ways.
As mentioned above, there are a few options for releasing equity with mortgages for pensioners in the UK.
Remortgaging a buy to let to release equity
This is relatively straightforward – if you have an existing home, you can remortgage it to raise capital, you repay the current mortgage (if there is one) and borrow the extra which gets paid into your account.
Say your property is worth £200k, you owe £50k, and want to borrow £75k – You’d take a new mortgage for £125k with a new lender and settle the existing mortgage.
Buy to let further advance
This is where your current lender lends more money on top of your mortgage, usually as a second mortgage product with rates available at the time of applying. On completion they just put the finds into your account! The application can be a little more straightforward as there is usually no need to engage in any legal processes, but, can be more expensive depending on the rates available elsewhere at the time.
Buy to let secured loans
This is where you leave your current mortgage as it is and take a loan as a second charge on top of your mortgage (the first charge), with a new lender. These can be an excellent way of releasing equity when you either don’t want to change your current mortgage … or can’t.
Home reversion plan
If you choose a home reversion scheme, you’ll be selling all or part of your property at less than its market value in return for a tax-free lump sum, a regular income, or both. You are able to remain in your home as a tenant, paying no rent. This is no longer popular as, unlike equity release or lifetime mortgages, you don’t actually own your home (or part thereof) and could lose it under certain circumstances.
Retirement mortgages for retired people
A retirement mortgage, also called a lifetime mortgage, is essentially an equity release mortgage. It allows you to release money tied up in equity and, if you choose, you don’t need to make any repayments. The mortgage lasts until you die, or go into long-term care. Unlike Home Reversion schemes, you retain ownership of your home.
Because you are not making any repayments, the interest will be added to the loan instead and paid when the property is sold.
Hybrid equity release
Also called a part and part mortgage, these are an interest-only and repayment mortgage hybrid – a “middle ground”, combined solution. Instead of paying back the full loan plus interest over an agreed term as you would with a repayment plan, you only repay the interest owed and an agreed proportion of the mortgage each month.
This means that when the term comes to an end, you will still have some remaining capital to repay on the property.
Equity release mortgages for older borrowers
There are a range of different equity release mortgages on offer, including…
Lifetime mortgages for older people
This is a specific type of borrowing for someone over the age of 55, who essentially takes money from the property and has the interest rolled up over time without the need to make any monthly repayments.
The beauty of this mortgage is that, because you retain ownership of your property, you are able to live in your home until you either die or go into long-term care.
Retirement interest only mortgage
A retirement interest only lifetime mortgage is a type of loan secured against your home that allows you to release equity from your property. Like an interest only mortgage, you will be expected to pay the interest of the loan on a monthly basis, which ensures that the balance of the loan remains level.
The remaining balance is paid back when you die or move into long-term care from the sale of your property. If there is any money left over after paying your loan, this is inherited by your beneficiary.
Eligibility for the types of mortgages for older adults
Your eligibility for a retirement mortgage can vary depending on the type of mortgage you are applying for, the lender and many other factors.
If you are applying for a repayment mortgage, some lenders can view older borrowers as more risky as if you retire before you have finished paying off your loan, you won’t have a regular salary, meaning lenders will be unsure if you will still be able to afford the mortgage repayments.
However, if you are applying for loan that is secured against your home, such as equity release, your income is often less of a factor for lenders as you will not be expected to make repayments.
What do retirement lenders look at when assessing a mortgage application?
To ensure you are eligible and can afford to take out a retirement mortgage, lenders will carry out checks which may involve looking at:
|The type of mortgage you are applying for||Your lender will assess your application differently depending on whether you are applying for a traditional mortgage or equity release|
|Your health||This can affect the amount you can borrow if you are securing your retirement loan against your house|
|Your age||If you are a younger applicant, you may be able to borrow less money with certain retirement mortgage products such as equity release. However, if you are applying for a repayment mortgage, being younger and therefore further away from retirement could mean that lenders are more willing to lend to you.|
|Your income||If you are applying for a repayment mortgage rather than a loan secured against your property, your lender will want to be confident that you can afford your mortgage repayments|
|Property type||Lenders prefer standard construction properties as these are easier to resell if they have to repossess|
|Credit History||This could affect how lenders judge your ability to repay your mortgage or interest payments if you take out a retirement interest only mortgage|
How much can an older person borrow on a mortgage?
Again, this really depends on the type of mortgage you would like to apply for.
If you are applying for a standard repayment mortgage and you are yet to retire, some lenders will be happy to provide a 75% loan to value (LTV) ratio deal. Of course, the amount you can borrow is also affected by the value of the property you would like to mortgage, your income and your credit history.
If you want to apply for a mortgage whilst in retirement, you might find that lenders are less willing to loan you larger amounts, if at all. If you are a retired borrower, some lenders will only be willing to provide a lower LTV of 50%. This is because you are no longer working and may only receive a pension as your income, therefore lenders perceive this as a higher risk that you won’t be able to keep up with your mortgage repayments.
How do retirement mortgage lenders assess income?
A lender will want to be confident that your loan is affordable to you based on your income during retirement. Loans are generally capped at 3-4x income, although some lenders may consider loaning 5x your income, and in the right circumstances, a few may go as high as 10x.
Your lender may take your pension, benefits and any savings you have to determine what your income and whether it is viable to sustain repayments throughout the term of the mortgage.
If you’d like a quote for a retirement mortgage in the UK or want to know more about how lenders will assess your income, contact a specialist here.
Mortgages for pensioners with bad credit
Mortgages for borrowers who are older can be particularly difficult to obtain because lenders want to be confident that during retirement, you’ll be able to afford your mortgage repayments. So if you are a borrower who has bad credit on top of this, this can result in some lenders being less willing to lend to you.
If you have bad credit this could include:
⦁ Low credit score
⦁ Late payments
⦁ Mortgage arrears
⦁ Debt management plans
There are some lenders are more likely to accept some forms of bad credit, depending on the date and severity of the credit. This is another factor that can cause confusion amongst borrowers as it can be difficult to know how this will affect your mortgage application.
Are there any exceptions to this?
The exception to this is equity release, where the property is considered the collateral, so a credit check is seldom carried out.
Therefore, speaking with a mortgage advisor who has experience in mortgages for retired borrowers can be very helpful as they can search the market to put you in touch with lenders who are more likely to accept you.
As well as saving you the hassle of comparing various lenders, the mortgage brokers we work with can also provide you with a free credit check. Talk to an advisor here who specialises in mortgages for older clients.
For more information on how bad credit can affect a mortgage application, see our bad credit section here.
Can you get a retirement mortgage on a unique property?
Some construction types can be deemed as higher risk for a lender to loan on, as in the unfortunate event of repossession, a property in bad condition or one with a non-standard construction can be harder to sell.
Because of this, the construction type of your property can affect how much you’ll be able to borrow and in some cases with certain lenders, if you’ll be able to get a retirement mortgage at all.
Such buildings include:
⦁ Listed buildings
⦁ High rise flats
⦁ Ex local authority
⦁ Uninhabitable property
⦁ Non-standard construction
⦁ Flats with balcony access
⦁ Timber frame
Can you get a mortgage on a retirement apartment?
With some lenders it is possible to mortgage a retirement complex however, it is always important to read the terms and conditions of your agreement with the retirement house builders, as it may have certain restrictions on to whom and when it can be sold.
If there are restrictions, this can limit the number of lenders who are willing to approve your mortgage traditional mortgage and a more specialist finance lender would be required.
What to do if you are declined for a retirement mortgage?
If your bank refuses to provide a mortgage for you as an older borrower, it’s important that you don’t apply to another lender straight away. This is because each time you make an application for credit, this can show up on your credit report which lenders will look at to assess whether to approve you mortgage.
If you have recently applied for credit with multiple lenders, this can create the impression that you are desperate for funds.
This is why speaking to one of the mortgage advisors we work with is so important. They specialise in mortgages for the retired as well as other issues such as bad credit. Not only will they be be aware of the lenders that will be more likely to approve your retirement mortgage but they will also speak to the lender on your behalf.
Retirement mortgage FAQs
Below you will find the answers to some of the questions we’re most frequently asked about retirement mortgage products.
Can I get a mortgage as a retired teacher?
Yes, this could be possible depending on your personal circumstances and the lender, as each one will have different criteria that they use to decide whether they will approve your mortgage.
Some lenders provide a 75% loan to value (LTV) for teachers who are currently employed but will be in retirement during their mortgage term. There are also some lenders who will provide a lower LTV of 50% on mortgages for teachers who are already in retired.
Are there mortgages for retired police officers?
If you are a retired police officer or a police officer who wants a mortgage but will be in retirement during the lending period, it is possible to obtain a loan. In fact, there are specialist lenders who specifically provide mortgages for police officers who have retired.
The amount of loan you are approved for will vary depending on the type of mortgage you would like, the property type, your age, income and other factors. Because of this, it can be helpful to speak to a mortgage broker who has experience with finding lenders for older borrowers, specifically police officers.
Are there mortgage loans for retired military personnel?
There are UK mortgages for older military borrowers available and when lenders assess your application, they will carry out the usual affordability checks to determine whether they can approve your mortgage. This will involve looking at your pension and calculating whether you can afford your monthly mortgage payments.
Can you get a joint mortgage with retired parents?
Some lenders have age limits that they impose on their borrowers which could be capped at 75. Therefore if you want to take a joint mortgage out with a retired parent, you may find it difficult to find a lender. That’s not to say that it’s impossible though as the advisors we work with may be able to find you a specialist lender who is more lenient with age caps.
Furthermore, if you do take a joint mortgage out with a parent or for a parent, on the parent’s death, you would need to transfer the property and the outstanding mortgage to a sole ownership mortgage.
Are there mortgages for older first time buyers?
Yes, there are lenders who accept applications from older first time buyers. Some may have first time buyer mortgage age limits, so speak to a mortgage advisor before making an application and they can point you in the right direction of a lender who is more likely to accept you.
Retirement only mortgage calculator
Many homeowners use online mortgage calculators to get a better understanding of how much they can borrow when taking out a mortgage past retirement age.
However these tools won’t be able to give you an exact figure as every lender uses different criteria to calculate how much they are willing to lend to you.
An example of this is that some lenders are more lenient when considering applications for mortgages for older applicants with more exceptional circumstances i.e. bad credit or a non-standard property.
For a more accurate figure, it’s best to talk to an advisor who has specific experience and knowledge about mortgages for older buyers.
Why you should speak to an expert in mortgages for older people
It’s important to look at all of your options when considering a retirement mortgage as there may be other alternative loans that may be more affordable or better for you as a pensioner.
With access to over 100 mortgage specialists, including mortgage brokers for pensioners, we’re confident that we can find the right broker to help you find the best solution for you.
Here at OMA, we only work with expert advisors who are:
⦁ Whole of market brokers
⦁ OMA Accredited
⦁ LIBF Training course qualified
Speak to an expert about retirement mortgages
If you have questions and want to speak to an expert for the right advice, call Online Mortgage Advisor today on 0800 304 7880 or make an enquiry here.
Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances. – We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.