Mortgages for Pensioners and Older Borrowers
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 about mortgages for pensioners, specifically questions like “Can you get a mortgage when you’re retired?” and “how can a mortgage help me beyond retirement age?”
To answer these questions and more, 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 retirement mortgage age?
- Are there alternative mortgages for pensioners?
- What is the difference between releasing equity and equity release?
- Eligibility for the types of mortgages for older adults
- How much can an older person borrow on a mortgage?
- How do retirement mortgage lenders assess income?
- 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
Can the elderly get a mortgage?
Yes, this may be possible if you meet all (or at least most) of a mortgage lender’s eligibility requirements.
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 during your retirement?
- Deposit – How much deposit do you have?
- 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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Retirement mortgages: Is there a maximum 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 70, 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 alternatives to mortgages for pensioners?
If you already own a property, then there are a number of options open to you which could include:
- Remortgaging to release capital tied up in your property
- Equity release mortgages
- Retirement interest only (RIO)
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.
As mentioned above, there are a few options for releasing equity with mortgages for pensioners in the UK, such as remortgaging to unlock a cash lump sum. You can read more about remortgaging in retirement in our handy guide here.
Alternatives you could potentially consider include…
Home reversion plans
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.
Equity release mortgages for older borrowers
There are a range of different equity release mortgages on offer – equity release is a standalone product category in its own right and not to be confused with releasing equity (i.e. unlocking the capital you’ve build up in your home, via a remortgage)
Equity release mortgages include…
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.
The loan to value available will increase with the applicant’s age. The older the applicant, the less time there is for interest to roll up, so the initial loan will increase. There should be a non-negative equity guarantee, meaning that you will never leave a debt behind.
Retirement interest only mortgage (RIO)
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 usually 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.
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.
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 a 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’re 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. Impaired or enhanced lifetime mortgages may allow you to release more.|
|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 based on your income during retirement. Loans are generally capped at 4.5x income, although some lenders may consider loaning 5x, and in the right circumstances, a few may go as high as x6.
Your lender may take your pension, benefits and any savings you have to determine what your income is 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.
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 elderly borrower, most brokers would suggest that you avoid making multiple new enquiries right 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 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 elderly 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.
Should I use a retirement only mortgage calculator to work out how much I can borrow?
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 on 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:
- Can offer bespoke advice on retirement mortgages
- Arrange them successfully every day
- Have whole of market access
- Are 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.
Mortgages In Retirement Information
Looking for specialist advice? Read through our articles about different types of pension mortgage situations, and how best to prepare yourself to find the right mortgage for you.