Pete Mugleston | Mortgage AdvisorPete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.
Updated: 17th December 2019 *
Many of our customers want advice on later life lending, specifically surrounding the best retirement mortgage options and what the most competitive rates are available to them.
While there are plenty of retirement mortgage products out there, eligibility will be determined by the type of product, individual circumstances and other factors lenders take into consideration before determining the best mortgage for older people.
Getting a cheap mortgage rate can be more difficult if you’re an older borrower and approaching retirement, or if you’re looking to take out a home loan after you’ve already retired. Lenders typically consider older borrowers as higher risk as many of them won’t have a regular income post-retirement, which will have a big impact on your affordability.
Mortgage providers want to be confident that you will be able to keep up with your repayments throughout the full mortgage term, and as such, some lenders will have caps on how much they are willing to let you borrow, the length of the mortgage term, and maximum lending age brackets.
However, that doesn’t mean that it’s impossible to take out a mortgage that will not be paid off until after you’ve retired, nor does it mean that you won’t be eligible for one of you’ve already reached retirement age.
Where can I find cheap mortgages for pensioners?
There are plenty of lenders who offer competitive later life lending rates - and they offer mortgage products that are specifically geared towards elderly borrowers, including…
Read on to find out more about these products, or contact us directly and we can put you in touch with one of the specialists we work with who can advise on the best mortgages for retired people.
How do I compare retirement mortgage deals?
The best way to compare products is to use a whole-of-market broker, like the ones we work with. They have access to every lender in the UK, so you can rest assured that they’ll track down the right deal for you.
There are a number of mortgage products available to later life borrowers, including...
If an older borrow can prove they can afford mortgage repayments based on their retirement income, some lenders are willing to offer a standard mortgage with a high maximum age cap, although many have a maximum age they’re willing to lend to.
Repayment mortgages will be authorised on a fixed term basis as standard, and may be the cheapest mortgage deal for older people if you can afford this option. Repayment plans differ from alternatives such as Retirement Interest Only (RIO) and equity release - discussed below - as the latter tend to be on an “open-ended” rather than fixed term basis.
The benefits of RIOs is that, while some have maximum age limits, others are set to end after a major life event, such as the borrower passing away or going into care. Most RIOs allow the sale of the property as the repayment strategy so don’t require other savings or investments to repay the loan.
The disadvantages are that affordability is key to approval, and as monthly interest repayments are required, borrowers may be subject to the risk of rate rises, meaning that it may not be the simplest or cheapest mortgage option for older borrowers in the long run.
The most common form of equity release is a lifetime mortgage. This is when older borrowers retain ownership of their property and lenders take a charge over it. Money is released, either as a lump sum or as a “drawdown” (where borrowers can contact their lender to borrow whenever necessary, and interest is charged only on what is withdrawn - or “drawn down”.
Total interest payments remaining are rolled up and added to the loan itself rather than having to commit to making monthly payments. The total amount borrowed (plus interest) is usually paid back when the house is sold, again, typically after a major event such as death(s) or being moved into care.
Hybrid equity release
There is a hybrid of the equity release and Retirement Interest Only (RIO) which can help borrowers limit the level of debt that builds up over time due to interest roll-up.
Lifetime mortgages are charged at a standard interest rate which is “rolled up” over the lifetime of the loan, meaning it could potentially increase significantly over the term. Hybrid forms of equity release allow borrowers to pay all or part of the interest for a selected period to help reduce the amount of interest roll-up.
These products are less common, although more lenders and products are popping up all the time. Visit our comprehensive guide to later life lending for more information on this, or get in touch and we’ll pass your enquiry onto one of the experts we work with.
What other factors impact retirement mortgage products?
The table below highlights how factors including age, affordability, credit report and more can impact on the retirement mortgage options available to you.
Retirement Interest-Only (RIO)
Equity Release (Lifetime Mortgages)
Most lenders cap at age 70, a few 80, and a handful with no maximum age (affordability dependant)
Generally available to those aged 55+. Some accept from 50, others 60 is the minimum age.
Minimum age is 55, no maximum age with majority lenders
Typically calculated at 4-4.5x income, some lenders may offer up to 5.6x. Some lenders are more generous with secured loans and may offer 10x income in some cases.
If not yet retired, some lenders will consider application based on current salary
Mortgage must be affordable based on retirement income.
Tend to be capped at 4-4.5x income, although 5x may be achievable based on other circumstances
No checks required because borrowers may switch to full roll-up at any point.
Many advisors assess affordability if one occupant passes away due to reduced income
Loan to Value (LTV)
Most will offer 80% LTV, some 85%, and a handful may consider 95% based on affordability
Most lenders willing to lend 40-55%, some 55%+ and a handful may offer up to 65%
Typically the older you are, the more you can borrow.
Currently approx. 25% LTV at age 55, up to 55% LTV for someone aged 82+.
Rates are likely to be higher as fewer lenders offer this product for older borrowers.
Rates tend to be competitive for those who do, as they tend to be offered as a standard mortgage rather than a specific product for older borrowers.
RIO rates can flucuate and refinancing is more common as fixed rate periods last X number of years, depending on the lender and deal taken out
Rates are often fixed for te term of the loan, and will vary by lender and LTV.
Every lender is different as with standard mortgages; most decline for recent or more severe issues, others will accept a wide range depending on the circumstances.
The later you borrow in life the fewer lenders you can expect to consider if severity is high.
As with standard mortgages, fewer lenders but may still be possible depending on other circumstances
Unlimited adverse credit may be accepted but may be declined for more severe issues such as repossession or bankruptcy.
Those with IVAs or DMPs may be required to settle it as part of the conditions for the loan
Some will not consider certain types of property as with usual repayment mortgages. Age, term and personal situation will play a role
Lenders may be more cautious depending on property type, but some may still consider depending on the perceived risk
Property condition and construction type will be a factor, and lenders will want to value the property to check it's suitable security for the loan.
Looking for the best mortgage deals for older borrowers? Speak to an expert!
If you like anything in this article or you’d like to know more, call Online Mortgage Advisor today on 0808 189 2301 or make an enquiry.
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 no obligation or marks on your credit rating.
*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 info 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.
Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes.
The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.
Pete's presence in the industry as the 'go-to' for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!
Read more about Pete here...