How Retirement Mortgages are Calculated

A retirement mortgage calculator provides a snapshot of how much you can borrow on a mortgage or a loan secured against your home.

There are a range of pensioner mortgage calculators, each providing a different estimation, which can make the process confusing, especially if you don’t have in-depth knowledge about the criteria that every lender uses to assess whether you will be approved.

If you are looking for professional advice about your retirement lending options or would like to use a retirement mortgage calculator, call us on 0330 818 7026 or make an enquiry, and we can arrange for one of the advisors we work with to contact you.

Our advisers are regulated by the Financial Conduct Authority, so you will be dealing with a highly trained individual who adheres to strict rules of conduct.

What is a retirement mortgage calculator?

A pensioner mortgage calculator is a tool used by some lenders and retired customers who want to calculate the cost of their retirement mortgage or the amount they can borrow through another form of retirement loan.

These loans could include:

• Equity release
• Retirement interest-only mortgages
• Refinancing

Because there are many varying mortgage products available to elderly homeowners or borrowers, it can be difficult to find a retirement mortgage calculator that is tailored to one specific product.

This can make figuring out how much a mortgage will cost or how much you can borrow confusing, so many of the people we have spoken to find it simpler and more effective to talk to an advisor.

Speaking with someone who is knowledgeable about retirement mortgages and other retirement products, such as equity release, can save a lot of time and help you find the best solution for you and your circumstances.

Call us on 0330 818 7026 or get in touch so we can arrange for one of the advisors we work with to help you.

How to use a retirement mortgage calculator

Here is how a typical pensioner mortgage calculator can give a guide on each retirement lending option.

The above table provides an overview of how different types of retirement mortgage calculators work, but you should remember that some lenders use more sophisticated calculators than others.

Some produce figures based on basic data like income and term length, while others factor in variables such as credit rating.

This is why results can vary across the board. Still, if you make an enquiry, the advisors we work with can introduce you to the lender whose retirement mortgage calculator will most likely return favourable results for a borrower with your needs and circumstances.

How will a retirement mortgage lender calculate the amount I can borrow

If you are applying for a repayment mortgage, your lender will want to be confident that your loan is affordable based on your retirement income.

Loans are generally capped at 4-4.5x income, although some lenders may consider loaning 5x your income or more in the right circumstances.

Income to loan ratio example for a borrower with an annual income of £20,000.

As a retired borrower, some lenders will only be willing to provide a lower loan-to-value ratio (LTV) of 50%.

This is because you are no longer working and might 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 payments.

That’s not to say getting a mortgage in retirement is impossible, though. Depending on your circumstances, specialist retirement lenders may be happy to provide you with a mortgage.

If you’d like to know more about which retirement lenders are more likely to approve your mortgage application, contact us.

Do mortgage calculators factor in age limits?

Yes. Most online mortgage calculators will be set with the standard repayment mortgage, which is usually 25 years.

However, lenders tend to offer a shorter term on their mortgage periods for a pensioner because, for example, someone who takes a loan out at the age of 75 may not be alive at the end of a 25-year mortgage agreement to pay it back.

Therefore, the older you are, the more difficult it may be to find a lender willing to provide you with a mortgage.

You should also keep in mind that specialist lenders will consider applicants up to the age of 85 and a minority with no upper age limits as long as they’re confident the borrower can repay the mortgage. Make an enquiry, and the advisors we work with will help you find them.

Age limits for loans secured against your property

Although the minimum age for loans like equity release is often 55, older applicants may find that with some lenders, they can unlock more capital compared to younger borrowers.

This is because most lenders are willing to increase the LTV for older homeowners because they are perceived to have a shorter life expectancy.

Some lenders can be more cautious about releasing large amounts of equity to younger borrowers, who are say 55, because that borrower is still relatively young and could potentially need to draw on their equity in the future for other retirement costs such as long-term care.

An exception to this is that for any cases where health issues are a factor, a doctor’s report can be sent to the lender to provide evidence of the illness or condition.

This is because some lenders may be willing to increase the LTV for homeowners with serious health issues, as they are perceived to have shorter life expectancies.

Mortgage calculators for pensioners with bad credit

You may find that mortgage calculators for retired borrowers don’t take into account affordability factors such as bad credit.

This can be frustrating and often misleading, as some lenders have strict criteria for lending to customers with less-than-perfect credit scores.

If you have bad credit, this could include:

• Low credit score
• Late payments
• Mortgage arrears
• Defaults
• CCJs
• Debt management plans
• IVA
• Bankruptcy
• Repossession

Some lenders are more likely to accept certain 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.

If you’re concerned about your credit history, get in touch, and we can arrange for a specialist to discuss this situation with you directly and help you find a lender who may be able to help.

Speak to an expert

Many homeowners use retirement mortgage calculators to better understand how much they can borrow, but these tools won’t give you an exact figure, as every lender uses different criteria to calculate how much they are willing to lend.

That’s why a retirement mortgage broker’s advice is invaluable.

They’ll be able to give you the most accurate and useful advice based on your circumstances.

If you have any questions and want to speak to an expert, call 0330 818 7026 or make an enquiry.