Later Life Mortgages Advice

What are the mortgage options available for older borrowers in the UK?

These are interesting times, because lenders are recognising that we’re living longer and older people still need to buy a home or move because of their circumstances.

So you can, believe it or not, take out a standard mortgage, although it does still depend on your age. The bracket really lies in your mid 50s. That’s the magic number. At around 55 you can get a standard mortgage with a high street lender, depending on how long you want the mortgage for and what the monthly payments are.

We can still do a standard mortgage taking you up to age 80 or even 90. Alternatively, there are retirement interest only mortgages, which are purely based on your pension income. Again, the magic number is 55. We would also ask about your retirement planning and what your pension looks like.

The last resort is equity release, which tends to be for a much older client, usually in their 70s to 80s.

How does age affect the mortgage approval process for older borrowers?

Again, it depends on your life stage. Are you still working? Are you retiring? The general rule of thumb with a standard mortgage is that if you’re not yet within 10 years of the state retirement age, which is at the moment 67 or 68, you could consider a standard mortgage.

For a longer mortgage, that may be based on a combination of your earned income while you’re still working and your future retirement income. If you’re within 10 years of retirement, though, most lenders will only look at your pension – because that’s what’s going to sustain your mortgage payments.

If you’re past state retirement age, you can look at retirement interest only mortgages as well, which are purely based on your pension income.

What are the eligibility criteria for obtaining a mortgage as an older borrower?

It’s more important to have an understanding of your own situation at the moment. If you’re a couple buying together, where’s the deposit coming from? What kind of property are you looking to buy for? Is it for the long term, or will you be downsizing again?

All those things need to be looked at, and more importantly, your income. Are you employed or self-employed? What is your retirement date? When are you planning to retire? Do you have a pension?

If you don’t have a pension, how likely are you to be able to afford the mortgage past retirement age? These are the same questions a bank will ask. If you’re self-employed, how are you going to maintain that business? Are you going to sell it?

There are more in-depth conversations to have, because everybody has a very different situation. You need a strong understanding of what you want to do and your long term vision.

Are there any specific mortgage products tailored to the needs of older borrowers?

Pension income is quite key. We need to know what your numbers are, so speak to your pension providers. If you’re currently working, you may already have a pension that you’re contributing to. Get your most recent statement and look at the projections.

If you’re not quite retired, what does your projected income look like from the state pension and any private pensions? Are you going to continue working? Lenders will ask what kind of job you’re doing, whether you’re employed or self-employed, and is that sustainable? Is it realistic to still be a builder in your 70s, for example?

Exploring these areas could help you get a standard mortgage, whether that’s to age 80, 90 or even 100. The default option is a retirement interest only (RIO) mortgage, which is purely based on your earnings once you retire.

At the end of a RIO mortgage, when you pass away or you go into full time care, the lender will take possession of the property, pay off the debt and any remaining equity goes back to the family. It can be quite complex, so that’s why it’s worth knowing your future plans and what would suit you.

Equity release tends to be for people who have already retired. You’ve got a sustainable pension, but it’s not quite enough to cover mortgage payments – which are needed for a retirement interest only mortgage. With equity release you’re purely releasing equity out of the house that you own.

Your borrowing is based on your age at the time. Typically you’re not servicing any mortgage payments – although you can if you want to. Otherwise, the interest rolls up, so that debt increases over time. Eventually, when you pass away or go into long-term care, the provider will then take possession of the property to recoup their debt. It could potentially mean you’ve got nothing left to give to your family. So again, that’s quite a complex area.

What is the maximum age limit for mortgage applications in the UK?

It’s basically for as long as you live. Many high street lenders will have a cap, and the default age is 70 or 75. A couple more may stretch to age 80.

Specialist lenders will look at the fact that your retirement income is guaranteed for the rest of your life – so why have an end date? That’s why I mentioned borrowing at age 80, 90 or 100. You’re going to get your pension for as long as you live.

The specialist lenders that work with older people don’t worry about age, as long as you’re doing a repayment mortgage as opposed to interest only.

Repayment is where you pay off capital and interest. so your pension will be covering those mortgage payments. If we did go to age 90, for example, by the time you hit that age, your mortgage would be fully paid off – as long as you kept up with the repayments.

If you go for interest only, you’ve only paid the interest. At age 90, the lender will expect you to pay that lump sum back, the amount you borrowed at the time. You’d need some sort of contingency plan to pay back the lender at that point. It’s slightly higher risk, but don’t be afraid. An advisor can work with you to explore the maximum you can go to.

Are there any additional requirements or criteria for older borrowers when applying for a mortgage?

Just be organised. Gather your pension statements from the company that you work for, plus private pension schemes and historic employment positions. You need to understand how much income you’re going to be earning at retirement.

That’s probably more important than your standard pay slips and bank statements – although those are also a requirement.

How does the lender assess the affordability of a mortgage for older borrowers?

It depends on the lenders’ level of detail. They obviously look at your age at the point of application and how long you want that mortgage for. They’ll see how much the mortgage will cost you today and in the future.

Some lenders will explore how sustainable your future pension is. If you’re a couple and you are both retired, they may also want to know if one person passes away, whether the other person will receive their pension. Sometimes that can be transferred to the survivor. They want to make sure the survivor can afford the mortgage on their own.

That’s why it involves quite a lot of in-depth conversations, a bit more planning and more time, but it can be done.

What are the key differences between traditional mortgages and mortgages for older borrowers? Can older borrowers still get a mortgage if they are retired?

Yes, older borrowers can get a mortgage when they’re retired, as long as their pension income looks strong. You may also receive additional benefits and allowances, and if those are sustainable, that income can boost your affordability if needs be.

The key differences are that traditional mortgages tend to have a cut-off at age 70 or 75. That is the longest a bank will expect you to be working. But older borrower mortgages are uncapped if it’s purely based on your pension income.

Is it possible for older borrowers to obtain a mortgage with no income or a reduced income?

The stronger your income, the more likelihood of you getting what you need to borrow. What I often find with older borrowers is that because they have owned a house, they have a lot of equity in the property.

For example, you may have an interest only mortgage and you’ve now reached your late 60s or early 70s, and you’ve got no means to pay it back. But you have lots of equity in the property. Depending on your income, we could look to repay that balance, because the equity will help.

But it’s very difficult if you have a reduced income. You do definitely need some sort of income, unless you go down the equity release route.

What else do we need to know about mortgages for older borrowers?

One of the biggest hesitations for older borrowers is that they took out their mortgage many years ago and they feel unfamiliar with the process. They are in a similar boat to a First Time Buyer, who can be a bit apprehensive because they’re new to the world of mortgages.

But once we’ve spoken and mapped everything out, you will have the confidence to decide whether you are heading in the right direction. If you’re in that situation where your interest only mortgage is ending and the bank will want their money back, don’t bury your head in the sand.

Talk to a broker about it as early as you can. We can look at your retirement, your pension income and look to apply for an older borrower mortgage. It might be a standard product, or retirement interest only. You can repay the bank and sleep at night.

So if you’re feeling hesitant, please don’t, because that’s what we’re here for.

Your home may be repossessed if you do not keep up repayments on your mortgage. 

A lifetime mortgage is a long-term commitment which could accumulate interest and is secured against your home. 

Equity Release is not right for everyone and may reduce the value of your estate.