Mortgage for Older Borrowers
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Mortgage for Older Borrowers
Lauren Tebb explains how the mortgage process works for older borrowers.
What are the mortgage options available for older borrowers in the UK?
There are a couple of options – there are mortgages designed specifically for older borrowers and there are also retirement interest only mortgages, which are slightly different.
How does age affect the mortgage approval process for older borrowers?
With older borrower ranges and retirement interest only deals there is a minimum age at application, which is usually 55. The mortgage term is usually shorter as it will be restricted by a maximum age at the end of the term. Lenders will specify the length of term you can have based on your age at application.
A retirement interest only mortgage is different as there is no age cap for the end of the mortgage term and it will continue to run until the property is sold, the borrowers move into a care home or both borrowers pass away.
What are the eligibility criteria for obtaining a mortgage as an older borrower?
There’s a minimum age, which is usually 55, and for older borrower mortgages there is a maximum age that is determined by the lender.
Each lender will specify what income they can use to determine affordability. As these mortgages will most likely take applicants passed retirement age, lenders will likely assess the affordability on retirement income only, and possibly not earned income in the same way as with a standard mortgage.
Are there any specific mortgage products tailored to meet the needs of older borrowers?
Yes, there are specific ranges with certain lenders that are designed for older borrowers and if you are under 55 you aren’t eligible for those rates and products.
What is the maximum age limit for mortgage applications in the UK?
If we’re looking at a retirement interest only mortgage, there is no age limit. With mortgages for older borrowers, there is a certain cut off point, which is different from lender to lender.
Some lenders will go up to age 70 or even 80, while others will be a little bit lower than that. The best thing to do is see which options are better for you based on your age and circumstances.
Are there any additional mortgage requirements or criteria for older borrowers?
The main thing is assessment of income, there is going to be a focus on income which is not ‘earned’ such as pension, investment or rental income because the mortgage term is likely to take you past retirement age and needs to remain affordable.
Also, there generally tends to be a restriction on Loan to Value on older borrower or retirement interest only products – if you’re buying, you might need a higher deposit or more equity in your property if you are remortgaging, to be eligible for those products.
How does the lender assess the affordability of a mortgage for older borrowers?
A retirement interest only mortgage is a bit different in terms of affordability. With a standard mortgage, if you’re a couple the affordability is assessed on both of your incomes. However, with retirement interest only mortgages the lender will assess the maximum loan based on each applicant’s individual income. The mortgage lender needs to make sure that both borrowers can separately afford the monthly repayments.
In addition, if you’re looking at an older borrower mortgage, the monthly repayments are potentially going to be higher due to the restricted loan term, and this might restrict the loan amount you can borrow.
What are the key differences between traditional mortgages and mortgages for older borrowers?
The biggest difference is the age you can go up to, plus the minimum age at application and the income they’re going to use. These mortgages are predominantly going to focus on your retirement income, whereas with a standard mortgage, lenders look at using earned income up to age 70. Once you hit age 70, lenders will want to know if you can still afford the monthly payments, therefore they will need to see what income you will have passed this age.
Can older borrowers still get a mortgage if they are retired?
Yes – as the name suggests, retirement interest only mortgages are designed specifically for those that are retired already, these are based solely on your retirement income.
If you’re retired you can also apply for older borrower mortgages, it’s just going to be based on retirement income. You might have a Buy to Let that brings in a stable income – or even dividends from a company you’re a shareholder in, without necessarily being part of the day-to-day business, all that income can be considered.
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Is it possible for older borrowers to obtain a mortgage with no income or a reduced income?
Yes, if you’ve got income from savings, or a pension you are taking funds out of regularly. These aren’t necessarily an income, but you have access to them we can potentially look at that.
If you have minimal income coming in – just the state pension, for example – we can have a look at that. Affordability and loan amounts might be restricted on that basis, but it’s certainly something we can explore with you.
What documentation is required for mortgage applications as an older borrower?
Lenders will ask for all the usual things: bank statements, proof of identity etc. Income wise, they might ask for a little bit more. If you’re working when you apply for the mortgage they will ask for three months bank statements and three months payslips, or the latest accounts for your business.
They might also ask for proof of your future pension. That could be how much state pension you’re eligible for, or how much is in your personal pension and what the forecast is.
What factors should older borrowers consider when choosing a mortgage term?
I think you need to consider whether a retirement interest only mortgage is right for you, or would an older borrower mortgage be better.
Older borrower mortgages are available on a capital repayment basis, which means that those monthly payments are a big factor. If you go down the capital repayment route on a shorter term, are those monthly payments going to be affordable? This is especially important to consider if your circumstances change and you retire during the time of that mortgage.
Are there any special considerations for older borrowers when it comes to interest rates?
Generally the interest rates are around the same as standard mortgages.
Are there any potential drawbacks or risks associated with mortgages for older borrowers?
Something to think about is what happens if your circumstances change during the term. Once you retire, will the monthly payments still be affordable? That’s why the lenders ask for extra information and do extra calculations to make sure that they’re not putting you in a situation where you can’t afford the mortgage.
The other risk is that because the term is shorter, your monthly payments are potentially higher. It’s all about making sure upfront that you consider the circumstances and you look ahead at what you’re forecasted to be bringing in post retirement. From there, you should be able to negate those risks as much as possible.
What steps can older borrowers take to improve their chances of mortgage approval?
Preparation is key – just look at your pensions and things beforehand and collate all that information. It helps to know what your retirement plan looks like at the point of application.
As usual, it helps to have a good credit score, so keep your other borrowing down if possible. Keep up with your monthly payments and things like that. If you’re looking to buy a house with one of these mortgages, having a good deposit is an excellent starting point.
How does age impact the maximum loan amount for an older borrower?
It’s all about that term and the ability to repay that mortgage individually rather than as a couple.
What options are available if an older borrower is unable to repay their mortgage?
The Mortgage Charter is the answer to that. It has been set up to help those in financial difficulty when it comes to their mortgage. It would be a case of speaking to your lender and seeing the options available.
The usual things are payment breaks or payment holidays; it’s just down to giving your lender a call and having that conversation with them.
Can older borrowers still access mortgage advice and support from a financial advisor?
Absolutely – I would say that if anything it’s actually more important to approach a mortgage broker for advice. There are different options on the market and different routes you can go down.
Having that conversation and allowing your broker to look at those different options will help determine which is going to be best for you and which is the right way to go. We see all sorts of mortgages all the time – that’s what we’re here for.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS