Mortgages for the over 55s
Age is just a number, or so the saying goes, but it does matter if you’re applying for a mortgage. If you’re aged 55 and over and want a mortgage or to remortgage into retirement, you may struggle to get the loan you want. Here’s our guide to getting a mortgage if you’re over 50.
Can I get a mortgage at any age?
It may not be possible to get a mortgage at any age, because lenders often impose upper age limits on each mortgage. It’s not unusual to see an upper age limit for new mortgages at 65 to 70, or age limits for repaying a mortgage that range between 70 and 85.
Banks and building societies are likely to be reluctant to approve loans that extend beyond retirement age, because that’s when your income is likely to drop. They hold this view, despite the fact there are plenty of borrowers who will continue to earn beyond retirement age and be able to support a mortgage, either through working longer or by using income from savings and investments.
The reality of this is that if you’re 50 and planning to retire at 60, you may struggle to get a mortgage. And if you do secure a mortgage, you may have to repay it before your 70th birthday. This means a term of 20 years instead of the normal 25 – and of course, a shorter term means more expensive monthly repayments, at a time when your income may fall as you enter retirement.
Generally speaking, smaller banks and building societies are more likely to be amenable to older borrowers as they will often lend beyond the age of 75 on a case-by-case basis. For example Market Harborough Building Society, Bath Building Society, and Mansfield Building Society will lend up to the age of 85 – and Leek United doesn’t have a maximum age.
Where should I start my search?
The best place to start looking for an over 50s mortgage is to talk to a mortgage broker first. They will know the smaller banks and building societies that are more likely to be amenable to older borrowers, and be able to help you find specific products aimed at the over-55s market.
You should also look at standard mortgage products, as you may be able to secure one of those too.
How can I increase my chances of getting a mortgage?
One of the best ways to increase your chances of getting a mortgage in your 50s is to have a clear plan of how you will pay the loan back. Knowing your budget and your monthly outgoings will help you understand how much you can afford.
You should also check your credit report, and look at improving your credit score ahead of a mortgage application, as this will also increase your chances of approval.
What will I need to show my mortgage provider?
You will need to prove you have adequate income to cover the repayments post-retirement in the same way as you would if you were working full-time. You should expect to show your bank statements and a statement that confirms your pension payments or evidence that you are receiving a pension. Your lender will also look at your regular expenditure to assess an affordable borrowing amount.
If you are a few years away from retirement, you will need to show a statement with a forecast of your income in retirement. If you are more than 10 years away, lenders may only want to see whether you are contributing to a pension(s). If you’ve had different jobs over the years, check back through your files to check you have details of all the different pension schemes you may have been contributing to
Can you port your mortgage when you buy a new home?
If you want to port your mortgage – which means taking your mortgage with you when you move home – you essentially have to reapply for your existing loan. You will be reassessed by your lender as if you are applying for the loan for the first time and will need to meet their new affordability criteria. Even if you are in the same financial position as when you first applied for the loan you could still get rejected. If you are going to see a fall in your income post-retirement, they will also take account of that.
Your lender may also have lowered their upper age cap which may mean, depending on your age, that you may not be able to get the mortgage term you want. If you are unable to transfer your mortgage, you may have to pay early repayment charges.
What happens if I can’t get a mortgage?
If your mortgage application gets refused, don’t think that’s it. If you’ve been turned down by one lender that doesn’t mean that other mainstream and specialist over-55s lenders won’t lend to you. You could also think about opting for a lifetime mortgage, which is a type of equity release plan where you take on a long-term loan that is secured on your home. You pay the loan and the interest back when you sell your home. It’s not the cheapest option as the interest on the loan is often much higher than on an ordinary mortgage loan.